Royal Dutch Shell profiting from Sultan’s absolute rule in Oman

5 Mar 2011 admin

Unrest has reached Oman, the usually “sedate” and “tranquil” Sultanate on the southeastern corner of the Arabian Peninsula. Inspired by uprisings in Tunisia, Egypt, Libya and Bahrain, Omani youth took to the streets to challenge government corruption, cronyism, unemployment and a lack of democracy. Protests spread across the desert country, with police firing bullets and teargas from helicopters, killing at least six demonstrators. Sultan Qaboos exercises absolute power over his kingdom, as he has for forty years since he deposed his father.

Political parties are banned, as is collective bargaining. Omani subjects can’t hold a public meeting without the government’s approval, or express criticism of the sultan in any form or medium. Publication of books is limited and the government restricts their importation and distribution.

This all adds up to a profitable business environment for Shell. The company was the first to drill in Oman in 1956 and exported its initial tanker load of 543,000 barrels of crude in 1967, only three years before Qaboos ibn Said overthrew his father Said ibn Taimur.

Today, Shell still dominates the oil scene in the sultanate. Although other companies including BP are extracting gas, 80% of Omani crude is extracted by PDO – Petroleum Development Oman. Royal Dutch Shell is the primary foreign shareholderin this joint venture, controlling a 34% stake alongside the government’s 60% holding. Shell staff fill key positions, including Managing Director Raoul Restucci and Exploration Director Martin Stäuble. The company takes around 200,000 barrels of crude per day – 5% of its global production – from a relatively risk free and highly profitably operation. Shell also played a key role in establishing, constructing and running Oman’s two LNG (liquefied natural gas) plants – Oman LNG and Qalhat LNG – near the coastal town of Sur that has seen repeated demonstrations.

Having worked closely with Sultan Qaboos’ regime for the past forty years, Shell has developed an ongoing symbiotic relationship with the despotJohn Malcolm, the Managing Director of PDO and Shell most senior representative in the country until 2010, demonstrated his allegiance to the crown in an obsequious introduction to the company’s 2007annual report:
“I would like to give special thanks to Your Majesty for your unflagging support and wise guidance to PDO over the years. Looking forward, our challenge as a Company is to work hand-in-hand with Your Majesty’s Government to secure our capability to produce oil and gas for the next 40 years. […]

As we move towards an ever more complex and challenging future, we know that we can count on Your Majesty’s continuing support and guidance. For our part, we reaffirm our commitment to securing the future of the Sultanate of Oman under the wise leadership of Your Majesty.”

Shell’s close partnership with the Omani government is part and parcel of Britain’s foreign energy policy towards the region. The Sultan long always been an anglophile, having attended school in Kent, trained as a British officer at Sandhurst and served in the British Army in Germany in 1960. Today, sports pavilions bear his name at both Sandhurst and the RAF officers’ college, Cranwell. But the military relationship went much deeper than educating a young Qaboos.

Back in 2001, Ken Silverstein described in Salon how “the British have played an extraordinary role in Oman ever since the coup. For more than a decade afterward, British officers commanded all branches of Oman’s armed forces and hundreds more were “on loan” to the sultanate. No one was more influential in Oman than Timothy Landon, an officer in the British Special Air Services who was a classmate of the sultan’s at Sandhurst, the British military academy. He counseled the sultan on the coup, helped put down a leftist insurrection soon afterward, and later served as the rough equivalent of Oman’s national security adviser.”

This military support is not a thing of the past. The foreign office boasts in an article titled “The UK & Oman: our relationship”, that “The UK has a very strong defence and security relationship with Oman. Nearly 100 British military personnel are on loan to the Omani Armed Forces – the second largest such group anywhere in the world.”

Such military support is integrated with British government efforts to boost the interests of “our companies”. Only last Saturday, as protests were beginning to sweep the country, Lord Stephen Green, UK trade and investment minister,accompanied a a high-profile British business delegation including oil corporation representatives to Muscat.

What do Omanis really think of the Sultan? Media reports claim that most of Qaboos’ subjects only have praise for the Sultan, reserving criticism for his ministers. But only weeks before Mubarak’s fall, analysts failed to detect how broad and deep opposition to his rule ran. And in the days prior to the Day of Rage in Libya, most reporting claimed that Gaddafi held the allegiance of most Libyans and that a widespread uprising was impossible. With Shell and the FCO both favouring stability and their long, “unique” relationship with the regime, they’re banking on the country remaining “sedate” and “tranquil”.

Focus Areas