Shell Chief Warns That Bolivia is The 'New Reality For Industry

By Eddyson Lugangwa Posted 16 May 2006 @ 05:33 am EET     Print     Reprint     E-Mail     Comments

London (IBTimes.com) - Jeroen van der Veer, chief executive of Royal Dutch Shell, has warned that the increasingly nationalistic position of oil-rich countries and their redrawing of contracts is a "new reality" that international energy companies have to accept.

However, not all his competitors share his view. van der Veer, head of the world's third-largest listed energy group by market capitalisation, told the Financial Times: "The higher the oil and gas price is, the more national thinking you get. This is a new reality. In the end, governments are always the boss."

He said using lawsuits to fight the loss of control and profit share that comes when countries such as Venezuela change contract terms was "counterproductive . . . good luck!"

"In Venezuela, we were one of the first to renegotiate. Under the circumstances, we are quite satisfied, we can work our future there. We have harmony with the government, which is very important. In Bolivia, I assume we will come to a solution."

Other companies, such as ExxonMobil of the US, take a different approach, often threatening international arbitration and legal action or abandoning fields. Rex Tillerson, Exxon chief executive, says governments should avoid acting unilaterally to scrap existing contracts.

Asked about Venezuela's actions in a recent interview, he said: "We're not looking for a fight with anybody.

And we're not trying to be confrontational with anyone. Sanctity of contracts is important to us . . . but our view has always been 'if you want to change a contract, let's sit down and talk about it'."

However, Exxon executives also warn that if oil companies failed to take a stand against unlawful changes in contract rules, they risked sending themselves and the industry down a slippery slope with oil-rich countries demanding more and more concessions.

In an interview with Les Echos, the FT's French sister paper, Thierry Desmarest, chief executive of Total, said the French company would like to start gas production in Bolivia, but would not do so "on any conditions".

He also said Total was waiting for the situation "to clear up" in Venezuela "although the rules of the game have been changed several times and in quite a brutal manner. Let's hope reason will triumph."