Shell Doomed Project Scalebacks
From an article byRoyston Wildpublished 15 Jan 2015 by The Motley Fool under the headline:
“Why Royal Dutch Shell Plc And BP plc’s Project Scalebacks Are Doomed To Fail”
With the oil price collapse showing no signs of bottoming any time soon, the world’s fossil fuel giants are in a desperate struggle to ratchet up their cost-saving initiatives and cut their exposure to what is becoming an increasingly perilous market.
Just yesterday, Royal Dutch Shell (LSE: RDSB) announced that it was stopping work on a £4.3bn petrochemicals plant with Qatar Petroleum. Construction of the huge Al-Karaana complex started in 2012, but Shell has been forced to bin the operation due to “high capital costs rendering it commercially unfeasible, particularly in the current economic climate prevailing in the energy industry.”
The Brent benchmark has shed a staggering 60% of its value since the summer, and touched its cheapest since March 2009 at around $45.20 per barrel just this week.
The effect of this ongoing weakness is prompting the City’s brokers to hurriedly take the red pen to their market forecasts, and Bank of America-Merrill Lynch projected just today that Brent could dip as low as $31 by the end of the first quarter. It forecasts an average of just $52 per barrel for 2015.
Undoubtedly, BP and Shell are caught in a delicate balancing act between exercising fiscal responsibility in the face of current market challenges, and maintaining a sturdy earnings outlook by creating a healthy asset base. As a result I believe that earnings forecasts could be subject to severe downgrades in both the near – and long term.
Detoxifying Shell’s online image: Possible or Impossible?
By John Donovan
Royal Dutch Shell has appointed Possible as its global digital agency, starting with corporate brand work.
Seems a safe assumption that one important aspect will be an attempt to detoxify the reputation of Shell, which has recently agreed to pay huge settlements of litigation arising from environmental pollution in Nigeria and the USA. Shell is said to be suffering from buyers remorse on the latter settlement deal.
Shell’s track record stretching back through the decades is horrendous. It includes financial and moral support for some of the most evil regimes in history, starting with Adolf Hitler and the Nazi Party.
The worlds biggest ship, The Pieter Schelte, named after an officer in the murderous Waffen SS jailed for war crimes, is currently having final equipment installed in Rotterdam before starting work for Shell in the North Sea. Shell has not disassociated itself from this obscene affront to the many millions of Jews and other victims, who perished in the holocaust.
Possible will find that there is a certain amount of confusion on the Internet over the online presence of its client. According to some search engines the website on which this article appears is the official Royal Dutch Shell website. Just search Royal Dutch Shell on Bing.
There is also some online confusion about who founded and owns Royal Dutch Shell?
Some would say that the Internet has been poisoned for Shell as a result of it being a relatively low cost medium, which its many detractors, including NGO’s and ordinary people, can use to draw attention to Shell’s activities, including Shell’s plunder, corruption and pollution in Nigeria.
There has also been extensive online coverage of Shell’s disastrous foray into Alaska/Arctic waters.
Lets hope Possible welcomes a challenge. It might prove to be an impossible task.
Oil companies throwing in the towel
“Other companies – including Maersk, Cairn Energy (Scotland) and Shell (the Netherlands) – have postponed their plans for two years while they consider their options.”
From an article by CW published by the Copenhagen Post on 14 Jan 2015 under the headline:
Oil companies throwing in the towel in Greenland
Greenland’s dream of becoming the next oil mecca is fading. Three major energy companies – Statoil (Norway), GDF Suez (France) and Dong Energy (Denmark) – have given up plans to excavate oil in the ocean west of the world’s largest island.
Other companies – including Maersk, Cairn Energy (Scotland) and Shell (the Netherlands) – have postponed their plans for two years while they consider their options. Investing in oil excavation in Greenland is too expensive and uncertain, the oil companies contend.
“Never say never, but taking the current market situation into consideration – combined with the little infrastructure and huge environmental demands and challenging climate in Greenland – it will be very expensive to excavate these fields,” Johannes Finborud, the head of GDF Suez in Greenland, told Politiken newspaper.
BP sees $50 oil for three years
BP can’t be immune to the upheaval. Today its job announcement is focused on the UK. But it won’t be long till it announces staff reductions in Houston, another of its important centres.
Robert Peston article published by BBC News 15 Jan 2015
BP sees $50 oil for three years
BP’s job announcement later today, including a few hundred job losses in Aberdeen, is being made because it does not expect the oil price to bounce any time soon.
The oil price has dropped around 60% since June, to $48 a barrel, and I understand that BP expects that it will stay in the range of $50 to $60 for two to three years.
Although no oil company has a crystal ball, this matters – especially since it has a big impact on its investment and staffing ambitions.
So plans that it had already initiated to reduce costs have taken on a new element, namely postponement of investments in new capacity that have not been started, and shelving of plans to extend the life of older fields where residual oil is more expensive to extract.
Aberdeen is an important centre for BP, and it employs around 4000 there. And it is in no sense withdrawing – it is continuing to invest in the Greater Clair and Quad 204 offshore properties.
But the reduction of several hundred in the numbers it will henceforth employ in the Aberdeen area is symbolic of a city and industry that faces a severe recession.
Hardest hit will be North Sea companies with stakes in older fields, where production costs are on a rising trend – and whose profitable life will be significantly shortened if the oil price does not recover soon.
The reason BP expects the oil price to stay in the range of $50 to $60 for some years is for reasons you have read about here – it is persuaded that the Saudis, Emiratis and Kuwaitis are determined to recapture market share from US shale gas.
This means keeping the volume of oil production high enough such that the oil price remains low enough to wipe out the so-called froth from the shale industry – to bankrupt those high-cost frackers who have borrowed colossal sums to finance their investment.
Only in that way could Saudi could be confident of reinvigorating its market power.
And, as I have also been banging on about, Saudi is not thought to be weeping that a lower oil price hurts its supposed nemesis, Iran, reduces the resources of an an oil-financed Islamic state and mullers the economy of a Russia that it sees as having been too supportive of Syria.
Meanwhile although the US shale industry is in pain, the lower price will probably reinforce the US economic recovery – and the White House doesn’t massively worry that Russia and Venezuela are in dire economic straits.
If BP is right, most big oil-producing companies will have to write off the value of older, more expensive oil fields. That is particularly true of European companies, because of accounting rules here.
In fact BP is less exposed to such losses than many – because it sold $43bn of mostly older oil properties over the past few years, to pay the enormous bills of its Gulf-of-Mexico oil spill.
But BP can’t be immune to the upheaval. Today its job announcement is focused on the UK. But it won’t be long till it announces staff reductions in Houston, another of its important centres.
What we are seeing, therefore, is a massive shift in corporate and economic power, from producers to consumers – with oil-producing countries as robust as Norway wincing and with a massive manufacturer like China quietly grateful that its own difficult economic reconstruction is being oiled (as it were) by the tumbling price of energy.
The TRUTH will set you FREE.
