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Occidental Chairman Irani Agrees to Leave Company

May 4, 2013 by Leave a Comment

The decision, announced at the company’s annual meeting, was the climax of a brutal boardroom struggle between Mr. Irani and Stephen I. Chazen, the chief executive during the last two years, over leadership and direction of the company. Earlier this week, the Occidental board bowed to investor pressure by announcing that Mr. Chazen would continue to serve in his position through the end of 2014 and help find a successor.

The company announced that Edward P. Djererjian, a former ambassador in the Middle East who has served as an independent director since 1996, will assume the role of independent chairman of the board, and that former Energy Secretary Spencer Abraham will become the independent vice chairmen. Both were elected by the board.

Mr. Irani has been chairman of Occidental since 1990, and many observers of the company believed he had been maneuvering to remove Mr. Chazen and retake the post of chief executive. He did not attend the shareholder meeting, held in Santa Monica, Calif.

Mr. Irani, 78, took over the Los Angeles-based company from Armand Hammer and stretched its reach across the Middle East, including Iraq, Oman and the United Arab Emirates. But he angered many investors by rewarding himself and some of his most senior executives with pay packages that were outsize even by the generous standards of large oil companies. Shareholders forced him to step down as chief executive two years ago.

Mr. Irani will be eligible for a severance payment of $38 million, which includes a life insurance payout, and additional annual payments of more than $2 million.

In recent years, Mr. Chazen tried to turn the company’s focus toward domestic oil fields to take advantage of the shale oil boom, but the financial results of his approach did not satisfy Mr. Irani. Occidental’s stock price has lagged those of competitors.

The shareholders had voted against Mr. Irani’s retention as chairman by more than 3 to 1.

“This means Chazen is really in charge until his time is up next year,” said Philip H. Weiss, a senior energy analyst at Argus Research. “This ends the battle at the top and clears a path for new leadership.”

In another sign of change, Aziz D. Syriani, the lead independent director, submitted his resignation. Mr. Syriani is the chief executive of the Olayan Group, a global trading and investment company, who received stock and cash worth $879,000 last year as an Occidental board member.

The developments were welcomed by activist investors who wanted Mr. Irani to retire.

“I am happy and cautiously optimistic but the devil’s in the details,” said Steven Romick, a managing partner of First Pacific Advisors and overseer of the $11 billion FPA Crescent fund, who attended the annual meeting. He said he hoped the company would now restructure its compensation policies for the board and senior management, and he was open to the possibility that Mr. Chazen might stay in his position longer.

Mr. Chazen is 66, two years younger than the new retirement age set for the chief executive just this week by the board.

Mr. Romick added, drawing a clear distinction with Mr. Irani’s direction, “My preference would be to be very circumspect about the Middle East.”

In February, Occidental surprised investors when it announced that it was creating a search committee to replace Mr. Chazen as chief executive. Fear spread among some investors that Mr. Irani was trying to put off his retirement and even return to his old post as chief executive. That stirred a revolt by the California State Teachers’ Retirement System and other shareholder activists who came out in favor of Mr. Chazen. They were supported by many Wall Street analysts who have complained that the company under Mr. Irani was often secretive.

Mr. Chazen, who previously served as chief financial officer, won the support of many investors because he was viewed as a smart allocator of capital and efficient manager of new projects.

Institutional Shareholder Services, the influential proxy adviser, had recommended that shareholders refuse to re-elect Mr. Irani or Mr. Syriani.

Article source: http://www.nytimes.com/2013/05/04/business/occidental-chairman-irani-agrees-to-leave-company.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Rivals Watch Travails of Shell Arctic Drilling

January 18, 2013 by Leave a Comment

Rival oil companies, as they form their strategic choices, are keenly watching to see how Shell’s $4.5 billion exploratory operation off the North Slope of Alaska is faring and how the effort is working with wary United States regulators.

The answer, so far at least, is not well.

The grounding of the Kulluk was only the latest in an extensive series of Shell missteps that environmentalists say highlight the dangers inherent in prospecting for oil in the unpredictable and severe Arctic environment.

Ken Salazar, the interior secretary, has already expressed what he called a “troubling sense” about Shell’s repeated operational mistakes — the latest being violations of air quality permits by both of Shell’s drilling rigs in Arctic waters last summer.

This week, before announcing that he would step down March 1, Mr. Salazar reaffirmed the Obama administration’s commitment to continued Arctic oil exploration as part of the administration’s so-called all-of-the-above energy policy. But he pointedly left open the timetable for renewed drilling and was noncommittal about whether Shell would remain the primary company involved.

Shell has begun its own internal investigation of its Arctic program, one that company officials say could lead to major changes in its operations in Alaska. “It’s critical that we identify what went wrong and learn from it,” said Curtis Smith, a company spokesman. “Alaskans expect more from Shell and so do we.”

Meanwhile, energy specialists and outside advisers to Mr. Salazar said the administration review, to be completed by March, could result in an outright drilling moratorium similar to the one imposed after the 2010 BP spill in the Gulf of Mexico.

Surging domestic oil and gas production, they say, affords the administration time to go slowly in the Arctic given Shell’s rocky, accident-prone start. Although a pause in the action would be costly to Shell, it would give the company more time to correct the many early operational and regulatory errors.

“We shouldn’t be in a rush,” said Amy Myers Jaffe, executive director of energy and sustainability at University of California, Davis. “We have all these shale resources onshore. We are doing well again drilling in the Gulf of Mexico, so why hurry in Alaska? At the end of any review, they will have to ask themselves: Is this something that can be done safely given the unique challenges of the Alaskan Arctic?”

Senator Mark Begich, Democrat of Alaska, a strong advocate of Arctic oil and gas exploration, said that even a one-year delay would be a “disaster” that would set the drilling program back years.

“Because of the logistical requirements, this could easily be a three-year delay,” he said. “In the Gulf of Mexico, a year means a year. In the Arctic, a year would mean three.”

Shell and the federal government have much at stake. Shell’s six years of effort and investment could put it at the forefront of the next big global oil prospect.

For the Obama administration, the rough start to drilling in the Arctic has called into question the credibility of federal regulation of the oil industry as well as the potential for billions of dollars of royalty payments from Arctic oil and a reduced dependence on imported fuels.

This early phase of Arctic exploration was supposed to be the easy part — drilling low-pressure wells in shallow water during generally benign summer weather. But problems with equipment, transportation, persistent sea ice and poor management have caused many to question whether the infinitely more complex long-term goal of year-round production in the Arctic is even feasible.

Drilling platforms that will operate permanently throughout the year will require engineering robust enough to withstand the brute force of crashing icebergs. Pipelines will need to be designed and laid to connect offshore fields with the Trans-Alaska Pipeline; they will need to be buried deep below the seafloor to protect them from sea ice known to gouge into the seabed.

Article source: http://www.nytimes.com/2013/01/18/business/energy-environment/rivals-watch-travails-of-shell-arctic-drilling.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Chaos in Yemen Drives Economy to Edge of Ruin

June 3, 2011 by Leave a Comment

After four months of mass protests and political deadlock, Yemen — already the poorest Arab country, a place where many people have become accustomed to mere subsistence — has had its domestic oil supplies and electricity network largely cut off by hostile tribes. Gas lines now extend for miles in the capital, Sana, provoking fights and new protests; electricity is available for only a few hours a day. Cooking gas and diesel for generators have also grown scarce, and with food prices rising fast, people have begun hoarding basic supplies, including water.

As foreign currency supplies dwindle, the elaborate system of patronage and corrupt payoffs that maintained a modicum of stability in Yemen is starting to crack, with former loyalists breaking off and fights erupting over a smaller and smaller pool of cash. The embattled president, Ali Abdullah Saleh, desperate to keep his supporters happy, has demanded multimillion-dollar loans from Yemen’s top businessmen in recent weeks, according to Yemeni officials and members of the business elite.

The most fundamental of Yemen’s diverse woes is lack of water. Since the political crisis began in January, the price of water has risen fivefold in some areas, tenfold in others. The drills that pump water from Yemen’s rapidly dwindling underground supplies are falling silent, because the diesel they require has grown so expensive and scarce. The area around Sana is especially arid, and it could become the first capital ever to run out of water, said experts at the World Bank.

“The bigger challenge than the political mess is the economic mess,” said one Western diplomat who spoke on the condition of anonymity under standard diplomatic protocol. Even if the political situation stabilizes, the diplomat said, the opposition’s hopes of increasing foreign investment and changing Yemen’s endemic corruption will not be realized “in one month, six months or even the next year.”

On Thursday, fighting still raged between government troops and opposition tribesmen in Sana. North of the city, government forces used tanks and artillery to repel a large group of armed tribesmen who were trying to reach Sana to aid Mr. Saleh’s rivals, the Ahmar clan. And south of Sana, in the city of Taiz, there were reports that young protesters had begun taking up arms against the government for the first time.

Yemen’s minister of trade and industry, Hisham Sharaf, estimated last week that the crisis had cost the economy $5 billion, or about 17 percent of the country’s 2009 gross domestic product. Another minister, Amir al-Aydarous, said in May that Yemen was “on the verge of an economic catastrophe.”

To make matters worse, Saudi Arabia in April ceased payments in its decades-old system of patronage to Yemeni tribal elders and other leading figures, according to tribesmen and a recent report issued by Chatham House, an international affairs institute based in London. Although the system was much criticized for its erosion of Yemen’s sovereignty, the cessation of payments left many around the country without a vital source of income.

Signs of economic crisis are everywhere. Most restaurants in the capital have closed, along with many businesses. Those companies that remain open complain that banks refuse to lend money. Most businesses stopped paying taxes months ago, according to the Yemeni Chamber of Commerce.

One importer, Anwar Abdullah Jarallah, said that he could no longer get dollars from the bank, and that his international partners wanted all their cash upfront because they were so nervous about being repaid.

“I’m scheduling my order to have, for example, 100 metric tons or something,” Mr. Jarallah said. “I’m going to reduce it to a quarter because I need liquidity. I will import a small quantity just to keep business going.”

Foreigners and the wealthy have moved their dollars offshore, forcing Yemen’s Central Bank to hold onto its declining foreign reserves. That in turn is causing the Yemeni riyal to slide in value. On the black market, the price of a dollar rose to 250 riyals from 217 in just a few weeks.

Economists say that if the riyal reaches 300 to the dollar, an additional 15 percent of Yemen’s 23 million people will be under the poverty line, living on less than $2 a day. Already, an estimated 40 to 50 percent of Yemen’s people are under that line, though reliable statistics are difficult to obtain in Yemen and some economists put the figure even higher.

Since mid-March, when tribesmen allied with the opposition blew up a pipeline and disabled one of Yemen’s two main oil-production facilities, the government has been forced to import almost all of its fuel. (The other main complex is used for exports.) That has further strained the government, which depends almost entirely on dwindling oil reserves for its revenues.

Mr. Saleh’s own financial resources have become a constant source of speculation, since it seems clear that his political survival depends on his ability to keep paying supporters. One Yemeni official said he was approached recently by several foreign ambassadors who demanded to know if it was true that Mr. Saleh had plundered the Central Bank’s foreign currency reserves for his own use. The official told the ambassadors it was just a rumor, he said. But most local economists say they have no idea how much money is left in the Central Bank, as they do not trust government figures.

For the poor, life has grown measurably harder in recent weeks. Marwan Ghazali, a 36-year-old taxi driver, said that he spent three days trying to refuel but that several stations ran out by the time he arrived at the front of the line. “The black market is the only place to buy gas now,” he said, “but I don’t want to buy it there, because they sometimes mix it with water.”

One Yemeni woman who works at an international aid agency said the growing scarcity of water was her greatest worry.

“Without water, everything in the house seems to shut down,” she said. “You cannot wash your clothes or wash the plates or cooking pots after dinner, and I am worried about my own personal hygiene and dignity. Even using the toilet has become a worry. I feel almost like a refugee in my own home.”

Khaled Hammadi and Kawkab Thaibani contributed reporting from Sana, Yemen.

Article source: http://feeds.nytimes.com/click.phdo?i=c6cbc3dd20558ca778bf51866679753d

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Obama to Set Goal of One-Third Cut in Oil Imports

March 30, 2011 by Leave a Comment

The president, in a speech to be delivered at Georgetown University, will say that the United States needs, for geopolitical and economic reasons, to reduce its reliance on imported oil, according to White House officials who provided a preview of the speech on the condition that they not be identified. More than half of the oil burned in the United States today comes from overseas and from Mexico and Canada.

Mr. Obama will propose a mix of measures, none of them new, to help the nation cut down on its thirst for oil. He will point out the nation’s tendency, since the first Arab oil embargo in 1973, to panic when gas prices rise and then fall back into old gas-guzzling habits when they recede.

He will call for a consistent long-term fuel-savings strategy of producing more electric cars, converting trucks to run on natural gas, building new refineries to brew billions of gallons of biofuels and setting new fuel-efficiency standards for vehicles. Congress has been debating these measures for years.

The president will also repeat his assertion that despite the frightening situation at the Fukushima Daiichi reactor complex in Japan, nuclear power will remain an important source of electricity in the United States for decades to come, aides said.

He will respond to members of Congress and oil industry executives who have complained that the administration has choked off domestic oil and gas production by imposing costly new regulations and by blocking exploration on millions of acres of potentially oil-rich tracts both on shore and off.

The administration is not prepared to open new public lands and waters to drilling, officials said, but will use a new set of incentives and penalties to prod industry to develop resources on the lands they already have access to.

The Interior Department on Tuesday issued a paper saying that more than two-thirds of offshore leases in the Gulf of Mexico and more than half of onshore leases on federal lands are unused. Oil industry officials called the paper a smokescreen to cover the administration’s stingy approach to drilling permits.

“This is an effort to distract the American people from rising gas prices and the fact that the administration has been delaying, deferring or denying access to our oil and natural gas resources here at home,” said Erik Milito, the director of exploration policy at the American Petroleum Institute. “Lease sales have been delayed or canceled, and this year, for the first time since 1957, we may not have a single offshore lease sale.”

White House officials indicated that Mr. Obama was turning to energy issues after a period of intense focus on turmoil in Libya and elsewhere in North Africa and the Middle East. He will link them by saying the United States cannot be secure as long as it depends on potentially unstable monarchies and dictatorships for a large part of its daily petroleum diet. The reduction in oil imports he has set as a target — roughly three million barrels a day over 10 years — corresponds roughly to current import levels from the Middle East and Africa.

Presidents since Richard M. Nixon have made this point, and American oil imports have continued to rise, except when slowed by recession.

Republicans in Congress have grown increasingly vocal about the administration’s energy and environment policies, saying they discourage domestic oil and gas development and impose heavy costs on industry in a period of economic angst. On Tuesday, House Republicans introduced three bills to reverse the administration’s offshore oil drilling policies, calling for vast new tracts of offshore territory to be opened to deep-water drilling and for speedier approval of drilling permits.

On the Senate floor, Mitch McConnell of Kentucky, the Republican leader, denounced the president for a variety of alleged energy sins, including telling Brazilian officials last week that the United States would be an eager consumer for its offshore oil.

“You can’t make this stuff up,” Mr. McConnell said.

“Here we’ve got the administration looking for just about any excuse it can find to lock up our own energy sources here at home,” he said, “even as it’s applauding another country’s efforts to grow its own economy and create jobs by tapping into its own energy sources.”

The administration imposed a moratorium on most deep-water drilling activities in the aftermath of the Deepwater Horizon explosion, which killed 11 rig workers and sent nearly five million barrels of oil into the Gulf of Mexico. The Interior Department wrote new safety and environmental rules for offshore drilling and officially lifted the moratorium in October.

The department has now issued seven permits for activities that were halted under the suspension, with 12 other deep-water permits pending. An additional 24 permit applications have been returned to applicants for more information.

Mr. Obama is also expected to renew his call from the State of the Union address to increase the percentage of electricity produced from so-called clean sources to 80 percent from the current 40 percent by 2035. The president’s definition of clean energy includes renewable sources like wind, solar, hydro and geothermal, as well as nuclear, natural gas and coal with carbon capture and storage, an as-yet-unproved technology.

On Friday, the president will appear at a United Parcel Service depot in Landover, Md., to talk about ways to make commercial truck and bus fleets more fuel-efficient and to make greater use of domestically produced natural gas in transportation.

Article source: http://feeds.nytimes.com/click.phdo?i=b2aee37c93b0b798441865037d01c95b

Filed Under: Business News Tagged With: , ,