Posts from ‘March, 2007’

If you’re hungry for WSJ energy news, but too busy to flip through the entire paper to find it, here’s a quick roundup:

Across the U.S. plains, farmers are placing big bets on where the price of corn will go in 2007. They are preparing to plant more corn than they have in decades, spending more on seed and fertilizer, investing in new equipment and buying crop insurance against the possibility of bad weather. Some are signing futures contracts to lock in prices now; some are holding off in the hope that prices will climb higher.

Texas officials recommended that TXU face a $210 million payment for allegedly manipulating the state’s electricity market two years ago, a development that could signal a tough regulatory path for a $32 billion effort to buy the utility giant.

When Jeroen van der Veer, a low-key chemicals executive and marathon ice skater, took the top job at Royal Dutch Shell in 2004, industry watchers wondered how long it would be before the Dutchman took a tumble at the scandal-tarred energy titan. Three years later, he’s not only still in the race, but he’s also starting to outpace BP, his biggest European rival.

A shareholder vote coming up here lays bare a widespread practice that investor advocates say is a little-understood risk of investing in China’s stocks: the loaning of money from a company that’s publicly traded to an affiliate that’s not. Tomorrow, independent shareholders of Cnooc Ltd. will decide whether to let China’s third-largest oil company by production sock away cash with a unit of its state-owned parent.

Shares of farm-machinery titan Deere have been riding high on the fumes of the ethanol boom, but that intoxication could soon level off.

The initial move in a $5 spike in crude-oil futures late Tuesday may have been triggered by an erroneous electronic trade or an inordinately large buy order rather than specific speculation about Iran, several brokers involved in trading said yesterday.

Enel Chief Executive Fulvio Conti said the Italian power company plans to take part in the sale of assets of bankrupt Russian oil company Yukos, as part of a push to increase its presence in upstream gas assets.

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Comments

The ethanol-front pager insisted that each farmer is worried that, if he overproduces corn, he’ll cause market oversupply and depress prices. That is, of course, ludicrous — no individual farmer can single-handedly depress market prices.

If farmers are worried about growing too much corn, it’s because they are simultaneously deciding how much soy to grow, hoping to maximize revenues from not only corn but also soy (and hoping, perhaps, that oversupply of the former causes undersupply of the latter).
Comment by Displaced Hawkeye – March 29, 2007 at 12:21 pm

Contrary to the generally favourable response by the business news media to the announcement that Royal Dutch Shell CEO Jeroen van der Veer will stay on until 2009, he actually has an atrociously bad track record. It only looks otherwise when compared with BP’s recent calamities.

Van der Veer has been skating on thin ice ever since he assumed the crown after his predecessor, Sir Philip Watts, was forced to resign in disgrace after the reserves scandal in 2004. Van der Veer remains tainted by his personal involvement in the reserves debacle.

He got off to a bad start as Shell CEO with his almost immediate surrender to Hugo Chávez when the Venezuelan President implemented a resource nationalism programme. This weakness was spotted by President Putin who seized control of Shell’s Sakhalin2 project in Russia. Once again, Van der Veer ran up the white flag without even putting up a face saving fight. It was a complete humiliation which has already cost Shell untold billions.

Van der Veer has taken Shell back into Iran despite the objections of the U.S. authorities and the risk of sanctions. Shell is still doing business with the Iranian government even though the outlaw regime has supplied roadside bombs and other weapons to insurgents in Iraq who have used them to kill American and British Soldiers (and currently hold 15 British sailors as hostages).

Under Van der Veer, Shell’s safety track record is even worse than BP’s. This is an extract from your article “Shell’s safety problem” published on March 15, 2007: “BP has been criticized for its safety standards since the deadly Texas City refinery explosion in 2005. But Royal Dutch Shell was a far more dangerous company to work for in the past two years.”

The saving grace for Van der Veer has been the one issue out of his control, the record high oil price which has generated billions in profits, enough to cover up his mismanagement. Posted by John Donovan of the website www.royaldutchshellplc.com
Comment by John Donovan – March 30, 2007 at 11:17 am

Van de Vijver shakes off reserves scandal to form investment outfit

CHRISTOPHER HOPSON
London

ROYAL Dutch Shell’s former upstream chief executive Walter van de Vijver is returning to the oil and gas industry, raising about $1 billion of private equity to form a new company called Delta Hydrocarbons.

Van de Vijver has founded the new company with Maarten Scholten, formerly head of Schlumberger’s mergers and acquisitions team. They have been joined by Jeri Eagan, formerly chief financial officer for Shell’s gas and power business and Frederik Rijkens, previously a Total project director.

Private equity company 3i has committed $250 million for Delta Hydrocarbons. Two other investors, SHV Holdings subsidiary Dyas and Upstream Capital Partners, an affiliate of Mercuria Energy Group, have each committed $250 million.

“At the moment, Delta has raised $750 million. It is in discussions with a number of parties and expects to raise a further $250 million over the course of the next six to eight weeks,” 3i investment director Colin Burnett said.

Delta is looking to collaborate with national oil companies and international oil companies to enhance production from mature fields. In particular, it will focus on assets where lack of investment has hindered development.

It will offer companies an outsourced solution to meet their needs to increase reserves and production with little risk.

Burnett said Delta will provide the capital, the people and the technical and management skills to develop existing producing fields and thereby increase production. “The aim over the coming months is to build a core team of 25 to 30 people, based in Amsterdam,” he said.

Delta is looking to develop a balanced portfolio of projects across a number of regions, outside of North America. These are likely to focus particularly on Europe, the Middle East, South East Asia and Latin America.

Van de Vijver was forced to quit Shell three years ago, together with former chairman Philip Watts, in the scandal that resulted from Shell’s 20% downgrading of its proven oil and gas reserves. The downgrade stunned financial markets, costing the group its top grade credit rating and leading to $150 million in regulatory fines.

By Torrey Clark

March 30 (Bloomberg) — Royal Dutch Shell Plc expects to cede control of the Sakhalin-2 project in Russia’s Far East to state-run OAO Gazprom by the end of the year as the two sides hash out the details of the $7.45 billion deal.

“Work is progressing well on the details,” said Maxim Shoob, a spokesman for Shell in Moscow. “We always expected the deal to be closed by the end of 2007.”

Gazprom Deputy Chief Executive Officer Alexander Medvedev said in December the company would join the project in February and pay for the stake by the end of the first quarter of 2007.

Officials from Gazprom are visiting the project’s sites on Sakhalin Island and helped develop a plan to fix environmental problems, including illegally felling trees.

Gazprom’s press service confirmed the deal would close by the end of the year. Neither Shoob nor Gazprom would comment on the payment schedule.

The three Sakhalin-2 shareholders, Shell, Mitsui & Co. and Mitsubishi Corp., each agreed to sell half their stakes to Gazprom last year as environmental regulators hounded Shell, the project operator.

To contact the reporter on this story: Torrey Clark in Moscow at tclark8@bloomberg.net .

Last Updated: March 30, 2007 03:25 EDT

30 March 2007

Shell International Petroleum Company Ltd (Shell) and OJSC Alliance Group (Alliance) announce a commitment to establishing a joint venture to operate a network of more than 150 Shell-branded retail sites in the Ukraine.  This deal will provide Ukrainian customers with access to high quality fuels at competitive prices and with an emphasis on customer service.
 
“With this joint venture we are delivering our strategy to invest in growing markets,” said Rob Routs, Executive Director of Shell’s Downstream business.  “Ukraine’s large population, projected GDP and its strategic location in Eastern Europe make it attractive and an important part of our future retail business in Europe. We welcome the opportunity to work with a company such as Alliance, a respected organisation with expertise in Ukraine, and look forward to developing our cooperation.”

Musa Bazhaev, President of Alliance Group, said: “We are pleased with the development of our relationship with Shell in Ukraine. Cooperation between our companies has opened the way to Ukraine for a most innovative international business. I am confident that our joint venture will be beneficial for both parties and will make an important contribution to development in the economic and social spheres in Ukraine.”

Alliance’s existing sites in Ukraine will be upgraded and re-branded as Shell sites – that will enable the JV to benefit from Shell’s experience and global reach and Alliance’s local knowledge.  The agreement is based on the success of the Trademark Licence Agreement trial in Ukraine last year, with the six Shell-branded retail sites in the Kiev area yielding positive and encouraging results.  Over a six-month period retail volumes have more than doubled.

By purchasing fuel at Shell-branded sites, Ukrainian motorists will join the 20 million customers of the world’s largest retail fuel network, who every day experience the Shell commitment to product quality and high service standards at more than 46,000 Shell-branded retail stations in over 90 countries world-wide.

Shell will have a 51% share and Alliance a 49% share of the newly established joint venture. Start of operations is subject to fulfillment of certain conditions, including obtaining regulatory approval.

Russia is not going to sue Sakhalin Energy for environmental violations in the Sakhalin-2 project, a natural resources official said Thursday.

Deputy Head of the Federal Resource Management Agency Oleg Mitvol earlier announced that the agency was planning to go to Russian, European and “all possible courts” to appeal the violations.

Mr. Mitvol, however, mentioned Thursday that the agency won’t to go to any courts, and Sakhalin Energy is willing to solve the problems. In addition, Gazprom, which is become a major shareholder in the project soon, has already submitted a plan to amend the breaches, according to the official. Federal authorities are now studying the proposals. Gazprom will be asked to pay for the unsolved problems, according to Oleg Mitvol.

The Sakhalin-2 project develops oil and gas deposits on the Sakhalin shelf. Royal Dutch/Shell holds 55 percent in the project, Mitsui Sakhalin Holdings 25 percent and Diamond Gas Sakhalin 20 percent.

Gazprom is expected to close a deal to buy 50 percent plus one stake in Sakhalin Energy before the end of March.

www.kommersant.com

Published: Mar 30, 2007

Oil major Shell has scrapped plans to build a liquefied natural gas terminal in the Gulf of Mexico, writes Tony Gray .

Shell said the Gulf Landing project was not needed because import capacity would be enough without it.

‘It is just an assessment of the market,’ said project manager Greg Koehler.

He stressed that Shell was not abandoning the LNG business. ‘Our plans are to continue to increase volumes of LNG into the US,’ Mr Koehler said.

Shell is, for example, a partner in the Altamira terminal Mexico’s northeast coast, and has capacity at existing US terminals at Cove Point, Maryland, and Elba Island, Georgia.

The oil major is also a partner with TransCanada in the Broadwater LNG project proposed for Long Island Sound between New York and Connecticut.

Gulf Landing was to have capacity of 1bn cu ft of gas a day, based 38 miles offshore Cameron, Louisiana.

The project was opposed by fisherman and environmentalists for planning to use ‘open-loop’ technology.

Published: Mar 30, 2007

THE companies involved in the extraction of natural gas from the Corrib Gasfield said yesterday that they plan to resume the peat haulage operation next week.

This will involve the transfer of 350,000 tonnes of peat from the site of the proposed onshore terminal at Bellanaboy to a Bord na Mona cut-over site at Srahmore, 11km away.

The operation will be completed by October, when construction of the onshore gas processing plant will begin, the Corrib gas partners said.

There are currently almost 200 people working on the Corrib Gas project and this figure will rise to approximately 350 in the coming weeks, once peat haulage is underway, Shell said. By next autumn, 700 jobs will have been created by the project with the construction of the onshore terminal.

The project has also resulted in the extension of the Bord Gais Eireann distribution system to the west of Ireland. The Corrib partners have funded the main transmission line between Mayo and Galway through a tariffing arrangement with BGE. It is hoped that the number of towns in Mayo that will benefit from the gas supply will increase as commercial markets are developed.

The Corrib Gas project is of strategic national importance. It benefits the Irish economy by enhancing security of energy supply and supporting economic development in the Border, Midlands and West region.

Ireland currently imports approximately 85pc of its gas. Corrib will enable the country to replace gas imports from the UK – 85pc of our needs – with indigenous supplies. At peak production, Corrib will supply some 60pc of national gas demand.

Health and safety is a key priority of the Corrib project and the Corrib partners are working to ensure that this operation is carried out in the safest manner possible.

The Corrib Gas Partners welcomed the oral hearing into the Environmental Protection Agency’s proposed determination to grant an Integrated Pollution Prevention and Control Licence for the Corrib project.

Jim Aughney

 

A round-up of headlines from across the financial sectors, provided by Bloomberg News

ENERGY

Royal Dutch Shell scrapped a plan to build a liquefied natural gas import terminal on the US Gulf Coast, citing adequate capacity to meet requirements among other terminals under construction or planned in the region.

• Sterling Energy, an oil and gas explorer, said it completed the purchase of Houston-based Whittier Energy for $145m (£73.8m), doubling reserves and production.

• Egdon Resources, a oil and natural-gas explorer, applied for planning approval to develop a gas storage site to supply as much as 5pc of daily demand during the heating season.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/03/30/cxbloom30.xml

EXTRACT: Shell would be one of the biggest losers if diplomatic relations between Britain and Iran were to break down further. The company is part of a £5 billion project to export liquefied natural gas from Iran, which is the world’s fourth-big-gest oil exporter.

THE ARTICLE

March 30, 2007
By Michael Theodoulou and David Robertson

Many Iranians have yet to see the footage of Faye Turney that has caused such outrage in Britain, but few who did shared the sense of revulsion and shock.

“The interview was definitely staged but that doesn’t mean her confession isn’t true,” a well-travelled 59-year-old businessman in Tehran said.

“It was clear that the woman didn’t know they were in Iranian waters at first but it’s obvious she’s now been persuaded they were,” he told The Times: “All Britain has to do is to admit they made a mistake and they will be freed.”

Maryam, 23, a British-educated journalist in Tehran, interpreted Ms Turney’s smoking as evidence that she was free to do so and also that she was under stress. “The woman did not look comfortable,” she said.

The social taboo on women smoking in public has long been broken, particularly in the more affluent and westernised suburbs of north Tehran.

The interview was first broadcast on al-Alam, an Arabic-language satellite channel with close links to Iran’s Revolutionary Guards. The national Farsi-language stations, which are watched by the vast majority of Iranians, led the news bulletins on Wednesday night with flood warnings and a traffic story. A shorter, edited version of the interview was broadcast 12 minutes into the main bulletin.

Many Iranians are out of touch with the news because Iran is celebrating its two-week-long New Year holidays and no newspapers have been published for days.

The silence of Iran’s most powerful figures and the sparse coverage suggests the regime is aware that few ordinary Iranians believe that a showdown with Britain is in Iran’s interests, despite popular mistrust of a country frequently demonised as the “little Satan”, “arrogant old coloniser” and “perfidious Albion”.

Iran’s decision to aim the footage mainly at an Arab audience showed the desire of regime hardliners to appeal to popular sentiment in the wider region that is highly critical of the British and American presence in Iraq, analysts said.

The symbolism of Ms Turney and the other Britons supposedly being well treated was apparently intended to highlight tacitly the contrasting plight of America’s prisoners at Guantanamo Bay.

Hardline Iranian students, who on Wednesday staged a mock trial for the 15 Britons, called for them to be executed as spies.

“Once again the sinister and unclean regime of Britain was embarrassed and the arrest of 15 British aggressors once again proved to the world that the satanic awe of Britain could be smashed,” the students said in a statement.

Shell would be one of the biggest losers if diplomatic relations between Britain and Iran were to break down further.

The company is part of a £5 billion project to export liquefied natural gas from Iran, which is the world’s fourth-big-gest oil exporter.

Other British businesses with ties to Iran include BMED, which flies five times a week to Tehran, HSBC, which has a “representative office”, Standard Chartered and Unilever.

http://www.timesonline.co.uk/tol/news/world/middle_east/article1588817.ece

BLOOMBERG

PetroChina Co. made a discovery in an offshore field in eastern Bohai Bay that that may be the largest in East Asia in 33 years.

The field may hold as much as 2.2 billion barrels of oil, China’s official Xinhua news agency reported on its website, citing officials at the Beijingbased company it didn’t identify.

The field might produce 200,800 barrels of oil a day in three years, Xinhua said, enough to meet 95 per cent of the needs of PetroChina’s largest refinery in Dalian.

“That’s a pretty big field,” said Ian Cross, vice-president of business intelligence at Inc., an Englewood, Colo.-based research company. “We only get a few discoveries a year in that range worldwide.”

If the field’s geological characteristics are similar to other Bohai Bay reservoirs, PetroChina, China’s largest oil company, may ultimately extract 500 million barrels, Cross said Wednesday in a telephone interview.

That would put the field on par with Chevron Corp.’ s $3.5-billion Tahiti field in the Gulf of Mexico, which is scheduled to begin production next year.

The last find in the Asia-Pacific region in excess of one billion barrels was the 1974 discovery of Vietnam’s Dai Hung field, Cross said.

“Things peaked in 1999 with the deepwater discoveries in places like West Africa and Latin America,” he said. “In the last couple of years, there haven’t been many big discoveries to speak of.”

PetroChina will announce details of the discovery in May or June, Xinhua said. Vice-chairman Jiang Jiemin described the field as “very rich” in remarks to reporters in Hong Kong on March 19.

Warren Buffett’s Berkshire Hathaway Inc. is PetroChina’s largest foreign investor with a 1.1 per cent stake.

Other oil companies involved in Bohai Bay exploration or production include Houston-based ConocoPhillips, the largest acreage holder; Royal Dutch Shell PLC; Chevron; Anadarko Petroleum Corp.; and Apache Corp., according to the U.S. Energy Department.

Chinese oil demand is expected to rise 6.1 per cent this year to 7.6 million barrels a day, extending gains of seven per cent in 2006 and 4.2 per cent in 2005, the Paris-based International Energy Agency said in a March 13 report. Only the United States consumes more oil than China.

PetroChina shares were little changed at $9 HK in Hong Kong. The stock fell 18 per cent this year amid surging costs for equipment and labour used to find and pump oil and natural gas.

The company plans to boost spending on exploration and development by 25 per cent this year to $24 billion US, exceeding the $21-billion capital budget of ExxonMobil Corp., the world’s largest energy company. PetroChina is a unit of state-owned China National Petroleum Corp.