Shell shelves plan to drill in Alaskan Arctic this summer
“The company has spent huge amounts of time and money on a project that has delivered nothing apart from bad publicity and a reputation for incompetence. The only wise decision at this point is for Mr. Van Beurden to cut his company’s losses and scrap any future plans to drill in the remote Arctic ocean.”
Anglo Dutch oil giant’s new chief executive slashes exploration and development spending as profits fall 71%
Shell has announced plans to slash its exploration and development spending from $46bn (£27.8bn) to $37bn this year and has ditched plans to drill in the Alaskan Arctic this summer.
The cutbacks were unveiled by new chief executive, Ben van Beurden, who said they were part of a range of initiatives to make up for what he described as Shell’s “loss of momentum”.
Van Beurden, who took over from Peter Voser at the turn of the year confirmed that fourth-quarter profits – on a current cost of supply basis – had plunged by 71% to $2.1bn. Annual earnings almost halved to $16.7bn.
The company will increase the pace of overall asset sales, which are expected to be $15bn over the next financial year – both in the exploration and refining sides of the business. “We are making hard choices in our worldwide portfolio to improve Shell’s capital efficiency”, Van Beurden said.
“Our ambitious growth drive in recent years has yielded a step-change in Shell’s portfolio and options, with more growth to come, but at the same time we have lost some momentum in operational delivery, and we can sharpen up in a number of areas,” he added.
The decision to shelve drilling off Alaska this summer will delight environmentalists and is the latest setback for the Anglo Dutch oilgiant in the far north.
It follows a US court ruling that the department of the interior had failed to consider all environmental impacts of the exploration in the Chukchi and Beaufort seas when it gave Shell permission to drill.
“This is a disappointing outcome, but the lack of a clear path forward means that I am not prepared to commit further resources for drilling in Alaska in 2014,” Van Beurden said. “We will look to relevant agencies and the court to resolve their open legal issues as quickly as possible.”
Greenpeace Arctic oil campaigner Charlie Kronick said: “The company has spent huge amounts of time and money on a project that has delivered nothing apart from bad publicity and a reputation for incompetence. The only wise decision at this point is for Mr. Van Beurden to cut his company’s losses and scrap any future plans to drill in the remote Arctic ocean.
“Shell’s Arctic failure is being watched closely by other oil companies, who must now conclude that this region is too remote, too hostile and too iconic to be worth exploring.”
Van Beurden will be under pressure to give a wider explanation of the company’s plans and problems when he faces investors and media later on Thursday.
Meanwhile Shell said it had distributed more than $11bn to shareholders in dividends and repurchased $5bn of shares in 2013.
Reflecting confidence in the potential for free cash-flow growth in 2014, the company said it was expecting the first quarter of 2014 dividend to be $0.47 a share, an increase of over 4% compared with the same period of 2013, and total dividends announced in respect of 2014 to be potentially more than $11bn.
The basic financial results were known two weeks ago when the company issued a shock profit warning.
At the time the Anglo Dutch group blamed a whole host of issues, including higher exploration costs, security problems in Nigeria, a high dollar exchange rate as well as heavier than anticipated maintenance work on liquefied natural gas (LNG) plants.
City analysts did not to react strongly to the bad news believing it was largely part of a traditional “kitchen sinking” of all the bad news by an incoming chief executive.
But Nick Butler, a former energy adviser to No 10 and now a columnist with the FT, said this explanation was unlikely and yet he questioned what had changed so quickly since a benign third-quarter presentation on 31 October.
“Anything less (than a full and detailed explanation today) will reinforce the impression that there is a governance problem which has left top management and directors out of touch with the operations of the business,” he wrote earlier this week.
Shell is traditionally seen as an extremely cautious company, although it had its own brush with scandal almost exactly 10 years ago when the company was accused of fiddling its reserve figures.
The company has already said it will make up to $15bn of divestments in an effort to concentrate on higher value assets. On Wednesday it announced its latest sale of a stake in a Brazilian field to Qatar for $1bn. Shell has also recently sold off $1bn interests in the Wheatstone LNG scheme in Australia, is reviewing some of its US shale gas holdings, and there is speculation that it is losing heart with its huge but trouble-hit Nigeria business.
Shell Puts Its Arctic Plans on Ice
SHELL GETS COLD FEET
Royal Dutch Shellwon’t drill in the U.S. Arctic this year.
A combination of afederal appeals court ruling and a need toget a handle on booming costs appear to have been the straws that broke the camel’s back.
FULL ARTICLE SUBJECT TO SUBSCRIPTION
Shell profit warning – the shock that wasn’t
In a mix and mingle of rational and strange explanations, while distancing himself as the ‘New Man’ from what happened under previous CEO Peter Voser, the new CEO firstly blamed lower oil and gas prices, which for oil is a strange claim. Shell’s supposedly ‘shocking’ admission its profits will be low for several years – many analysts cite 2017 as the year when the ‘annus horribilis’ will end – cannot be treated as surprising. This was above all a disaster waiting to happen, and it happened.
New CEO Admits
Shell’s new CEO Ben van Beurden has admitted corporate performance in 2013 was not what he expected from the group. Just two weeks after taking over the helm at end-December, he gave what journalists and commentators called ‘a shock profit warning’, saying that full-year profits excluding ‘special items’ could be about 25% below 2012′s performance. For the 4th Quarter of 2013 Shell’s earnings before special items fell by about 50%.
In a mix and mingle of rational and strange explanations, while distancing himself as the ‘New Man’ from what happened under previous CEO Peter Voser, the new CEO firstly blamed lower oil and gas prices, which for oil is a strange claim. He went on to widen his claims by saying that Shell is exposed to “weak industry conditions” in downstream oil, unexpected costs in its drive to become the most natural gas-oriented of the oil majors, higher exploration and infrastructure expenses, higher corporate risks, especially in Iraq, and lower upstream production volumes.
The group’s third- and fourth-quarter 2013 earnings figures were badly hit by a 3Q 49% drop in downstream profits, blamed on adverse refining conditions, both in North America but especially in Europe, due to structural refining overcapacity and weak energy demand. Van Beurden also cited the huge upstream asset writedowns made in 2013.
Shell was quickly accused by some analysts of ‘kitchen sinking’, that is rushing to pump out the bad news, hoping investors will think the worst is over and past.
Van Beurden said these special items ran at $700m for 4Q 2013, and at $2.7bn for the full year. When these massive writedowns, which will continue through 2014 are included in 2013 corporate figures, fourth-quarter earnings will be about 70% lower than one year before. Full year 2013 earnings, at about $16.75bn will be down by around 38% compared with 2012.
Despite Shell issuing its first-ever profits warning in more than 10 years, next day trading on 17 January only clipped its share price by about 3%. This was in part due to van Beurden’s frequent references to his drive for ‘better capital efficiency’, which for analysts and major investors has to mean Shell will cut back on its runaway capex (capital expenditure) program. This spending in 2013 racked up a total of $44bn, compared with total corporate turnover of $40.3bn.
Shell and the Gas Bubble
In early November 2012 at London’s Royal Institution, outgoing CEO Voser hammered the ‘go for gas’ strategy Shell has pursued since the 1990s. He argued that Shell – as an integrated energy major – is creating value from the whole production supply chain, and the corporation sets gas growth as the jewel in the crown. He defended the gas strategy with the argument that sustained investment through the implied oil-gas value cycle is what shareholders want, not a stop-start strategy. Voser also repeated the corporate conviction that investment in gas exploration, production, processing and supply were ’30-year assets’, and Shell was not in the business of chasing ‘short-term volume targets or market share’.
From before Voser’s time as CEO, and almost certainly through new CEO van Beuren’s watch, Shell has a few fixed or recurring corporate traumas, starting with the fear Europe will be left behind in the global dash for gas, becoming a continent completely reliant on volatile imports, while the rest of the world races towards gas self-sufficiency. Shell strategists believe Europe’s decreasing domestic gas production is structural – due to policy if not geology – and the continent now has a stark choice between importing more gas or allowing shale gas to be developed.
In his early November presentation to London’s Royal Society, ex-CEO Voser repeated another fixed belief of Shell’s corporate strategists. They imagine gas demand is growing so fast in Europe the continent may be left behind for signing up a share of future gas production among the worldwide flurry of new stranded gas finds and shale gas development.
Voser was simply talking about reality when he signalled the massive rate of global gas finds, and extended reserve revisions as gas E&P progresses, with huge finds or reserve extensions since 2009 in countries as wide ranging as Mozambique, Tanzania, Azerbaijan, Iraq, Australia, Qatar, Iran, Brazil and elsewhere. But his claim that European gas demand is on a tear is light years from reality. European gas demand is falling. Growth potential for gas in Europe is at best modest.
Worse still for Shell, global gas demand growth has repeatedly failed its major economic challenge – that is the expectation, or gas producers’ hope that consumption will increase despite slowing economic growth, reduced industrial output and outplacement, cheap coal supplies, the renewables, energy saving, and several other demand-trimming factors. Gas failed this challenge. Teflon-style growth of global gas demand is no longer the case, even if it held previously.
Shell’s corporate policy statements and reviews on its dash for gas are now at best ‘forward looking statements’, based on the energy world before at latest 2012. Investors may want to more carefully scrutinize these assertions and claims, today.
Two specific gas sectors are easily identified as creating the most serious challenges for Shell on the downstream side, GTL or gas to liquids conversion, and gas-fired power production in a few large markets, especially Europe and Japan. On the upstream side, as partly-admitted by van Beuren, the scramble for gas drilling acreages, and the following serial increase of development costs often generating veritable capex explosions, and nearly always stretched completion schedules which sometimes double the number of years needed, has made many attractive prospects turn very sour.
Divest and Survive
Runaway capex, stretched project schedules, declining or stagnant oil and gas market outlooks, and increasing country risk in key operating countries are among the reasons Shell has been forced into a very active divestment program. It is estimated by some analysts as possibly running to 30 billion dollars through 2012-2015.
Official divestment goals as announced by new CEO van Beuren are for sales of assets able to raise $15 billion over 2 years. Already known to some journalists and analysts, this will inevitably target ‘mature upstream assets’, especially in the now capex-intensive ‘drilled out’ North Sea and a large slice of Shell’s refining portfolio in Europe and the US. Some of this concerns non-performing assets which are likely to stay that way, unless huge new capex is thrown at the problem.
More important for Shell’s gas strategy, corporate triage will winnow out a lengthening list of projects moving up the investment decision ladder, that are now considered too risky or overpriced – at the same time as corporate spokespersons have said there is no question of Shell reducing its goal of $130 bn of capex spending through 2012-2015. Project triage, due to the urgency of reducing Shell’s runaway spending profile, may well extend from project types with a probable continuation of Shell’s retreat from refining and oil production, to a complete retreat from selected large geographic regions. Analysts suggest the first to be abandoned by Shell may be Australia and West Africa, particularly Nigeria. But a near-total retreat from the North Sea production and European refining is also not impossible.
Contradicting corporate confidence in a shining near-term future for gas, Shell is also cutting back its US shale gas operations. It said in September that it was selling its acreages and production shares in the large Eagle Ford and smaller Mississippi Lime shale zones. The corporation has also shelved or delayed prospective agreements for LNG gas transport and terminals development with US, Canadian and international energy partners.
Corporate capex triage, in part due to unexpectedly long project development schedules and high costs in the gas sector, has focused Shell to higher risk projects offering higher possible returns. These particularly concern Iraq, where Shell is focusing oil, gas and petrochemicals development.
In mid-November, ex-CEO Voser announced that Shell and the Iraqi government were close to cementing a deal to build an $11 billion petrochemical complex named Nebras in southern Iraq in what will be biggest move by Shell in Iraq’s energy sector. The project inevitably carries large and increasing country risk. The Nebras project may be used by the Nouri al-Maliki government in Baghdad as a bargaining chip in the lengthening number of disputes that it has with Shell, and the other majors operating in Iraq on revenue sharing, production increases, infrastructure spending and other issues. .
The Shock that Was Not A Surprise
Shell cannot be wrongfooted for its corporate conviction that global gas had to grow. Among the oil majors, it is now the most gas-intensive producer and has global reach in gas reserves, transport and downstream assets, and value-add through gas-based petrochemicals. Shell is also a world leader in GTL (gas to liquids) conversion. Its Malaysian Bintula plant, opened in 1993, is a model for this conversion technology, now upstaged by the Shell-Qatar joint venture Pearl GTL project, the biggest GTL producer in the world.
This can be called the good news. Its Bintula GTL plant, for which simply repairs to a major accident in 1997 cost about $1 billion, produces about 17 000 barrels a day of a range of fuel and nonfuel liquids, pricing this technology into a special cost dimension utterly dependent on almost-free natural gas for breakeven. The same applies to the Pearl GTL venture. If the gas is free, GTL works.
As Shell has found, literally to its cost, LNG ventures have a troubling habit of massive cost overruns and stretched completion schedules. Reasons why the corporation may wind down and divest its Australian production operations are summarized by the three-letter word LNG.
Among non-American oil majors, Shell was fast off the block in moving into US shale gas production, but as Exxon Mobil through its gas subsidiary XTO Energy, as well as the USA’s biggest gas producer Chesapeake Corp quickly found, along with other producers like Shell, the US shale bonanza can leave a lot of red on company balance sheets. Overall, US gas is too cheap, but Royal Dutch Shell can do nothing about it.
Shell’s capex spending spree sprang from a pre-2012 optimistic look at world energy to 2020, in which gas ‘had to grow’, which it will but at a slower rate, and not in the way Shell hoped. Corporate project planning and management also suffered from the worst kinds of over-optimism, as one example resulting in Shell’s new and risky bet on Iraq, which by supreme irony has made strident demands for Shell to increase its gas production in the country!
Perhaps not surprising for an oil major with a European HQ, Shell’s focus on Europe has repeatedly produced over-optimistic and irrational corporate forecasts of energy demand recovery in Europe, led by gas, followed by project decisions on that wrongheaded basis. Corporate reading of Europe’s energy transition plans believed firstly that emissions trading would hold up giving an edge to gas-fired power production, and that European refining infrastructures would get major and sustained EU and member state support for critically needed makeovers and restructuring. None of this happened in the real world.
Shell’s supposedly ‘shocking’ admission its profits will be low for several years – many analysts cite 2017 as the year when the ‘annus horribilis’ will end – cannot be treated as surprising. This was above all a disaster waiting to happen, and it happened.
SOURCE: Monday, January 20, 2014
Shell Profit Drops 48% as Oil and Gas Production Declines
Shell will need to slash investments and boost cash flow to meet its $130 billion net capital-expenditure target for 2012-2015.
Jan 30, 2014 7:14 AM GMT
Royal Dutch Shell Plc (RDSA), Europe’s largest oil company, said profit plunged 48 percent on exploration expenses and lower production.
Profit excluding one-time items and inventory changes was $2.9 billion in the fourth quarter, down from $5.6 billion a year earlier. That matches the drop Shell forecast on Jan. 17 because of losses in the Americas, lower refining margins and production disruptions in Nigeriaand elsewhere.
“Its Americas growth strategy –- the home for 50 percent of past investment –- woefully underdelivering under the weight of dead capital,” Lucas Herrmann, a London-based analyst at Deutsche Bank AG, said before the earnings report. “Corporate change could release huge value.”
Chief Executive Officer Ben van Beurden, who took over from Peter Voser this year, has accelerated asset sales with two deals announced this month. He must cut record spending to reduce costs and win investor confidence after The Hague-based Shell issued its first profit warning in a decade this month.
Shell earnings are “significantly below recent profitability and matching the lowest level since fourth-quarter 2009,” Oswald Clint, an analyst at Sanford C. Bernstein & Co. in London, also said before the earnings report. Van Beurden needs “to explain how results will improve from here, following three quarters of disappointing earnings.”
Sell Assets
The Anglo-Dutch company, which plans to dispose of about $15 billion in assets, has agreed to sell holdings valued at about $2.1 billion in Australia and Brazil. It’s seeking buyers for interests in oil and gas fields, in pipeline, fuel-refining and marketing assets from the U.S. to Nigeria. It may also exit its investment in Woodside Petroleum Ltd. worth about $6.3 billion.
Shell will need to slash investments and boost cash flow to meet its $130 billion net capital-expenditure target for 2012-2015. It has two years left to generate 60 percent of the $200 billion forecast cash flow for the period, according to Neill Morton, a London-based analyst at Investec Securities Ltd.
Of the 29 analysts that cover the company, 14 recommend buying the shares, 14 have hold ratings and three advise selling the stock.
The company will hold a webcast of fourth-quarter earnings at 2:30 p.m. London time.
To contact the reporter on this story: Eduard Gismatullin in London ategismatullin@bloomberg.net
To contact the editor responsible for this story: Will Kennedy atwkennedy3@bloomberg.net
Nigeria: Bonga Oil Spill – FG Fines Shell $11.5 billion
Shell Nigeria Exploration and Production Company, SNEPCO, was, yesterday, ordered by Nigerian Maritime Administration and Safety Agency, NIMASA, and the National Oil Spill Response and Emergency Agency, NOSREA, to pay a total of $11.5 billion, about N1.84 trillion, as fines and compensation for the 2011 Bonga oil spill incident.“The kind of impunity Shell and its allies have demonstrated so far in the Niger Delta area in the past must stop if the future of the people of Nigeria and the environment are to be protected.”
By Godwin Oritse, 30 January 2014
Shell Nigeria Exploration and Production Company, SNEPCO, was, yesterday, ordered by Nigerian Maritime Administration and Safety Agency, NIMASA, and the National Oil Spill Response and Emergency Agency, NOSREA, to pay a total of $11.5 billion, about N1.84 trillion, as fines and compensation for the 2011 Bonga oil spill incident.
Speaking at a public hearing organised by the House of Representatives Committee on Environment, Mr. Patrick Akpobolokemi, Director General, NIMASA, said the maritime agency calculated a total of $6.5 billion, about N1.04 trillion, as compensation to be paid to the communities affected by the spill.
Meanwhile, the Director General of NOSREA, Mr. Peter Idabo said that on its part, it fined Shell $5 billion, about N800 billion for the oil spill incident.
Explaining his experience during the investigation of the spill, the NIMASA boss said that Shell tried as much as possible to frustrate the agency’s moves to get to the site of the spill, adding that the agency had to step in immediately after the spill by providing some stop gap measures such as providing relief materials to some of the communities.
He lampooned Shell and its allies over their nonchalant attitude towards the spill and called on the organisation to take responsibility for its actions and ensure that such does not repeat itself.
He said: “The kind of impunity Shell and its allies have demonstrated so far in the Niger Delta area in the past must stop if the future of the people of Nigeria and the environment are to be protected.
“And in other climes when spills like this occur, the first thing is remuneration, attention to the affected communities and finding ways of reducing the suffering of the people and restoring the eco-system, but Shell fell short of all these criteria and of course, it is sad that it is only in Nigeria that we can witness this degree of impunity.”
Shell scraps controversial exploration programme in Alaska
Capital spending will fall to $37 billion this year from $46 billion in 2013, Shell said, adding that for the time being it was also scrapping a controversial exploration programme in Alaska.
Shell to cut spending and step up disposals in 2014
Jan 30 (Reuters) – Anglo-Dutch oil company Royal Dutch Shell on Thursday said it would step-up disposals and cut spending as it seeks to win back investors with a new focus on returns, less than two weeks after a shock profit warning.
Shell, the world’s no. 3 investor
owned oil company, earlier this month issued a “significant” profit warning for the quarter to the end of December, detailing across-the-board problems just weeks into the tenure of new boss Ben van Beurden.
owned oil company, earlier this month issued a “significant” profit warning for the quarter to the end of December, detailing across-the-board problems just weeks into the tenure of new boss Ben van Beurden.
“Our overall strategy remains robust, but 2014 will be a year where we are changing emphasis, to improve our returns and cash flow performance,” van Beurden said in a statement.
Capital spending will fall to $37 billion this year from $46 billion in 2013, Shell said, adding that for the time being it was also scrapping a controversial exploration programme in Alaska.
The company said it would increase the pace of asset sales, targeting disposals of $15 billion this year.
sales, targeting disposals of $15 billion this year.
“We are making hard choices in our world-wide portfolio to improve Shell’s capital efficiency”, van Beurden said.
To woo investors, it plans to raise its first quarter dividend by 4 percent compared with the same period last year to $0.47 per share, in a move which it said reflected its confidence in its ability to boost free cash flow.
Fourth quarter earnings excluding identified items and on a current cost of supply basis came in at $2.9 billion, in line with a downgraded profit expectation it gave on Jan. 17, and making the quarter its least profitable for five years.
New Shell CEO Ben van Beurden sets agenda for sharper performance and rigorous capital discipline
The recent Ninth Circuit Court decision against the Department of the Interior raises substantial obstacles to Shell’s plans for drilling in offshore Alaska. As a result, Shell has decided to stop its exploration programme for Alaska in 2014. “This is a disappointing outcome, but the lack of a clear path forward means that I am not prepared to commit further resources for drilling in Alaska in 2014,” van Beurden said.
Thursday, January 30, 2014
Speaking to investors today, new Shell CEO Ben van Beurden updated on the company’s priorities: improving Shell’s financial results and achieving better capital efficiency, as well as continuing to strengthen operational performance and project delivery.
Van Beurden, who became the new CEO of Royal Dutch Shell plc (“Shell”) on 1 January 2014, said Shell’s strategy overall is sound. The company has a high quality portfolio and key strengths in technology and project delivery. Shell will continue to invest in new projects that deliver more energy to customers, and create value for shareholders. The strategy is designed to deliver through-cycle growth in cash flow, to drive competitive returns and a growing dividend.
Van Beurden said: “Our ambitious growth drive in recent years has yielded a step change in Shell’s portfolio and options, with more growth to come, but at the same time we have lost some momentum in operational delivery, and we can sharpen up in a number of areas.”
“Our overall strategy remains robust, but 2014 will be a year where we are changing emphasis, to improve our returns and cash flow performance”, he continued, highlighting three priorities:
- Improved financial performance, including restructuring in some areas of the company
- Enhancing capital efficiency, with hard choices on new projects, reduced growth investment, and more asset sales
- Continued strong delivery of new projects, and integration of recent acquisitions.
The landscape the company had expected has changed. Factors such as the worsening security situation in Nigeria in 2013, and delays to non-operated projects in several other countries, have altered the outlook. Oil prices remain high globally, but North America natural gas prices and associated crude markers remain low, and industry refining margins are under pressure. Restructuring and improving profitability in North America Upstream resources plays, and Oil Products world-wide, is a particular focus for the company.
The recent Ninth Circuit Court decision against the Department of the Interior raises substantial obstacles to Shell’s plans for drilling in offshore Alaska. As a result, Shell has decided to stop its exploration programme for Alaska in 2014. “This is a disappointing outcome, but the lack of a clear path forward means that I am not prepared to commit further resources for drilling in Alaska in 2014,” van Beurden said. “We will look to relevant agencies and the Court to resolve their open legal issues as quickly as possible.”
The company will increase the pace of asset sales, which are expected to be $15 billion for 2014-15 combined in Upstream and Downstream. “We are making hard choices in our world-wide portfolio to improve Shell’s capital efficiency”, van Beurden said.
With a changing operational landscape and the streamlining of Shell’s portfolio, the company will no longer be updating against previous cash flow and net spending targets. “I want Shell to be measured on our competitive performance”, van Beurden said.
Capital spending will be reduced. In 2013, this totalled $46 billion, including $8 billion of acquisitions. In 2014, Shell expects total capital spending of around $37 billion, including $2 billion of previously announced acquisitions.
Innovative large-scale projects such as Pearl gas-to-liquids have been the main drivers behind Shell’s recent increase in cash flow, which reached over $87 billion in 2012-13 combined, an increase of 35% on 2010-11. Recent start-ups and Shell’s latest projects and acquisitions – dominated by liquefied natural gas, and deep-water oil in the Gulf of Mexico, Brazil and Malaysia – are expected to build on this growth in 2014.
Shell has distributed more than $11 billion to shareholders in dividends and repurchased $5 billion of shares in 2013. Reflecting confidence in the potential for free cash flow growth in 2014, the company is expecting the Q1 2014 dividend to be $0.47/share, an increase of over 4% compared to Q1 2013, and total dividends announced in respect of 2014 to be potentially over $11 billion.
Shell Abandons U.S. Arctic
LONDON—Royal Dutch Shell PLC on Thursday said it would abandon drilling in the U.S. Arctic, as it reported a 71% decline in fourth-quarter profit largely because of rising costs and lower oil and gas volumes.
The oil major’s decision to halt a project in offshore Alaska comes after a federal appeals court ruled last week that the U.S. government improperly relied on “inadequate information” in the process of awarding licenses for exploration there, which the company said Thursday “raises substantial obstacles to Shell’s plans.”
FULL ARTICLE SUBJECT TO SUBSCRIPTION
Shell 4Q earnings fall 74 percent
AMSTERDAM — Shell’s earnings have dropped by 74 percent in the fourth quarter from the same period a year ago, on a mix of higher exploration costs, lower production, and worse refining margins.
The company, which warned on Jan. 17 weaker figures were coming, also had more one-time gains in 2013. Net profit for the quarter was $1.78 billion (130 billion euros), versus $6.73 billion a year earlier.
The earnings report, the first featuring new Chief Executive Ben van Beurden, noted that production was down 5 percent to 3.25 million barrels per day. Shell said 2 percentage points were due to wells shut in Nigeria for security reasons, Shell said, and the rest due to other maintenance and “asset replacement activities” — old fields fading faster than new projects came online.
Copyright 2014 The Associated Press. All rights reserved.
Posted in: Associated Press, Ben van Beurden, Oil Company Profits, Profits Warning,Royal Dutch Shell Plc.Shell Arctic plans at risk
Almost every legal option in dealing with the appeals court decision will take time, however, and Shell may be running out of time, for this year at least. The company must begin making commitments soon to contractors and suppliers if it is to get its drill fleet ready to move north in July.
Shell Arctic plans at risk after 9th Circuit Court tosses EIS
By Tim Bradner, Alaska Journal of Commerce: Published: 2014.01.29 02:32 PM
A Jan. 22 U.S. 9th Circuit Court of Appeals ruling could invalidate a key section of the Environmental Impact Statement on the 2008 Chukchi Sea Outer Continental Lease Sale, throwing a wrench into planning by Shell to return to the Arctic this summer.
The U.S. Interior Department, the defendant in the case, could ask the Ninth Circuit for a hearing before the full court, as the Jan. 22 decision was not unanimous among a three-judge panel.
Alternatively, the case could be returned to the Alaska U.S. District Court, where Judge Ralph Beistline had earlier approved the EIS for the lease sale.
A coalition of 13 environmental groups and two tribal groups, the Native Village of Point Hope and the Inupiat Community of the Arctic, had brought the lawsuit.
Almost every legal option in dealing with the appeals court decision will take time, however, and Shell may be running out of time, for this year at least.
The company must begin making commitments soon to contractors and suppliers if it is to get its drill fleet ready to move north in July.
Approvals of an expenditure to mobilize a fleet of two drill ships and 20-odd support vessels must come soon, and it might involve a commitment of several hundred million dollars.
Shell has already laid out about $5 billion on its Arctic exploration program including $2.3 billion spent to acquire the Chukchi Sea leases in 2008.
If the decision of the three-judge panel isn’t reversed, the U.S. Bureau of Ocean Energy Management, the Interior Department agency which is responsible for OCS leasing, may have to prepare a new Environmental Impact Statement.
That could take 18 months to 24 months.
Any delay for Shell is also a delay for ConocoPhillips and StatOil, which also have plans to drill Chukchi Sea OCS leases those companies hold.
What’s at issue now is the size of an oil field the Interior Department estimated was most likely in the Chukchi Sea as a first discovery. The agency concluded that a one billion barrel find was reasonable.
Environmental groups contesting the sale argue that the agency should have used a higher figure, including the possibility that more than one field will be developed. The majority opinion of the 9th Circuit panel agreed, saying the federal agency used an “arbitrary and capricious” method for settling on one billion barrels in the lease sale EIS.
The figure is important because all of the analyses of environmental effects of the lease sale are based on that assumption.
Neither Shell or the BOEM would comment on the appeals court ruling, but the environmental plaintiffs were quick to offer their opinions.
“We think they should go back and do a full EIS, or redo the one they have. The flaw in the assumption infects the entire analysis,” said Erik Grafe, an attorney with Earthjustice, an environmental law firm helping represent the plaintiffs.
“Right now the ball is in the agency’s court,” he said.
Grafe said the Interior Department may be in a weak position to assert the one billion-barrel figure because the agency made estimates in 2006 that as much as 12 billion barrels might be developed in the Chukchi Sea at an $80 oil price.
“The Interior Department should reevaluate its decision to offer leases in the Chukchi Sea in light of the higher risks,” he said.
The lawsuit has been around a long time. Environmental plaintiffs won the first round in challenging the adequacy of the EIS in 2010. The Interior Department redid the document, which took about 15 months.
The supplemented EIS got the approval at Judge Beistline’s court, but the plaintiffs appealed it to the 9th Circuit.
Meanwhile, BOEM issued permits and Shell moved ahead with its 2012 drilling based on the U.S. District Court approval.
Arguments were heard at the appeals court last March, and the decision was made by the three-judge panel on Jan. 22. Judge Ferdinand Fernandez and Judge William Fletcher agreed with the plaintiffs while Judge Johnnie Rawlinson dissented.
Rawlinson reasoned that judges should not substitute their own opinions for the expertise of government agencies in scientific determinations.
“We do not sit as a panel of super-scientists to dissect the agency’s analysis,” he wrote. “There is no such thing as a ‘perfect’ estimate and BOEM was not required to adopt a different benchmark in the face of its critics.”
Tim Bradner can be reached at tim.bradner@alaskajournal.com.
Tesoro, Shell Oil settle lawsuit from families of killed workers
The attorney representing the families of six of the seven refinery workers killed in an explosion in 2010 said they’ve settled a wrongful death lawsuit against Tesoro and Shell Oil Company. The families claimed the company deliberately ignored dangerous conditions at the Anacortes refinery that led to the blast, killing seven workers. Attorney David Beninger said the lawsuit settled last month for around $39 million and the money was divided among the families.
by JAKE WHITTENBERG / KING 5 News
NWCN.com: Posted on January 29, 2014 at 9:12 AM
The attorney representing the families of six of the seven refinery workers killed in an explosion in 2010 said they’ve settled a wrongful death lawsuit against Tesoro and Shell Oil Company.
The families claimed the company deliberately ignored dangerous conditions at the Anacortes refinery that led to the blast, killing seven workers. A contractor who was burned but survived was also included in the suit.
Attorney David Beninger said the lawsuit settled last month for around $39 million and the money was divided among the families.
Beninger said a separate suit against Lloyd’s Register Energy, a company hired to examine the refinery’s naphtha hydrotreater unit, is still scheduled for trial later this year.
The Chemical Safety Board conducted an investigation and found that at the time of the blast a bank of heat exchangers was being brought online in the unit when another heat exchanger failed, spewing highly flammable hydrogen gas that quickly ignited.
The CSB has planned a public listening session in Anacortes for January 30th, where investigators will present results of the investigation to the board and provide safety recommendations. Several families have expressed concerns about the length of time it’s taken to complete the investigation.
The accident at Tesoro was the most deadly U.S. refinery incident since the 2005 explosion at BP Texas City that killed 15 workers and injured 180 others.
Iraq and Iran plot oil revolution in challenge to Saudi Arabia
Iraq’s goal of pumping 9m barrels a day of crude could be a game changer for oil prices and British companies: British oil giants BP and Royal Dutch Shell are also poised to benefit from Iraq’s ambitious production plans. Both companies are already managing two huge oil fields in southern Iraq which are vital if Baghdad is to achieve its goal.
By Andrew Critchlow: 1:32PM GMT 28 Jan 2014
Iraq is poised to flood the oil market by tripling its capacity to pump crude by 2020 and is collaborating with Iran on strategy in a move that will challenge Saudi Arabia’s grip on the Organisation of Petroleum Exporting Countries.
“We feel the world needs to be assured of fuel for economic growth,” Hussain al-Shahristani, Deputy Prime Minister for Energy in Iraq told oil industry delegates attending a Chatham House Middle East energy conference.
Al Shahristani said on Tuesday that Iraq plans to boost its capacity to produce oil to 9m barrels a day (bpd) by the end of the decade as Baghdad rushes to bolster its economy, which is still shattered by war and internal conflict. Iraq was producing 3m bpd in December, according to the International Energy Agency.
Iraq’s intention to challenge Saudi Arabia’s status as the “swing producer” in the OPEC cartel could see a dramatic fall in oil prices if Baghdad decides to break the group’s quotas and sell more of its crude on the open market.
“It’s very difficult to predict actual world (oil) demand by 2020 because the world economy is unpredictable,” said Mr al-Shahristani.
British oil giants BP and Royal Dutch Shell are also poised to benefit from Iraq’s ambitious production plans. Both companies are already managing two huge oil fields in southern Iraq which are vital if Baghdad is to achieve its goal.
However, even if Iraq is able to achieve its target of boost production capacity it is unlikely to be able to put in place sufficient pipeline and port infrastructure to export the additional crude.
Iraq’s main export terminal for loading oil tankers at Al Faw near Basra will require billions of pounds worth of improvements in addition to the refurbishment of its pipeline network.
Iraq’s ambitious plan could see it clash increasingly with the regime in Saudi Arabia, which has used its influence in OPEC over the last decade to keep oil prices above $100 a barrel. Saudi itself is now under pressure to boost output to maintain market share. The kingdom pumped 9.8m bpd in December up by about 100,000 barrels from the previous month.
Experts say that attention within OPEC, which pumps 30pc of the world’s crude, could increasingly focus on compliance with more of the group’s members tempted to pump more barrels to protect their share of the market as the cartel grapples with the rise of US shale oil production.
OPEC agreed in early December to renew for six months its 30m bpd output cap for the first half of the year to keep prices above $100. However, quotas have in the past proved difficult for OPEC as a group to enforce without any binding penalties for over-producing. Since its restoration to OPEC following the 2003 Gulf War, Iraq has been excluded from the group’s quota system to allow its economy to recover but pressure is mounting for it to comply this year.
The International Monetary Fund this week warned that Iraq’s weak economy remains vulnerable to fluctuations in oil markets. Crude oil exports account for 93pc of government revenues. The IMF estimated that Baghdad required an average oil price of $106.1 per barrel in 2013 to balance its budget, up from $95 in 2011 because of higher spending.
Despite Mr al-Shahristani’s hopes for boosting Iraq’s energy sector there are severe concerns over security amid fears the country may again be slipping toward a civil war between Sunni and Shia Muslim factions.
In a further challenge to Saudi Arabia, which is mostly closed to international oil companies, Mr al-Shahristani revealed that Baghdad is working with Iran to help it attract investment ahead of the possible lifting of sanctions. Oil companies are understood to be queuing up to win Iranian oil deals.
“Iran has been in touch with us,” said Mr al-Shahristani. “They want to share our contracts model and experience.”
Combined, Iran and Iraq hold greater reserves of oil than Saudi Arabia and the potential with the help of international investment to match its capacity to produce oil, which currently stands at around 12.5m b/d of crude.
Links to a selection of recent articles relating to Royal Dutch Shell
Links to a selection of recent articles relating to Royal Dutch Shell kindly supplied by a regular contributor
Benchmark in Jeopardy: Oil & Gas Journal-Jan 27, 2014: … by increasing the volatility of an important crude oil price marker. … unveiled investigations into suspicions that representatives of Shell, BP, …
Price-rigging probes jammed by oil industry bid to protect its secrets: Environment & Energy Publishing-Jan 17, 2014: Shell and Vitol, the Switzerland-based multinational oil trader, are pressing the 2nd U.S. Circuit Court of Appeals to reverse a lower court ..
Oil field fumes so painful, Alberta families forced to move: The Vancouver Observer-:… recalls the first winter in 2011 when the fumes from oil tanks near his … includes operators Shell Oil, Penn West, Murphy Oil, and Husky Oil.
Cambridge University condemned by Greenpeace after Vice …: Cambridge News-Sir Leszek Borysiewicz has received “with gratitude” £3.8 million from multinational oil company, Shell, and £260,000 from Russian gas giant …
Audubon Magazine-:What’s more, the staging area for offshore oil operations–Barrow, … In August 2012 Shell’s dilapidated oil-spill response barge, the Arctic …
Efficiency drive hurting Shell: The Australian-Jan 24, 2014: During that time Shell committed billions of dollars to local investments and Pickard became one of the Australian oil and gas industry’s most ..
Why the oil industry wants the US to export crude: The Globe and Mail-Jan 23, 2014: For 40 years, U.S. leaders have fretted about the country’s dependence on oil imports and vowed to pursue energy independence. Now, even ..
A Dangerous Arctic Shell Game: OnEarth Magazine-Jan 23, 2014: For $2 billion, the Interior Department sold Shell the rights to drill for oil over nearly 30 million acres of the sea floor, estimating that there were…
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