A NEW BLUEPRINT FOR OIL AND GAS BRIBERY: Carlyle – Shell Oil ties run deep  

Javier Ferrandis: Follow: Researcher: Published December 8, 2020

Extracts from an extensive article by former Shell Petroleum Economist Javier Ferrandis:

The CARLYLE-MUBADALA ALLIANCE: A NEW BLUEPRINT FOR OIL AND GAS BRIBERY

Information about the nine-year period Javier Ferrandis spent at Shell can be found at the foot of this article.

I would argue in this article that the overvalued and questionable purchase of Abu Dhabi’s Mubadala owned CEPSA by the Carlyle group in 2019 was part of a USA government-sponsored bribery operation connected to the transfer of large Oil & Gas concessions in the United Arab Emirates (UAE) into the hands of Chinese National Oil Companies and other oil companies based in countries that collaborated with the 1MDB operation and that happen to be main recipients of UAE crude oil exports. The timing of the 1MDB operation and specifically the purchase of Coastal Energy by Abu-Dhabi owned CEPSA and the 1MDB Chinese middleman Jho Low was chosen to coincide exactly with the historic expiration of the 75 years old Abu-Dhabi oil concessions.

Carlyle – Shell Oil ties run deep  

The last piece of the puzzle that would help us to understand the rationale for Carlyle’s CEPSA acquisition and the connection to the 1MDB operation are the strong ties between Carlyle energy investments and Shell Oil during the last two decades.

Petroplus now defunct was first formed in 1993 by dutch businessman Marcel Van Poecke and became the largest European independent oil refiner before its bankruptcy in 2012. The first Petroplus large acquisition was completed in 2000. It was the acquisition of Shell’s Cressier refinery and associated assets in Switzerland. Private equity firms Carlyle and Riverstone Holdings acquired Petroplus and delisted the company from the Amsterdam Stock Exchange in 2005. Petroplus rode a bull run of high-profit margins on the roughly five years to the first half of 2008 that marked a golden age of refining. Marcel van Poecke, co-founder and then co-CEO of the company, resigned in 2006. Petroplus was listed again in 2007 but this time on the Swiss exchange not on the Amsterdam stock exchange, raising $2.4 billion and making big profits for Carlyle and Riverstone [46].

In 2007 Rob Routs, Shell’s executive director for oil products and chemicals announced Shell’s intention to cease refining in France following a new group strategy of “more upstream, profitable downstream” [47]. Shell sold its refineries to Petroplus and to plastic producer Basell. Basell was formed originally in the year 2000 as a 50/50 joint venture between BASF and Shell. Later that same year Basell and Lyondell merged to become LyondellBasell Industries, which based in Houston and Rotterdam is one of the largest refining, chemical, and plastics companies in the world [48].

At the end of 2007, after Carlyle cashed out, Petroplus’s financial debt stood at $1.33 billion, compared with the zero that had been reported at the end of 2006. After 2007 Petroplus refining margins dived, its lenders froze credit to the company in 2011, the company was delisted in 2012 and crumbled in a mountain of debt that became impossible to manage. In retrospect, one can see that Petroplus was a vehicle that allowed Carlyle to profit greatly from the few years of high-profit margins in the refining business but most importantly it was a vehicle created to allow Shell Oil to divest its European refineries just before the economic collapse of 2008.

After resigning from Petroplus Marcel Van Poecke created AtlasInvest in 2007. AtlasInvest in a joint venture with raw materials trader Vitol (75%/25%) created Varo Energy in 2012 in order to acquire the Swiss refinery Cressier from the insolvent Petroplus, that Van Poecke had previously managed. In 2013 AtlasInvest sold its shareholding in Varo Energy to Carlyle while Vitol reduced its stake to enable each party to own 50%. Today AtlasInvest through its partnership with the Carlyle Group manages the Carlyle International Energy Partners funds. These Carlyle Group funds manage more than $7bn of assets and invest in conventional energy businesses globally (outside of North America).

In 2015 Shell signed an agreement to sell its 75% stake in Tongyi Lubricants to Huo’s Group and The Carlyle Group [50]. Shell had acquired a 75% stake in Tongyi Lubricants from Huo’s Group in 2006 and became the number one international lubricants supplier in China by share of supply, a position it still holds.

In 2017 Carlyle-backed Assala Energy, a new oil and gas exploration and production (E&P) company focused on energy opportunities in Sub-Saharan Africa, announced the acquisition of Shell’s onshore assets in Gabon, Africa, for $587 million. The company’s management team included successful, Africa-experienced E&P professionals, many of whom have worked in Gabon previously[51].

In 2018 The Carlyle Group acquired EnerMech Group Ltd, an international services company that provided critical asset support to the energy, infrastructure, and industrials sectors [52]. Enermech had scored the previous year a contract to work on Shell’s giant PRELUDE Floating LNG project offshore Australia [53].

In 2018 Carlyle acquired Neptune Energy, a large global E&P business with operations in Europe and interests in large development projects in Indonesia and Algeria, small producing assets in Egypt, and material resource opportunities in Azerbaijan and Australia [54]. Neptune Energy in Norway has ownership in seven producing fields. Neptune Energy Norway managing director was previously in charge of Shell’s Norway operated assets portfolio[55]. Neptune and Shell are also partners in Shell’s operated field Alam El Shawish West in Egypt [56]. Currently, Carlyle and a consortium backed by Cairn Energy are among the bidders for Royal Dutch Shell’s onshore Egyptian oil and gas assets [57]. The process, which was expected to be completed in May, was slowed by the coronavirus pandemic, which limited travel and led to a collapse in oil and gas prices.

Beyond Carlyle Marcel Van Poecke is also the chairman of dutch based ONE-Dyas (the largest privately owned Dutch exploration and production company). ONE-Dyas acquired UK operated SEAN assets from Shell in 2011 [58]. ONE-Dyas also partners with Shell Norway in several offshore Norwegian fields [59].

The ties between the Carlyle Group and Shell oil extend way beyond energy deals. Shell Oil has also been a source of talent for Carlyle. In 2007 Carlyle acquired Spanish-based Applus+ for US$2 billion, a company specialized in industrial safety testing and certification, which is currently headquartered in Barcelona (Spain). This was the largest investment undertaken by a private equity firm in Spain at the time [60]. John Hofmeister, who was president of Shell Oil US between 2005 and 2008 and current member of the prestigious US Energy Security Council [61-63], was hired in 2013 as a Non-executive Director of the Applus+ board to help drive Applus+ expansion in North America. Hofmeister is currently Chairman of the Appointments and Remunerations Committee [64].

Marcel Van Poecke is also chairman of dutch based Mazarine Energy since 2016 after Carlyle acquired part of the company. Mazarine is a privately owned E&P company with assets in Romania and Tunisia, which counts with Royal Dutch Shell ex-CEO, Jeroen Van der Veer, as one of its senior advisors [65].

In 2019 Ben van Beurden, Chief Executive Officer of Royal Dutch Shell was the recipient of the Executive of the Year Award, which is the international energy industry’s most prestigious accolade. This award is administered by Houston-London based the Energy Intelligence Group [66]. Not surprisingly Marcel Van Poecke is the Vice-chairman of the Energy Intelligence Group, a leading provider of news and analysis in the Energy Industry [67].

SHELL-CNPC UAE Oil Concessions and the 1MDB Operation

There are a good number of high profile Carlyle energy investments are connected in one way or another to Shell Oil. One may wonder if there is any connection between Carlyle’s purchase of CEPSA and any Shell Oil asset or transaction.

On January 8th, 2014, The National, a private English-language daily newspaper based in Abu Dhabi published an article titled “The End of An Incredible Oil Powered Era” [68]. The article reminded us that the original concession deal for Abu Dhabi’s oilfields was expiring on Friday, January 10th, 2014. Signed in 1939, the concession heralded a new dawn for the emirate and helped to fuel the formation of the UAE. January 10 2014 marked the expiry of the 75-year concession that covered the oilfields run by the Abu Dhabi Company for Onshore Oil Operations (Adco). The company would continue to operate, but for the first time, the oil being pumped from its 11 fields and the reserves will belong wholly, through the Abu Dhabi National Oil Company (Adnoc), to the Government. There will no longer be any foreign shareholding.

The UAE had held a 60 percent stake in Abu Dhabi Company for Onshore Oil Operations (ADCO). Four of the world’s largest stock-listed energy companies – ExxonMobil, Royal Dutch Shell, Total, and BP – have each held 9.5 percent equity stakes in the ADCO concession until then [69]. Abu Dhabi took full control of the UAE’s biggest oilfields after its 75 years old venture with four western oil giants expired on January 10th, 2014. Some big oil companies, notably ExxonMobil, expressed concern about operating side by side with rivals in an ADNOC-controlled concession, with all partners expected to share their technology.

In the half-century that passed since the first commercial discovery, western oil demand started to wane, while consumption in Asia soared, spurring Asian companies to seek security in stakes in oil and gas fields around the world. Abu-Dhabi was considering new partnerships in new terms with its long-term collaborators or Asian newcomers. Since 2012, CNPC had been appraising the technical potential of five onshore and two offshore undeveloped blocks covering much of the area west of Abu Dhabi’s legacy fields.

Finally, three months later in April 2014 a historic landmark deal was announced. The deal allowed a Chinese NOCs, CNPC, to gain access to both onshore and offshore concessions under one operating company in Abu Dhabi for the first time [70]. For China, the award marked a break away from its role as a cheap go-to for construction projects – such as the Fujairah pipeline – to become a producer willing to go where others did not dare: Iraq, Sudan, Afghanistan. In the six years since China and the UAE signed this historic agreement the partnership, the UAE-China partnership has greatly extended at a fast pace to other fields and other areas [71-76]

We mentioned earlier that on January 17th, 2014 [29], exactly one after that the Abu-Dhabi 75 years old concessions expired, Abu-Dhabi owned CEPSA and Jho Low’s SRG purchased Coastal Energy Resources. According to the DOJ court Case 2:17-CV-04438, Jho Low invested US$50 mln in the partnership that was traceable to the 1MDB fund [31] and CEPSA purchased Jho Low’s share for US$300 just one week after closing the deal (a 500% return in one week).

Are you wondering what did Shell achieve but relinquishing without a fight these prime underdeveloped oil concessions, that have the potential to produce hundreds of thousands of barrels of oil per day in the coming decade?

In April 2014 the same month that China signed its historic first oil concession agreement with the UAE, Shell Oil also signed a historic agreement with China. The agreement – China Petroleum & Shell Global Cooperation Agreement – was signed by the two companies on April 8th 2014 in Beijing, according to CNPC [77].

In June 2014 two months after Shell and CNPC signed its historic agreement in Beijing Shell signed another historic cooperation agreement with CNOOC. The agreement —China National Offshore Oil Corporation & Shell Global Strategic Alliance Agreement—was signed by the two companies on June 17th 2014. Chinese Premier Li Keqiang, who is on an official visit to London, and British Prime Minister David Cameron witnessed the signing of the Agreement [78].

On the occasion, the CNOOC Chairman Wang Yilin said: “We are delighted to see our strategic partnership with Shell taking a step further under the Agreement. It is another milestone for our already fruitful, mutual-beneficial cooperation. I look forward to a deeper and more extensive cooperation with Shell.” [79]

Ben van Beurden, Shell’s CEO, said: “We are very happy to reconfirm our commitment to the Shell-CNOOC strategic partnership that has borne many fruits. We are committed to growing business together with CNOOC and other Chinese partners and cooperating with them internationally to bring more and cleaner energy to China.” [79]

Conclusion

In retrospect, one can see that Marcel Van Poecke and the Carlyle group have rendered a great service to Royal Dutch Shell over the years by creating investment vehicles that have allowed Shell to offload its mature assets safely.

The overvalued purchase of CEPSA by the Carlyle group is nothing but one more part of the 1MDB operation, a close collaboration of the intelligence services of US-China and UK, that also counted with the collaboration of the governments of Spain, Turkey, Japan, Thailand, Taiwan, Malaysia, India, Azerbaijan, and Israel. The 1MDB operation goal partly was to facilitate the payment of bribes to the Abu-Dhabi royalty that allowed these historical agreements between China, UAE, and Shell to become a reality.

The Carlyle Group, which has managed billions of dollars of UAE SWF money for years and also has experienced incredible growth in China, sits at an important intersection that allowed it to become a wild card, a useful tool in this state-corporate operation. The Carlyle-Mubadala alliance has been a powerful instrument that possesses the required flexibility to make this operation possible avoiding the close scrutiny of the regulatory agencies and for all practical purposes allowing the legalization of large-scale state-sponsored bribery.

References :

[1] The Carlyle group to acquire a significant minority shareholding in CEPSA from Mubadala (Carlyle News Release, April 8th 2019)

[2] The Carlyle group completes acquisition of shareholding in CEPSA from Mubadala (Carlyle Group Media Release, October 15th 2019)

[3] The Carlyle group completes acquisition of shareholding in CEPSA from Mubadala (CEPSA Press Release, October 15th 2019)

[4] Carlyle dealmaker puts $100 mln of his cash into own fund (Financial Times, October 14th 2018)

[5] Abu-Dhabi creates $125 billion fund by merging Mubadala, IPIC (Reuters, January 21st 2017)

[5] Abu-Dhabi SWF gets entangled in Global 1MDB scandal (WSJ, December 1st 2016)

[7] United States of America vs All Funds on deposit in Bank Privee Edmond de Rothschild ( DOJ case 2:20-cv-05912)

[8] Key Figure in 1MDB Probe is arrested in Abu-Dhabi (WSJ, August 18th 2016)

[9] Alleged co-conspirators sentenced to Prison (WSJ, June 16th 2019)

[10] Alleged 1MDB conspirator says he is a scapegoat for emiratis (WSJ, January 23rd 2019)

[11] UAE’s ambassador to US linked to 1MDB scandal (WSJ, June 30th 2017)

[12] Sovereign Power: The Impact of Abu-Dhabi SWFs on the US economy (Javier Ferrandis, LinkedIn, March 4th 2020)

[13] Carlyle Exec: CEPSA Deal nothing to do with oil rebound (CNBC, 2019 April 8th)

[14] Carlyle co-CEO Youngkin to Exit, Leaving Lee in Sole Control (Bloomberg, July 21st 2020)

[15] Glenn Youngkin to retire as CEO after 25 years (Carlyle News Release, July 21st 2020)

[16] Glenn Youngkin to retire as co-CEO of the Carlyle Group (Washington Business Journal, July 21st 2020)

[17] Goldman Sachs agrees to a $3.9 billion 1MDB settlement with Malaysia (CNN, July 24th 2020)

[18] Najib Razak, Malaysia’s former prime minister, found guilty in graft Trial (The New York Times, July 28th 2020)

[19] Goldman Sachs Charged in Foreign Bribery Case and Agrees to Pay over $2.9 Billion (DOJ, October 22nd 2020)

[20] Malaysian finance minister : It’s reasonable to ask Goldman Sachs for $7.5 billion over 1MDB agony (CNBC, January 14th 2019)

[21] David Solomon DJs in the Hamptons after reaching a $3.9 billion settlement ( New York Post, July 27th 2020)

[22] Goldman cuts quarterly profit by 91% after $3.9 billion settlement (Markets Insider, August 7th 2020)

[23] Tim Leissner settles FCPA charges with the SEC (The FCPA Blog, December 16th 2019)

[24] Ex-Goldman banker says he warned bosses about Jho Low, 1MDB (Bloomberg, November 20th 2020)

[25] Abu-Dhabi fund buys Spain’s CEPSA (Financial Times, February 16th 2011)

[26] IPIC acquires TOTAL 48.83 % stake in CEPSA (Institutional Investor, August 2nd 2011)

[27] Spain’s CEPSA to buy Coastal in deal worth $2.2 billion (Reuters, November 18th 2013)

[28] CEPSA adquiere la norteamericana Coastal Energy por 1.630 millones de euros (El Economista, November 19 2013)

[29] CEPSA finalizes Coastal Energy Takeover (1/20/2014, Offshore Energy Today)

[30] La CNMC da luz verde a la compra de la petrolera canadiense Coastal Energy por CEPSA ( 1/18/2014 El Confidencial Digital). Coastal completes merger with CEPSA ( Coastal Energy Press Release, January 14th 2017).

[31] U.S. Links Malaysia Prime Minister to Millions Stolen From Fund. (7/21/2016, Bradley Hope, Tom Wright, WSJ)

[32] The reserves fraud case at the center of the 1MDB scandal (Javier Ferrandis, Linkedin, December 19th 2019)

[33] Thailand Department of Mineral Fuels 2008 Annual Report; 2009 Annual Report; 2010 Annual Report; 2011 Annual Report; 2012 Annual Report; 2013 Annual Report; 2014 Annual Report; 2015 Annual Report; 2016 Annual Report; 2017 Annual Report; 2018 Annual Report (Thailand Ministry of Energy). These documents are available for public download at www.dmf.go.th

[34] UniThai-COOEC Consortium wins Gulf of Thailand Decommissioning Gig (April 11th 2019, IHS Markit, Connect Upstream Insight)

[35] Carlyle to buy up to US $4.8 billion stake in CEPSA from Abu Dhabi’s Mubadala (April 8th 2019, Reuters Business News); Carlyle Group to buy up to 40% stake in Spanish oil company from Mubadala (April 8th 2019, CNBC)

[36] Carlyle to sell stake to MidEast government (New York Times, September 21st 2007)

[37] Government of Abu-Dhabi buys stake in Carlyle (Washington Post, September 21st 2007)

[38] CALPERS buy stake in Carlyle Group for $175 million, invests in funds (The Wall Street Journal, February 2nd 2001)

[39] CALPERS and Carlyle (The Nation, March 14th 2002)

[40] Carlyle took debt to pay owners dividend before IPO (The Washington Post, March 13th 2012)

[41] Reject Carlyle Group’s attack on investor rights, Groups tell SEC (Public Citizen, February 3rd 2012)

[42] Carlyle eyes $7.5 – $8 billion valuation in IPO (Reuters, April 10th 2012)

[43] Carlyle IPO raises unimpressive US$671mln (Reuters, May 2nd 2012)

[44] The big loser in Carlyle’s IPO (Forbes, May 2nd 2012)

[45] Mubadala Annual Report 2012 (Mubadala, December 2012)

[46] Petroplus: Rapid rise and fall of a refiner (Reuters, April 4th 2012)

[47] Shell to cease refining in France (Petroleum Economist, August 1st 2007)

[48] Shell agrees to sell three french refineries (O&G Journal, August 2nd 2007)

[49] AtlasInvest in second European refinery acquisition (Petroleum Economist, May 9th 2012)

[50] Shell, Huo’s Group and the Carlyle Group reach agreement on Tongyi lubricants stake (Fuel and Lubes, August 7th 2014)

[51] Carlyle backed Assala Energy acquires Shell Gabon Assets (Carlyle Press Release, March 24th 2017)

[52] The Carlyle group acquires Enermech from LimeRock partners (Carlyle Press Release, October 15th 2018)

[53] Enermech gets to work on world’s largest FLGN project (Offshore Energy, March 21st 2017)

[54] Neptune Energy Company Highlight (Carlyle, 2020)

[55] Neptune Energy appoints Odin Estensen as MD for Norway (Neptune Energy, May 2018)

[56] Alam El Shawish West Field (Neptune Energy, 2020)

[57] Carlyle, Cairn Energy backed group among bidders for Shell’s Egypt assets (Reuters, July 15th 2020)

[58] Oranje-Nassau Energy BV (ONE) acquires UK operated SEAN assets from Esso and Shell (ONE Dyas, May 6th, 2011)

[59] ONE Dyas assets (December 2020)

[60] Carlyle acquires spanish certification group Applus+ : The largest investment undertaken by a private equity fund in Spain. (Carlyle Press Release, July 23 2007)

[61] United States Energy Security Council Members (USESC, December 2020)

[62] Carlyle group to float NCT operator Applus+ (The Irish Times, July 10 2013)

[63] Morgan Stanley, UBS hired to run Applus+ IPO (Reuters, December 4th 2013)

[64] Applus+ Board Members (December 2020)

[65] Jeoren Van der Veer to join Mazarine Energy as senior adviser (Mazarine Press Release, October 2020)

[66] Energy Excutive of the Year Award (Oil & Money, October 8th 2019)

[67] Energy Intelligence Board of Directors (Energy Intelligence, December 2020)

[68] The end of an incredible oil Powered Era (The National News, January 8th 2014)

[69] UAE takes charge of ADCO fields (Gulf Business, January 8th 2014)

[70] China breaks western grip on Abu-Dhabi oil deals (The Telegraph, April 29th 2014)

[71] The UAE and China thriving partnership (The Hufftington Post, July 15th 2015)

[72] ADNOC Completes ADCO deal with 4% stake to CEFC(Oil & Gas Middle East, February 20th 2017)

[73] ADNOC awards PetroChina stakes in two offshore concessions (Reuters, March 21th 2018)

[74] CNPC to sign oil exploration refining pact with UAE’s ADNOC this month (Reuters, July 6th 2018)

[75] China and UAE sign strategic oil and gas agreement (Gulf Business, July 22nd 2019)

[76] China to expand its influence in the Middle East with major oil deal (RT News, August 12th 2020)

[77] CNPC and Shell strengthen global cooperation (Oil & Gas Journal, April 10th 2014)

[78]  Shell signs global strategic alliance with CNOOC (Reuters, June 17th 2014)

[79]  Shell and CNOOC sign global strategic alliance agreement (Shell Press Release, June 17th 2014)

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