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Tuesday, February 24, 2015

Oil and gas industry in ‘bleak’ 2014, finds survey

Oil and gas industry in ‘bleak’ 2014, finds survey

Screen Shot 2015-01-31 at 08.53.48FROM A BBC ARTICLE PUBLISHED 24 FEB 2015

Oil and gas industry in ‘bleak’ 2014, finds survey

The UK offshore oil and gas industry has reported its worst annual performance for four decades.

Industry body Oil & Gas UK said falling oil prices and rising costs meant the sector spent and invested £5.3bn more than it earned from sales during 2014.
That outflow of cash was the biggest since massive investment in platforms in the 1970s preceded the flow of oil.
The body’s annual survey also indicated that investment in the industry is set to fall this year, as well as drilling.
Oil & Gas UK said the “bleak” findings emphasised the urgency of government action to secure the industry’s long-term future.
Although drilling of 25 wells was expected last year, only 14 took place, continuing a downward trend. Only 50 million barrels of viable reserves of oil or its gas equivalent were discovered.
This year, Oil & Gas UK members expect between eight and 14 exploratory wells to be drilled, and only five wells to appraise initial discoveries.
This points to a steep drop in investment in developing new reserves and extending current offshore fields.
The survey also showed that:
  • Investment last year reached £14.8bn, which was higher than expected due to cost and project over-runs.
  • It is forecast to fall to between £9.5bn and £11.3bn during this year. Feedback from offshore operators suggests very little new investment is expected to be given the go-ahead during 2015.
  • Annual investment could fall as low as £2.5bn within three years, once the current wave of large projects enters production.
  • Production of oil and gas fell by only 1% during 2014, following sharp falls over the previous three years. Due to recent high investment levels, it is expected to rise by 1% during this year.
  • Operating costs continued to rise during last year, up by 8% to £9.6bn.
The cost per barrel extracted has risen to a record high of £18.50. That is expected to fall as the industry cuts back on its costs, including a controversial move to change rota patterns for offshore workers.
It is claimed that cost and efficiency measures need to improve by up to 40% per barrel of oil if there is to be a sustainable future for the UK’s offshore sector.
Oil & Gas UK chief executive Malcolm Webb said: “Even at $110 per barrel, the ability of the industry to realise the full potential of the UK’s oil and gas resource was hamstrung by escalating costs, an unsustainably heavy tax burden and inappropriate regulation.
Screen Shot 2015-02-24 at 11.20.22
“At current oil prices, we now see the consequences only too clearly.
“Without sustained investment in new and existing fields, critical infrastructure will disappear, taking with it important North Sea hubs, effectively sterilising areas of the basin and leaving oil and gas in the ground.”
Screen Shot 2015-02-24 at 11.21.14
From 2010 until mid-2014, world oil prices had been fairly stable, at about $110 a barrel. But since June, prices fell below $50 and have recently been trading at around $60.
This has been driven by weak demand in many countries due to insipid economic growth, coupled with surging US production, and a break from past behaviour by oil exporting nations, by keeping production up rather than cutting it to maintain the price.
Responding to the report, a UK government spokesman said: “The Oil & Gas UK report underlines the need for a concerted and joined-up approach between the government, the Oil and Gas Authority and industry to ensure investment and exploration in the UK North Sea continues and is able to get through this difficult period.
“The UK government recognises how important the North Sea is, both in terms of the thousands of jobs it supports and the benefit it brings to the UK economy.
“The package of fiscal changes and initiatives announced by Treasury in early December shows the government understands the challenges and is on the front foot in dealing with them.”
Scotland’s Energy Minister Fergus Ewing said: “This report highlights the long overdue and urgent action on taxation and regulation, which the UK government must deliver to give the industry the certainty it needs to protect jobs and investment.
“It is encouraging that Oil and Gas UK expect the first annual production increase in 15 years to happen this year.
“However, to sustain North Sea activity over the longer term, exploration levels must improve and long-term investment must be sustained to ensure that sufficient new production comes on stream.
“This should help to protect future tax receipts and ensure a fair return to the nation.”
RELATED BBC ARTICLES
The Big Oil Drop




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Shell Replaced Only 26% Of Its Produced Reserves In 2014

Shell Replaced Only 26% Of Its Produced Reserves In 2014

Screen Shot 2015-02-24 at 11.00.06From an article by Zoltan Ban published 23 Feb 2015 by Seeking Alpha under the headline:

Shell Replaced Only 26% Of Its Produced Reserves In 2014

Summary

  • Shell replaced only 26% of its produced reserves in 2014.

  • The three year average rate of reserve replacement is 67%.

  • Even with potential for growth in the downstream, Shell is likely to undergo a continued process of shrinkage as a company in the longer term.

Royal Dutch Shell (RDS.ARDS.B) produced 1.2 billion barrels of oil equivalent in 2014. Only 26% of that was replaced with new reserves, which means that just over 300 million barrels of oil equivalent were added. Over the past three years, 67% reserve replacement was achieved, which looks much better, but still suggests that Shell is a shrinking upstream producer (link).
Shrinking oil production has already been a well-established trend with this company since 2010, but the current low reserve replacement ratio suggests that there is much worse to come.
Screen Shot 2015-02-24 at 10.52.36
Data source: RDS.
Aside from the fact that reserves are declining, the quality of those reserves is very different compared to reserves already on the books. Increasingly, we are looking at unconventional reserves such as shale oil & gas, as well as deep water fields that are very expensive to develop. Enhanced recovery from old fields also features prominently in the company’s reserve replacement strategy.
We should keep in mind that these reserve additions were achieved during a year when the second half saw a constant slide in prices, therefore we should be mindful of the fact that the rate of reserve replacement should improve if the price of oil will recover to the $100/barrel range we experienced in the past half a decade or so. The 2014 reserve replacement rate is in part a reflection of lower oil prices in the second half of the year. Shell data shows us that even in the preceding years, it failed to replace 100% of the reserves produced. If prices will stay well bellow $100 for the foreseeable future, it is very likely that reserve addition will suffer a similar fate to 2014, this year and most likely next year as well.
This trend of shrinking reserves should have been foreseen as Shell struggled to make a number of frontier projects happen. It sold its Catarina play in the Eagle Ford to Sanchez Energy (NYSE:SN) last year, admitting that it was unprofitable. It gave up on trying to produce oil out of Kerogen and it also put its arctic drilling program in Alaska on hold. Given the relative difficulty faced by many multinational oil & gas companies in trying to tap new conventional reserves, it would have been very good news for Shell if some of the unconventional or frontier plays would have worked out.
Production decline rate to mirror decline in reserves.
As we can see from the above graph, there is already a well-established production decline trend in place for some years now. The rate of decline will in fact start to accelerate as the reserve base Shell is basing its production on declines as well. Given that in the next few years and for the foreseeable future oil & gas prices will likely be volatile and on average significantly lower than the $100 oil price plateau we saw in the past four years, reserve additions will also be significantly lower than in past years.
It is hard to predict what the exact extent of this decline in reserves and therefore production will look like, but given that Shell only managed to replace about two thirds of the reserves it produced in the past three years, I think it is also reasonable to expect that production will be about a third lower a decade from now. The current reserves of 13.1 billion barrels of oil equivalent are only enough to last for about a decade, therefore a decade from now, production will in theory more or less reflect the current and future reserve addition volumes. The picture will worsen significantly if future rate of reserve replacement will become more like what we saw in 2014.
Future revenue potentially hit by lower production and possibly lower prices. Downstream may be bright spot.
With lower oil & gas production, revenues have also been taking a hit in the past few years. After hitting a record of $484 billion in 2011, it has been sliding steadily for three years in a row and we already know that 2015 will be a terrible year given oil prices.
Screen Shot 2015-02-24 at 10.53.34
Data source: RDS.
As we can see, even in the 2012-14 period, revenues were down, year after year, even though the price of oil remained on the $100 plateau for most of that time. Now with production in decline and the price of oil likely to be more volatile and generally lower on average than the $100 level which companies started to take for granted, it is probable that Shell will never manage to surpass the revenue level it achieved in 2011.
There is increasing evidence that Shell is in a permanent state of shrinkage and what is worse, it seems that its debt level, while very manageable at the moment, given the size of the company, is on an increasing path in the past few years and given the current oil price environment, this year and possibly next year as well will not only show a continuation of the trend but also an acceleration.
Screen Shot 2015-02-24 at 10.54.21
Source: RDS.
The downstream segment.
If there is a potential bright spot out there for Shell in the long-term, it has to be the downstream segment. 2014 cash flow from downstream operations increased by 40% compared to previous year, while upstream cash flow increased 6%. The upstream segment is still by far the most important part of the company’s operations, with earnings from upstream being almost three times larger than downstream, but there is definitely more potential in value-added operations.
Shell’s massive cracker plant near Pittsburgh, which is in its early planning stages, with land recently having been purchased to build the plant on, is an example of the kinds of opportunities for value added investments. Shale gas in the region sells for very cheap compared to the US spot price due to supply outgrowing regional demand. Making use of production from the Marcellus & Utica shale gas fields makes far more sense than trying to simply sell the gas into an over-saturated regional market.
I expect that Shell will continue to pursue such projects around the world and I do believe that it will serve to partly offset the decline in oil & gas production the company is likely to continue to experience in the foreseeable future.
Even with such downstream investments, Shell will not be able to prevent its continued shrinkage as a company. This is likely to be the fate of many other similar oil & gas giants as challenges such as declining discoveries, increased resource nationalism and failures to tap new frontiers will take their toll. While Shell does provide for a good investment opportunity for those looking to get a good dividend, and take advantage of oil prices rebounding this year or next, its long-term potential is not looking very bright.




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Groups derail Shell refinery plan

Groups derail Shell refinery plan

Screen Shot 2015-02-24 at 10.38.34

Screen Shot 2015-01-06 at 21.26.38Article by Gary Chittim published 23 February 23, 2015 by King5.com under the headline:

Groups derail Shell refinery plan

Seattle – Six environmental groups successfully challenged approval for a rail expansion that would bring oil trains directly to the Shell Oil Refinery in Anacortes.
The project was initially moved along by Skagit County through a Mitigated Determination of Non-Significance.
The groups Earth Justice, Sustainable Communities, Friends of the San Juans, ForestEthics, Washington Environmental Council, Friends of the Earth, and Evergreen Islands appealed that decision to the Skagit County Examiner.
The Examiner agreed a complete environmental review is needed before the project can proceed.
The groups used recent explosions and leaks in Ontario and West Virginia as examples of how common and dangerous accidents can be.
Shell General Manager Tom Rizzo released the following statement:
We are disappointed by the decision not to uphold the County’s Determination of Non-Significance for our proposed East Gate Rail Project. This project is critical for the refinery, and we strongly believe that the County’s environmental analysis was thorough and based on sound science and evidence.
Shell is committed to safe and modern rail operations and to the communities of Skagit County with whom we have enjoyed a long and close relationship. This project will reflect the high standards of these communities by utilizing only rail cars with enhanced safety features, along with the facility’s state-of-the-art environmental protections.
For over two years, we have been going through an exhaustive planning and regulatory process in an effort to procure each of the various permits required for this facility. We respect the Hearing Examiner’s decision and are determined to stay the course in this process in order to achieve a win/win for Shell and the community. We are still going through the details of the ruling, and it is too early at this point to comment on specific next steps.
Earth Justice’s complete statement can be found athttp://earthjustice.org/
RELATED ARTICLES
Extracts
(Reuters) – Royal Dutch Shell’s proposed crude-by-rail project in Washington state has been put on hold pending environmental review, just days after a pair of oil train derailments caused huge fires in Canada and West Virginia.
A Skagit County Office of Land Use Hearings examiner ruled Shell’s proposal must undergo a full environmental review, which can take a year or more.



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Why Shell Withdrew Application For Pierre River Oil Sands Project

Why Shell Withdrew Application For Pierre River Oil Sands Project
Screen Shot 2015-02-24 at 13.58.40
Screen Shot 2015-02-24 at 13.59.13
Published: Feb 24, 2015 at 7:48 am EST
Royal Dutch Shell plc (ADR) (NYSE:RDS.A) indicated on Monday that it has withdrawn the application to develop Pierre River Oil Sands in northern Alberta. The oil sands mine was first proposed by Shell Canada in 2007.
The Pierre River oil sands are estimated to produce around 200,000 barrels of oil per day. The company had earlier expected to finish the project’s construction by 2010 and production was expected to initiate by 2018. Last year, Shell specified that it had to reassess the development timeline of the project and asked the regulatory authorities to halt the review for the time being.
President of Shell Canada Lorraine Mitchelmore has indicated that the Pierre River project continues to remain a long-term opportunity for the company. She also indicated that the project is currently not the main priority of the company. Ms. Mitchelmore said: “Our current focus is on making our heavy oil business as economically and environmentally competitive as possible.”
According to the Wall Street Journal, Ms. Mitchelmore in August last year had indicated that the Canadian oil sands businesses could only be profitable when Brent crude was trading above $70 per barrel. However, Brent crude during the pre-market hours today, as of 5:23AM EST, was trading at $58.83 per barrel.
Crude oil price since the last six months has fallen more than 50%. The Canadian oil sands regions are considered as one of the costliest regions of the world. The lower crude oil price has forced the company to shy away from the project.
Shell, currently from its oil sands in Canada produces around 255,000 barrels of oil per day. The oil giant seeks to reduce costs and focus primarily on its existing operations in the country. Shell has indicated that it has the regulatory approval to double its existing oil sands production. Shell, along with Marathon Petroleum Corp (NYSE:MPC) and Chevron Corporation (NYSE:CVX) owns stakes in the Jackpine and Muskeg River surface mines. Shell owns a 60% stake, while the remaining stake is held by Chevron and Marathon, respectively.
Last month, Shell applied 300 job cuts at its oil sands operations. Shell is amongst the first companies to shed off workers after the more than 50% decline in crude oil price since the last six months. Ms. Mitchelmore has indicated that Shell CEO Ben van Beurden believes on maintaining adequate liquidity by cutting costs, capital spending, and by increasing productivity.
Since the decline of the crude oil price, many other energy companies have reduced their workforce and have taken a toll on their oil sands projects. Companies like Total SA (ADR) (NYSE:TOT), Cenovus Energy Inc (USA) (NYSE:CV), and Statoil ASA(ADR) (NYSE:STO) have all postponed spending in the Canadian oil sands regions.
Shell’s decision to back out from the Pierre River project is considered to be a huge blow to the Canadian oil sands industry. As reported by Reuters, the Government of Alberta expects a C$7 billion decline in revenue this year. However, the government remains optimistic over the production, believing it to grow at a much slower pace. The government believes that it is still viable to produce considering the lower oil price and Shell’s move being “a business decision”.






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SEN. BERNIE SANDERS' PHOTOS 24FEB15










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SHELL CIRCUMVENTED RA 7641

SYNDICATED ESTAFA


MY QUEST FOR SWINDLED 

RETIREMENT PAY BY SHELL



SWINDLING ITO, SYNDICATED ESTAFA


HOT PURSUIT
DUTY OF LAW ENFORCEMENT ENTITIES


SHELL SWINDLING OF RETIREMENT PAY 5TH YEAR

1001counts
SEE BELOW FOR THE 1001ST   TIME THE REITERATION OF DEMAND PAYMENT OF RETIREMENT PAY WHICH SHELL REFUSED TO HONOR IN THE PRESENCE AND DEEMED APPROVAL OF THE HONORABLE MAGISTRATES OF THE SUPREME COURT OF THE PHILIPPINES


Dishonest scales are an abomination to the Lord, but a just weight is His delight... Proverbs Chapter 11  v. 1
Retirement Pay Law circumvented by Shell subject to penal provision provided for by Article 288 of the Labor Code of the Philippines.





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