Nigerian Parliament Fines Shell 3.96 Billion

Nigerian Parliament Fines Shell 3.96 Billion For Bonga Oil Spill

Nov 29th, 2014 

by John Donovan. 

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Published: November 29, 2014 at 6:55 am EST
By: Micheal Kaufman

Nigeria is a member of the Organization of Petroleum Exporting countries and is the largest crude oil producer in Africa. At one point, the country had a great demand for its oil exports in the US and enjoyed high profit margins. However, the US shale oil boom has taken this advantageaway from Nigeria. The hydraulic fracturing techniques have allowed the US to produce oil that is quite similar in composition to the oil produced in Nigeria, reducing its reliability on Nigeria for oil imports.

Furthermore, Nigeria has experienced a fall in foreign investments as major investors like Royal Dutch Shell plc (ADR) (NYSE:RDS.A) are now involved in asset divestitures due to the oil theft in the region. Recently, Shell also decided to shut down a pipeline due to leakage, which has been a major source of oil revenue for the country. Therefore, the country is going to suffer heavily following Shell’s actions.

In pre-market trading today, Shell’s shares of Class “A” American Depository Receipts (ADR) dropped 6%. Over the past three months, Shell stock has declined 11.6%.

However, it seems that Nigeria is not going to let go of Shell that easily. Nigeria’s National Assembly has bombarded the oil giant with a $3.96 billion fine. The fine has been imposed as a punishment for the 2011 oil spill in the Bonga oilfield in which Shell’s subsidiary, Shell Nigerian Exploration and Production Company, was involved.

Numerous state agencies of Nigeria have spent a lot of time analyzing and researching the oil spill. Initially, the agencies felt that the fine should have been $11 billion. However, the assembly finalized a penalty of $3.96 billion after going through a report by the National Oil Spill Detection and Response Agency (NODRA).

According to NODRA’s report, around 40,000 barrels of oil were spilled in 2011. The oil spill covered an area of 950 square kilometers and heavily disrupted the environment. Before the spill, the Bonga oilfield had been producing 200,000 barrels of oil per day. Local fishermen who heavily relied on fishing in the area were also severely affected.

Although Shell initially assumed responsibility for the spill and cleaned the area, decided not to comment over the recent development. The company on several occasions was approached by the environmental committee over the issue but was constantly rejected by the company. Therefore, the committee decided to use NODRA’s report as a lead agency in the oil spill management.

Other than the Bonga oilfield spill, Shell was also alleged of involvement in two oil spills in the Niger delta in 2008. In June, the company offered $51 million in compensation, which was rejected. The compensation was offered to the 15,000 individuals living in the Bodo community.

Shell is bound to face considerable pressure owing to the newly-imposed fines. The United Nations Environment Program has consistently blamed the European energy company for not dealing with the Nigerian spills in an efficient manner. How Shell will react to the non-binding fine remains to be seen. However, one thing is certain that the Nigerian Government is not going to let Shell divest its assets and leave the country without paying a heavy price.

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Posted in: Africa, Bidness Etc, Environment, Litigation, Nigeria, Oil, Pollution, Royal Dutch Shell Plc, Shell.
Tagged: Niger Delta · Nigeria · Oil · Royal Dutch Shell Plc

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Oil company revenues set to drop

Oil company shares slumped

Nov 29th, 2014 

by John Donovan. 

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OPEC’s decision on Thursday not to cut production in order to prop up oil prices sent markets reeling. Oil company shares slumped, wiping billions off firms’ market value… As they come to terms with the new oil regime, companies will cut spending by up to 10 percent in 2015… and delay new project approvals.

LONDON, Nov 28 (Reuters) – With oil company revenues set to drop on the back of a rout in prices, boards will have to cut investments and increase borrowing to maintain their cherished dividend payouts.

OPEC’s decision on Thursday not to cut production in order to prop up oil prices sent markets reeling. Oil company shares slumped, wiping billions off firms’ market value and leaving dividend payouts as the only solace for shareholders.

The world’s top oil companies, or majors, including BP , Royal Dutch Shell, Total, ExxonMobil and Chevron are already in the midst of a painful belt-tightening process.

The majors have hacked back spending and sold assets worth around $150 billion over the past four years, increasingly relying on that income to reward shareholders.

COST CUTTING

As they come to terms with the new oil regime, companies will cut spending by up to 10 percent in 2015… and delay new project approvals.

FULL ARTICLE

RELATED REUTERS ARTICLE

REUTERS: Billions wiped off energy shares as investors rush for exit

Extracts

LONDON (Reuters) – A fresh slide in the price of crude wiped tens of billions of dollars off oil companies’ market value on Friday and signalled an end to the sector’s safe-haven status, as fears mounted over future profits and dividend payouts.

Fund managers described the last 24 hours of trading as “capitulation” – the point at which a sell-off becomes widespread and panic-driven – as investors reassessed whether the sector could keep gushing cash after OPEC’s decision not to cut oil production to fight a supply glut.

“Oil stocks are currently in the final phase of capitulation,” said UniCredit strategist Christian Stocker.

Oil prices have been sliding for months, but the pain has mostly been felt by oil-services suppliers rather than majors like Royal Dutch Shell or Total. Investors maintained some faith in them based on their record of paying reliable dividends. That faith appeared to erode on Friday, when $33 billion in market capitalisation was wiped off the sector in Europe. Norway’s Statoil fell 8.2 percent, BP 3.7 percent and Shell 3.3 percent.

FULL ARTICLE

New York Times: Free Fall in Oil Price Underscores Shift Away From OPEC

HOUSTON — Since the economically crippling oil embargo of 1973, every American president has pledged to seek and achieve energy independence.

That elusive goal may finally have arrived, at least for the foreseeable future, with the failure of Saudi Arabia and its 11 oil cartel partners in the Organization of the Petroleum Exporting Countries to agree to a production cut that would put a brake on plummeting crude prices.

On Friday, the benchmark American price for crude oil continued the free fall that began on Thursday, closing at $66.15, its lowest price in more than four years.

The inability or unwillingness of OPEC to act showed that the cartel was no longer the dominating producer whose decisions determine global supplies and prices. Suddenly, the United States — which is poised to surpass Saudi Arabia as the world’s top producer, possibly in a matter of months — is in that position, although the resiliency of that new command must still be tested.

“This is a historic turning point,” said Daniel Yergin, the energy historian. “The defining force now in world oil today is the growth of U.S. production. The outcome of the OPEC meeting is a clear indication that the oil exporters now recognize that this is a new market.”

FULL ARTICLE

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Posted in: BP, Chevron, Exxon Mobil, New York Times, Oil, Oil Company Profits, Oil Prices, OPEC, Profits Warning, Reuters, Royal Dutch Shell Plc, Shale Gas, Shale Oil,Shell, Total.
Tagged: BP · Chevron · ExxonMobil · Royal Dutch Shell Plc · Total

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What hit Africa more than Ebola?

Falling oil prices hit Africa more than Ebola

Nov 28th, 2014 

by John Donovan. 

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By Ed Cropley

JOHANNESBURG, Nov 27 (Reuters) – Plunging world oil prices have dealt a blow to Africa far greater – in purely economic terms – than Ebola, setting back investment in exploration and plans to industrialise.

The highest profile victim so far has been Africa’s top producer, Nigeria, which was forced to devalue its naira currency by 8 percent this week after the central bank admitted dwindling reserves were making it hard to defend it.

In dollar terms, the devaluation knocked $40 billion off the value of Nigeria’s economy – considerably more than the $32 billion worst-case scenario the World Bank projected in October for Ebola’s economic impact on the entire sub-Saharan region.

FULL ARTICLE

RELATED

Oil price plunges after Opec split keeps output steady 

Oil prices have crashed to a new four-year low, below $72 per barrel, after a major split inside Opec forced the cartel to hold production at current levels rather than make cuts to try to turn the market around.

The Opec oil price still matters (just not as much as before)

Opec has less clout than it once did, partly due to the importance of non-Opec producers such as Russia and partly because of the shale revolution in the US. Members of the cartel have different interests, with Saudi Arabia better placed to deal with lower prices than Venezuela or Iran. But Opec still matters: witness the fall in oil prices as it became clear that there would be no production curbs emerging from the current meeting in Vienna.

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Posted in: Africa, Nigeria, Oil, Oil Prices, Reuters.
Tagged: Nigeria · Oil · Oil Prices

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WHAT after the 2010 Deep Water Horizon oil spill disaster?

Big Oil Optimistic On Gulf Of Mexico Projects

Nov 28th, 2014 

by John Donovan. 

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After the 2010 Deep Water Horizon oil spill disaster, it seems that economic activity in the Gulf of Mexico has picked up again as big oil companies, like BP and Shell, have started to undertake major projects in the region

Published: November 25, 2014 at 7:13 am EST

By: Micheal Kaufman

The Gulf of Mexico used to be the hub of US crude oil and natural gas industry, before the Deep Water Horizon oil spill in 2010. BP plc (ADR) (NYSE:BP) along with Transocean Ltd (NYSE:RIG) and Halliburton Company (NYSE:HAL) got involved in a massive oil spill in 2010, which killed 11 people and caused major environmental damages. The 2010 oil spill is estimated to be 8-31% larger than Ixtoc 1, which has now become the second-largest oil spill to have occurred in the region.

In 2001, the Gulf of Mexico accounted for one-quarter of the US crude oil and natural gas production. However, after the oil spill production has declined by almost 50%. The oil spill has probed the US government to take necessary precautionary measures and issue fewer permits to avoid future similar incidents.

It has been four years since the spill and now big companies have started to step in the region again with their projects. However, the companies are more prepared now and have undertaken costly projects. One such project was the Olympus tension leg platform (TLP), which was initiated in the region with Royal Dutch Shell plc (ADR) (NYSE:RDS.A) and BP partnering up, having a 71.5% and 28.5% ownership, respectively.

The project was estimated to be completed by 2015 but the production of oil and gas processing started earlier from February 2014. The Olympus tension leg contains 48 wells and weighs more than an aircraft carrier. The estimated capacity of the leg is around 100,000 barrels of oil equivalent per day, which constitutes 3% of Shell’s global production.

Other companies have also decided to undertake projects in the region despite the 30% decrease in oil price since June. Hess Corp. (NYSE:HES) has started to pump crude oil from its deep water Tubular Bells of Gulf of Mexico for the next ten years. Exxon Mobil Corporation (NYSE:XOM) and Anadarko Petroleum Corporation (NYSE:APC) have collaborated on two major projects to commence in December.

The combined projects of oil giants like Exxon Mobil, Chevron Corporation (NYSE:CVX), and Hess Corp are said to amount to 900,000 barrels per day (bpd), surpassing the total oil and gas production in California. Hess is also planning to undertake a $6 billion Stamped project.

Although the companies are optimistic and active regarding their ongoing projects, they are still at a disadvantage. Oil price has declined substantially and its future seems uncertain. The rise and fall of oil price depends on the outcome of the November 27 OPEC meeting.

Compared to 2010, production costs are 25% higher now. Companies are drilling deeper than before, causing them huge overheads. However, the companies now undertake greater precautionary measures and use extra bundles of valves to stop a well if it goes out of control. Moreover, production is estimated to be 13% slower now due to an increase in inspections and maintenance of the wells.

The production from the Gulf of Mexico region is expected to reach 1.9 billion bpd by the end of 2016 but after that growth is expected to decline due to higher costs. This coupled with low oil price does not indicate good prospects for the oil industry. However, Shell’s Executive Vice President of Deep Water, John Hollowell, remains optimistic with the oil industry and predicts higher fuel demand in the future.

SOURCE ARTICLE

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Posted in: Bidness Etc, BP, Chevron, Environment, Exxon Mobil, Gulf of Mexico, Oil,Royal Dutch Shell Plc.
Tagged: BP · Chevron · ExxonMobil · Gulf of Mexico · Oil · Shell

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Shell admits fracking failure

Shell admits fracking failure in Ukraine

Nov 28th, 2014 

by John Donovan. 

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By John Donovan

The Russian News Agency Tass is reporting that Graham Tiley, the country manager of Shell Ukraine has admitted in a meeting with a local high-ranking official that Royal Dutch Shell has failed to achieve the desired progress in the Yuzovka gas field in Ukraine’s east.  Tiley blamed the fracking failure on the situation in the neighbouring Donetsk region.

TASS REPORT

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Posted in: Fracking, Gas, John Donovan, Royal Dutch Shell Plc, Russia, Shale Gas, Shell,Shell Project Delays, Ukraine.
Tagged: Gas · John Donovan · Royal Dutch Shell Plc · Russia · Ukraine

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