Royal Dutch Shell Feeling the Pain
Extracts from a Motley Fool article by Rupert Hargreaves under the headline: “Did ExxonMobil Make the Right Decision About Europe?”
Feeling the pain
There’s no company that is feeling the pain more than Royal Dutch Shell (NYSE: RDS-B ) . Shell’s CEO, Ben van Beurden previously described the company’s refining sector results as “unacceptable.” It’s easy to see why.
During the first quarter of this year, Shell revealed a $2.9 billion charge to earnings, mainly due to writedowns on its refineries in Asia and Europe reflecting a poor outlook for refining margins.
What’s more, during the quarter the company’s downstream division reported a year-on-year slump in earnings of 15%, mainly as a result of tighter refining margins.
The problem is cost. US refineries have been given huge advantage by the shale boom. US domestic crude is priced at a discount to Brent, so according to data from ExxonMobil, crude accounts for around 60% of costs for refineries within Europe. Within the US, this figure is as low as 30%.
Reflections on the notorious Kashagan ‘Cash All Gone” project
By John Donovan
In view of the recent shattering news from the jinxed Kashagan project…
…it is interesting to reflect back on the situation as it was in 2007, reported in this Reuters article by Tom Bergin.
It seems that not much has changed.
It also explains why Royal Dutch Shell ended up issuing a profits warning and launching a fire sale of assets, following a succession of disastrous projects mired by incompetence.
4 Sept 2007
(Reuters) – A Royal Dutch Shell Plc (RDSa.L) executive working on Kashagan, a project under pressure from the Kazakh government for being overbudget and behind schedule, has quit, company sources told an unofficial company Web site.
John Donovan, who runs a Web site critical of Shell and acts as a conduit for whistleblowers at the company, said Shell insiders had told him that John Stubbs, a senior project manager on Kashagan, had left the Anglo-Dutch oil major.
Stubbs previously worked for Shell in Nigeria, where he had a leading role in the $3.6 billion Bonga oil and gas project, and the North Sea, where he was project director on the 876 million-pound ($1.8 billion) Shearwater gas development, which Shell said was up to 10 percent below budget.
A Shell employee told Donovan by email that Stubbs was one of an “elite band of great project management heroes” who had recently left Shell, leaving the company with a lack of talent to deliver on the big projects it is relying on for growth.
Shell said it was unable to confirm his departure.
The start of production at Kashagan has been delayed until the second half of 2010 from an initial 2005 target. Its cost has escalated from $57 billion to $136 billion, according to the Kazakh energy ministry.
The Kashagan consortium, led by Italy’s ENI SpA (ENI.MI), has blamed industry inflation and complex geology for the cost overruns, but Kazakhstan accuses them of mismanagement and is pressing for compensation.
Respond To Shell Allegation Of Non-Release Of Ogoni Remediation Funds
ARTICLE BY LARA ADEJORO PUBLISHED 8 JULY 2014 BY THE DAILY TIMES OF NIGERIA
The disclosure by Shell Petroleum Development Company (SPDC) that the Nigerian government was frustrating the release of funds for the implementation of the United Nations Environmental Programme (UNEP) Assessment on Ogoniland has come as a rude shock and the Ogoni people demand an answer, the Environmental Rights Action/Friends of the Earth Nigeria (ERA/FoEN) has said.
Augustine Igbuku, the Ogoni Restoration Project Manager for SPDC told the House of Representatives Committee on Environment that Shell was willing to contribute to the $1 billion Ogoni Restoration Fund but was being frustrated by the lack of government structure and a legal framework for the Hydrocarbon Restoration Project (HYPREP), the ad hoc intervention agency set up by the same government.
The Shell official also identified lack of work plan by the Ministry of Petroleum Resources for the proposed cleanup and the utilization of the funds as part of the delay.
But in a press release issued in Lagos, ERA/FoEN said, “we find the Nigerian government’s laid-back attitude to the remediation exercise very sad and bewildering because while Shell tries to absolve itself from the current impasse it actually benefits from the Nigerian government inaction while the Ogoni environment and people suffer”.
ERA/FoEN Executive Director, Godwin Uyi Ojo said: “We strongly believe this is complicity. Is it not an irony that while the rest of the world clamors for global binding mechanisms to hold transnationals like Shell accountable for environmental atrocities, the Nigerian government is demonstrating its unwillingness to compel the same company to act in this frustration game being played out? This kind of foot-dragging and summersaults on an issue that bothers on the lives and livelihoods of the people of Ogoni is so worrisome”
Ojo explained that: “we lament this assertion and the level of complicity. While the blame game continues, it is environment and the Ogonis that suffer from this neglect. Like we had mentioned during the recent visit of the Dutch Minister for Foreign Trade and Development Cooperation, Mrs. Lilianne Ploumen, during her visit to Port Harcourt on 16th June, 2014 we want Shell’s home government to compel the company and the Nigerian government to come up with feasible and realizable plan of action on the cleanup.”
“ERA/FoEN position clearly stated during Ploumen’s visit is that the communities are willing to engage positively with the polluter and the Nigerian government but they remain shut out in this game of rigmarole on the cleanup and remediation exercise proposed by UNEP which is expected to take 30 years to complete”
He reiterated ERA/FoEN demands which are:
• The Nigerian government should as a matter of urgent national importance set up the Ogoniland Environmental Restoration Authority to oversee the implementation of the recommendations of the UNEP Assessment.
• The establishment of the Centre of Excellence for Environmental Restoration in Ogoniland to promote learning in other areas impacted by oil contamination in the Niger Delta and elsewhere in the world to run training courses in environmental monitoring and restoration and ultimately become a model for environmental restoration, attracting international attention.
• The Nigerian government should review all the National Oil Spills Detection and Response Agency (NOSDRA) enabling laws to make it the sole agency for handling all oil spill-related issues management including taking steps to ensure that oil spills does not occur, and when it does, proper remediation and environmental recovery is carried out and impacted communities and individuals adequately restituted. The funding structures of NOSDRA should be reviewed for effective discharge of its functions.
Shell ending investments in gas development project in Saudi Arabia
Reuters article published by ArabNews.com Monday 7 July 2014
DUBAI: Royal Dutch Shell is ending investments in a gas development project in Saudi Arabia, complicating the top oil exporter’s efforts to exploit its huge gas reserves.
The search for gas has been a priority for Saudi Arabia as it struggles to keep pace with rapidly rising domestic demand.
But the emergence of the shale gas industry has opened up more lucrative opportunities for energy companies elsewhere.
“Shell has decided to end further investment in the Kidan development,” it said in a e-mailed statement.
“This was a difficult decision but Shell remains committed to the Kingdom and we are keen to grow our investments, both in upstream and downstream.”
Shell did not give a reason for the decision to shelve the joint venture in the Kidan area of the Empty Quarter, the sea of sand dunes that cover south-east Saudi Arabia.
Last year, industry sources said the company was set to end investments in the venture due to disagreements with the government over terms.
At least three foreign firms — Italy’s, Spain’s Repsol and France’s Total — have already abandoned the search for commercially viable gas deposits in that part of Saudi Arabia.
Shell has stuck it out longer in its South Rub Al-Khali Co. (SRAK) project with Saudi Aramco after finding small quantities of gas.
Kidan is rich in sour gas and is near the 750,000 barrels per day (bpd) Shaybah oilfield, one of the biggest in the country. Sour gas has high levels of potentially deadly hydrogen sulphide and therefore is tougher to produce than conventional gas reserves.
The relatively high cost of developing challenging deposits in a country where gas sales prices are fixed at a fraction of probable production costs were possible reasons to discourage Shell too, industry sources familiar with the matter told Reuters last year.
Saudi Arabia, which holds the world’s fifth largest proven reserves of gas, expects domestic demand for natural gas — which it uses mainly for power generation — to almost double by 2030 from 2011 levels of 3.5 trillion cubic feet per year.
The TRUTH will set you FREE.
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