The TRUTH will set you FREE.
Wednesday, January 22, 2014
Tuesday, January 21, 2014
JOHN DONOVAN JANUARY 21, 2014 ARTICLES
Shell EP: The lame being led by the blind
So the shock of not becoming number one was too big for Andy Brown. I wish him a speedy recovery and thereafter he should go spend quality time with his family and enjoy his earnings. Wetselaar is no doubt a brilliant finance man. But a finance man is really a failed banker, not good enough for the real thing… And this brilliant fellow will ‘lead’ the whole upstream as a part-time job? Has Shell not learned from the past what happens if you put beancounters in charge?
Shell rethink on LNG looms large
Whether it is 400 or 600 staff that are destined for redundancy (depending on which rumour you believe) there is a clear pattern that Arrow (Shell’s investment vehicle in Queensland LNG) in a joint venture with PetroChina is looking to downgrade its expenditure in Queensland.
Elizabeth Knight: Business columnist: January 21, 2014
The new management broom at Shell’s head office is arguably going to have a bigger impact on Australia than the changing of the guard at even a large local company.
Shell’s new international boss is clearly rethinking the economics of the company’s Australian investments – which includes Woodside, the refinery operations in Geelong, but more immediately the $20 billion Queensland-based LNG and various West Australian LNG projects.
Development of LNG was what the government was betting on to replace a large portion of investment in iron ore and coal as a driver for economic growth.
However, economic sanity must prevail and the year ahead will see this industry consolidate.
The clear message is that when it comes to LNG, Shell is having a major rethink. Monday’s whispers are that the costs of this project simply don’t stack up – and the talk for months has been about how or whether this project is viable.
Whether it is 400 or 600 staff that are destined for redundancy (depending on which rumour you believe) there is a clear pattern that Arrow (Shell’s investment vehicle in Queensland LNG) in a joint venture with PetroChina is looking to downgrade its expenditure in Queensland.
Shell is not alone in its plans to revisit LNG plans in Queensland.
The various consortiums, including Origin, Santos and BG, are feeling the pain of cost overruns and access to gas, having developed plans to turn this region into an LNG hub several years ago.
Since that time the cost of pursuing gas has skyrocketed and the prospect of cheaper supplies from the United States has further dampened the economics of these projects.
The likelihood of the US becoming energy self-sufficient, thanks to massive emerging reserves of shale gas and oil, and potentially becoming a net exporter has shifted the tectonic plates in the world energy industry.
It is now incumbent on the various LNG producers to reduce their cost of doing business and shore up their customer base as US producers will be competing for their share of the Asian energy market.
Shell is the last cab off the rank in Queensland LNG, which puts it in an interesting position. It is best able to ditch the project and it is also tail-end Charlie if it chooses to stay in the game and find new partners.
The clear path ahead is to consolidate these various projects or in some way develop them with the prospect of sharing infrastructure or gas supplies.
Shell has some gas suppliers lined up so it remains in the game. Plus it has a big balance sheet.
But Shell’s focus on return on assets cements the view that something has got to change.
Its newly installed chief executive, Ben van Beurden, will be updating the market on the detail of his plans in March – and it will be one of the more important announcements for Australia this year. There has been plenty of talk that the three big LNG projects in this region, the leaders of which have been Origin, Santos and BG, will ultimately undertake some form of consolidation.
The question remains as to whether Shell will stay in the game. It has the financial might to buy any of the aforementioned players. But equally it may decide to sell out and cop a hit on the billions of dollars it has already invested.
Van Beurden has just issued a company profit downgrade and will be looking to prove to his investors that his strategy can provide some short-term improvements to earnings.
The previous management has already outlined the potential sale of its Australian refinery assets and there is an expectation that the downstream retail petrol stations will also emerge on the chopping block.
But how it proceeds with LNG is a far bigger issue for the Australian economy.
The investment community has been pretty clear about the fact that we cannot support four new LNG projects in Queensland. Not only is feedstock gas supply an issue but the various players have built unsustainable costs into their businesses.
Shell is in the box seat to determine how the LNG industry plays out in Queensland and to a lesser extent in Western Australia.
While this is still the big game, the potential sale of Shell’s 23 per cent of Woodside will occupy the minds of investment banks and the West Australian group’s shareholders. The capital expenditure requirements in West Australia’s Browse project must also come under Shell’s capital microscope.
The TRUTH will set you FREE.
Monday, January 20, 2014
RENEWABLE ENERGY
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Comment posted by “Stuart” on 2014/01/21 at 21:14