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Posts on ‘September 21st, 2006’

MarketWatch: Dutch foreign minister seeks Russia meeting on Sakhalin -spokesman

Last Update: 4:49 PM ET Sep 21, 2006

LONDON (MarketWatch) — Dutch Foreign Minister Bernard Bot is seeking a meeting with his Russian counterpart, Sergey Lavrov, to clarify the reasons why a key Russian environmental permit was withdrawn from a Royal Dutch Shell PLC (RDSB.LN) venture, a spokesman for the Dutch minister said Thursday.

Russia’s Ministry of Natural Resources said Monday it was withdrawing its approval for the second phase of the Sakhalin II oil and gas project led by the Anglo-Dutch energy major because of allegations it had violated terms of the deal. Shell denies this. read more

The Economist: Yukos revisited?: Russia must stop strong-arming foreign investors

Sep 21st 2006
From The Economist print edition

Russia must stop strong-arming foreign investors

IT IS natural to be miffed when a deal that seemed shrewd turns out worse than you thought. It is especially galling if it involves a prized asset. The civilised response—if the other party is disinclined to renegotiate—is to shrug and move on. But with the gigantic energy developments on Sakhalin Island, the Kremlin prefers to bully its partners into surrender.

Sakhalin and the seas around it host the two biggest foreign investments in Russia, which are also two of the world’s biggest energy projects. Led by Exxon Mobil and Royal Dutch Shell, the consortia signed “production-sharing agreements” (PSAs) with the Russian government in the 1990s to insure against unpredictable legal changes; another PSA applies to an Arctic development led by Total, of France. Sakhalin has other ominous peculiarities. The Shell consortium is building Russia’s first liquefied natural gas (LNG) plant, to serve markets in North America, South Korea and Japan. It is the only big energy scheme without a Russian partner. The projects are also the only exceptions to Gazprom’s gas-export monopoly—staunchly defended by both the state-controlled gas giant and the Kremlin against European efforts to break it up.
 
In other words, Sakhalin is potentially crucial in the Kremlin’s drive to recapture its geopolitical clout using energy wealth. Hardly surprising, then, that its state-controlled energy firms want pieces of the island action. Opportunities for foreign firms in energy—the “holy of holies” of the economy, as Vladimir Putin puts it—are now tightly circumscribed. Using Gazprom and Rosneft, a state-controlled oil firm, the Kremlin has recaptured its stewardship of the industry. PSAs were controversial even when they were signed, amid low oil prices and a scarcity of foreign capital and expertise; now that Russia is flush, to some officials they look downright humiliating. (An enormous cost overrun at Shell’s Sakhalin project, which will massively reduce the state’s share of the profits, has bolstered this conviction.) Other countries, Kremlin apologists point out, have redrafted energy deals as the oil price has risen. read more

UpstreamOnline: US urges ‘rule of law’ at Sakhalin

By Upstream staff
21 September 2006 18:09 GMT

The US government hopes Russia and foreign partners, including ExxonMobil, can reach an agreement on the gaint Sakhalin 1 oil project that “respects the rule of law,” an Energy Department spokesman said today.

Russia said today it would oppose a $4.2 billion cost overrun on ExxonMobil’s project on the Pacific Island of Sakhalin 1 on grounds that it would cut into Moscow’s profits.

“We hope that the government (of Russia) and these multinational corporations are able to reach agreement in a way that respects the rule of law, continues to provide oil to the markets and demonstrates that Russia is open to foreign investment,” Energy Department spokesman Craig Stevens said. read more

Sakhalin II & Brent Bravo debacles: time for Brinded to resign?

Brinded 

(Malcolm Brinded, Chief Executive, Shell Exploration & Production)

21 September 2006

Part One (By a Shell Insider)

There are some important similarities between Sakhalin and the Brent maintenance issues which you may wish to bring to the attention of your readers.

SAKHALIN

Brinded was advised against the Sakhalin development by his Exploration and Production technical staff on the basis of economic and risk considerations in the 1990’s. Even at $9bn the Sakhalin project was considered marginal, especially given the uncertainties of operating in a frontier environment.  read more

MarketWatch: Iraq-Kurdistan oil minister says in talks with oil majors

21 Sept 2006   

LONDON – The Kurdistan Regional Government in the north of Iraq is to sign oil contracts with companies next month, and is in talks with oil majors, its oil minister said Wednesday.

Ashti Hawrami, the KRG’s minister of natural resources, told reporters on the sidelines of a London briefing on the region’s oil sector: “We have been talking to oil majors about specific areas,” though he declined to say which companies were in the frame.

Officials from Royal Dutch Shell PLC (RDSB.LN), Eni SpA (E), BHP Billiton (BHP) and Statoil SA (STO) were among those at the briefing. read more

Associated Press: 3 oil majors ink deal with Nigeria for gas venture

September 21, 2006

ABUJA, Nigeria (AP) — Oil majors Total SA, ENI SpA and ConocoPhillips signed a deal with Nigeria’s state oil firm Wednesday for a $2 billion natural gas plant in the country’s southern oil region, a senior official said.

Martin Hutchison, managing director of the project, said the shareholders agreement will regulate the building and running of a liquefied natural gas plant at Brass in the Niger delta that will target North American and European markets.

The group has reached purchase agreements with six buyers covering the entire production of the first two LNG-producing units at the plant, Hutchison said. read more

The Scotsman: Russian energy broadside aims at Exxon after Shell

By Mikhail Yenukov

MOSCOW (Reuters) – Russia’s government switched the focus of its attack on huge foreign-led energy projects to Exxon Mobil’s Sakhalin-1 oil scheme on Thursday, saying it would forbid a $4.2 billion overspend that cut Moscow’s profits.

Moscow has already taken aim at Royal Dutch Shell’s massively over-budget Sakhalin-2, which it has ordered to be partly for environmental infringements, prompting tough criticism of its actions from Japan and the European Union. read more

The Wall Street Journal: Oil Companies Are Split on Push By Nations to Wring More Profits

Wall Street Journal 

Shell, Exxon Stand Firm
As Chevron, Total Consider
Renegotiating Contracts
By STEVE LEVINE in Dallas, BHUSHAN BAHREE in New York and GREGORY L. WHITE in Moscow
September 21, 2006; Page A2

Oil-producing nations demanding contract concessions or seeking outright expropriations have created a split in the petroleum industry, with some companies insisting a contract is a contract and others saying they are willing to renegotiate some terms to reflect higher oil prices.

Oil companies have pushed back as developing countries have asked for a bigger share of what they regard as windfall profits from contracts negotiated during the days of $10-to-$20-a-barrel oil in the late 1990s. But senior executives of Chevron Corp. and France’s Total SA last week publicly said that they are ready to consider giving more of the profits to the countries. read more

The Wall Street Journal: SHELL HANGS TOUGH

21 September 2006

Royal Dutch Shell PLC is standing firm against Moscow’s efforts to alter the early-1990s contract giving it the right to the massive Sakhalin Island oil and natural-gas project, warning that significant holdups will result in delays of liquefied-natural gas shipments to Japan and South Korea scheduled to begin as early as 2008, noting they “form a critical input to the energy balance in these countries.”

Earlier in the week, Tokyo said relations between Japan and Russia might be hurt by any long delays in the deliveries after Russian regulators increased pressure on Shell by pulling a key permit on the project, which is 75% complete, citing environmental violations. Russian officials have said their main concern is cost overruns at Sakhalin that Shell announced last year. Shell owns a 55% stake in the project’s operator, with Japan’s Mitsui & Co. and Mitsubishi Corp. owning the remaining 45%. read more

The Wall Street Journal: Oil News Roundup: September 20, 2006 9:30 p.m.

THE WALL STREET JOURNAL ONLINE
September 20, 2006 9:30 p.m.

Crude-oil futures fell sharply for the second straight day on the New York Mercantile Exchange, shedding more than $1 a barrel to settle at less than $60.50, their lowest close since late March, after a government report of higher-than-expected crude-distillate inventories. Here is Wednesday’s roundup of oil and energy news.

* * *
MORE DRAMA IN RUSSIA: Russia’s Ministry of Natural Resources said it is reviewing Total SA’s Kharyaga production-sharing agreement license for possible cancellation, the latest in a series of setbacks for foreign oil companies in Russia. The move comes amid an apparent effort by the Kremlin to reconfigure three pioneering, foreign-owned projects which were negotiated when oil prices were lower and international oil majors were less eager to pile into Russia’s oil sector. The threat to Total’s license could bode ill for Royal Dutch Shell PLC and Exxon Mobil Corp., which have much larger projects on Russia’s Sakhalin Island.
read more

Daily Telegraph: Russian balancing act benefits aircraft firms

EXTRACT: Russia’s attempts to use its gas company Gazprom to achieve energy ambitions in Europe and the pressure on Shell to renegogiate the terms of the $20bn Sakhalin oil and gas project are unnerving western investors. The EU has led diplomatic protests about the tactics being used to force Shell to give ground and bring in Gazprom as an investor. President Putin is expected to raise the prospect of increased co-operation between the Russian aerospace industry and EADS as an alternative to building a bigger sharehholding. EADS shareholders are far from enthusiastic about seeing the Kremlin use an investment to force changes. read more

Daily Telegraph: Database: Energy: Thursday 21 September 2006

• Russia’s government denounced projects led by Exxon Mobil and Royal Dutch Shell for breaching environmental rules, as President Vladimir Putin seeks tighter control of the oil and gas industry.

• Shares of Drax, owner of Britain’s largest electricity plant, had their biggest ever two-day drop after Goldman Sachs said earnings may decline and added the stock to a list of strong sells.

• Alkane Energy, a UK producer of electricity from biogas and coal mine methane, narrowed its loss in the first half after the company opened new plants and electricity prices rose. read more

Daily Telegraph: Russia woos Japanese over Sakhalin project

By Roland Gribben
(Filed: 21/09/2006)

Russia is making renewed attempts to win Japanese support for Russian investment in the $20bn (£10.6bn) Shell-led Sakhalin oil and gas project offshore Siberia to ease diplomatic tensions.

Alexander Losyukov, Russia’s ambassador to Japan, said in Tokyo the project would advance faster if Gazprom, the state-controlled gas business, had a stake in the consortium, which currently has Shell (55pc) and two Japanese corporations, Mitsui and Mitsubishi (45pc combined) as partners. read more

The Guardian: Royal Society tells Exxon: stop funding climate change denial

Exxon

The Royal Society is worried about climate change lobby groups, including those funded by Exxon. Photograph: Matt Slocum/AP

David Adam, environment correspondent
Wednesday September 20, 2006

Britain’s leading scientists have challenged the US oil company ExxonMobil to stop funding groups that attempt to undermine the scientific consensus on climate change.

In an unprecedented step, the Royal Society, Britain’s premier scientific academy, has written to the oil giant to demand that the company withdraws support for dozens of groups that have “misrepresented the science of climate change by outright denial of the evidence”. read more

The New York Times: Suits Say U.S. Impeded Audits for Oil Leases

EXTRACT: In two of the lawsuits, two senior auditors with the Minerals Management Service in Oklahoma City said they were ordered to drop their claim that Shell Oil had fraudulently shortchanged taxpayers out of $18 million.

THE ARTICLE

By EDMUND L. ANDREWS
Published: September 21, 2006

WASHINGTON, Sept. 20 — Four government auditors who monitor leases for oil and gas on federal property say the Interior Department suppressed their efforts to recover millions of dollars from companies they said were cheating the government. read more

The New York Times: Helicopter Pilots’ Union Declares Strike

EXTRACT: PHI is the primary helicopter provider for Shell Exploration & Production Co., an arm of Royal Dutch Shell PLC. Company spokesman Fred Palmer said Shell had been aware of the possibility of a strike and had made contingency plans.

THE ARTICLE
           
By THE ASSOCIATED PRESS
Published: September 21, 2006
Filed at 1:19 a.m. ET

LAFAYETTE, La. (AP) — A union representing pilots at PHI Inc., which provides helicopter flights for the offshore petroleum industry and medical emergencies, went on strike Wednesday. read more

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