Posts from ‘October, 2007’

As Reservoirs Age and Demand Grows,
Prices May Go Even Higher
By NEIL KING JR. and GUY CHAZAN
October 31, 2007; Page A6

LONDON — Oil at $100 a barrel? That may not be the worst of it.

Several leading oil experts, gathered here yesterday for an annual energy conference, sketched a near-term future in which mounting global demand and shrinking supplies push oil prices well past the $100-a-barrel mark.

Consuming countries, they argued, will simply have to deal with the fact that new pockets of oil are getting far harder and more expensive to tap. That, combined with years of underinvestment by the industry, has led to a tapering off of new oil supplies that will continue for years, despite rising energy demand in Asia, the Middle East and some industrialized countries.

Yet on a day when U.S. benchmark oil prices retreated from Monday’s record, closing down $3.15 a barrel, or 3.4%, to $90.38 on the New York Mercantile Exchange, two ministers from the Organization of Petroleum Exporting Countries at the same gathering insisted that the immediate problem isn’t too little oil.

Prices have jumped nearly 40% since early summer, the oil ministers of Qatar and the United Arab Emirates said, because of the slumping dollar, widespread Wall Street speculation and bottlenecks in the refining process.

“Please don’t blame us” for record oil prices, said Abdullah al-Attiyah, Qatar’s minister of oil, expressing a sentiment that is widely held among major oil-producing countries. “You have blamed us for 50 years.”

Hard to Pinpoint Cause

The debate over what is driving the surge in oil prices is sure to get more spirited if prices continue to soar and oil executives, consumers and politicians seek to assign blame. But the feuding theories at this year’s Oil & Money conference also show how hard it is to pinpoint a cause.
 
Sadad I. Al-Husseini, an oil consultant and former executive at Aramco, Saudi Arabia’s national oil company, gave a particularly chilling assessment of the world’s oil outlook. The major oil-producing nations, he said, are inflating their oil reserves by as much as 300 billion barrels. These amount to hypothetical reserves that are “not delineated, not accessible and not available for production.”

A lot of production in the Middle East is from mature reservoirs, and the giant fields of the Persian Gulf region, he said, are 41% depleted.

Global oil and gas capacity is constrained by mature reservoirs and is facing a “15-year production plateau,” Mr. Husseini said. He predicted that supply shortages will continue to add $12 to the price of oil for every million barrels a day in additional demand. Global demand, now at some 85 million barrels a day, was on average 10 million barrels a day lower in 1999.

Nobuo Tanaka, the new executive director of the Paris-based International Energy Agency, which is funded by the world’s leading industrialized consumer nations, said he sees little likelihood the world’s spare capacity for oil production will increase notably in the near future, partly because so many oil-rich countries continue to shun outside investors.

“The IEA says that despite the high oil price, market tightness will increase from 2009, because new capacity additions won’t keep up with reduced capacity from existing fields,” he said.

IEA analysts insist that a sufficient resource base exists to supply demand through 2030, but Mr. Tanaka said he isn’t confident there will be enough investment, skilled workers and technology to actually get to that oil “in a timely manner.”

Andrew Gould, the chairman and chief executive of Schlumberger Ltd., an oil-services company, expressed similar concerns, noting that 70% of the oil fields that now quench world demand are more than 30 years old. The growth in global demand since 2003, he said, has been roughly the equivalent of the daily output from two of the world’s larger suppliers: the North Sea and Mexico.
 
“Our industry simply cannot cope with these kinds of increases,” Mr. Gould told the assembly. OPEC countries supply about 40% of world production. But that slice is expected to increase in coming years as output decreases in non-OPEC countries such as Mexico and Russia. Saudi Arabia, the world’s largest single supplier, is looking to increase production substantially into the next decade.

But with oil prices now flirting with $100 a barrel, OPEC officials have been aggressive in batting aside talk that they are to blame. “The market is increasingly driven by forces beyond OPEC’s control, by geopolitical events and the growing influence of financial investors,” said Mohammed bin Dhaen al-Hamli, the United Arab Emirates’ oil minister, who also serves as OPEC’s president.

‘Fed Up’ With Blaming OPEC

Mr. Hamli said prices still are “far below” the all-time inflation-adjusted high of $101 a barrel, set in the spring of 1980 after the 1979 Iranian revolution shocked oil markets. His Qatari counterpart, Mr. al Attiyah, noted that gold prices also have been skyrocketing. “Why are people concentrating on oil and closing their eyes on gold?” he asked, adding later that he is “fed up” with people blaming OPEC for fluctuations in oil prices.

Both ministers said the cartel won’t formally consider whether to increase supplies to the world market during a heads-of-state meeting in Saudi Arabia next month. The group agreed last month to add about 500,000 barrels a day to world production, effective Nov. 1.

A top official at the Energy Department disputed OPEC’s claim that supply isn’t an immediate challenge. “We think the market still needs more barrels, as we look toward the next year or so,” said Guy Caruso, an administrator at the department’s Energy Information Administration. “The problem is we don’t have cushions,” in terms of spare production capacity and spare crude stocks, he said. “We have relatively low and declining inventories and a refining sector that’s finding it hard to get the crude it needs.”

•  The Issue: With oil now more than $90 a barrel, debate swirls over whether market fundamentals could push the price well beyond $100.

•  The Yeas: Some experts argue that low investment, tough access to new fields and rising demand will continue to propel oil prices upward.

•  The Nays: Key OPEC officials insist that, at least for now, speculators and a falling dollar are boosting oil prices, not any crimp in supply.

Write to Neil King Jr. at neil.king@wsj.com and Guy Chazan at guy.chazan@wsj.com

Crude oil options traders work on the
floor of the New York Mercantile Exchange

By Russell Hotten, Industry Editor
Last Updated: 6:35am GMT 31/10/2007

OPEC oil ministers say they are powerless in the face of many factors driving up the price of crude, with one member of the producers’ cartel warning that the ‘market is out of control’.

Mohammed bin Dhaen al-Hamli, president of Opec, told a conference in London yesterday that record oil prices are the result of speculative investment and international political tensions. “We are of course concerned about high oil prices,” he said. But “the market is increasingly driven by forces beyond Opec’s control”.

However, there were signs yesterday that the inexorable rise in crude prices could be about to ease, with the cost of a barrel slipping on news that Mexico had increased production and investment bank Goldman Sachs saying that it was time for investors to “take profits”.

Mr al-Hamli said that Opec, whose members supply about 40pc of the world’s oil needs, was “monitoring” the situation and would increase output if necessary. “If the market needs more oil, we will supply it,” he said.

But he added that the oil price, up 34pc since mid-August, was the result of geo-political tensions and speculation by traders. Mr al-Hamli did not refer to specific situations, although analysts have pointed to recent problems on the Turkey-Iraq border and speculation by hedge funds as fuelling recent price rises.

Another oil minister, Qatar’s Abdullah al-Attiyah, pleaded: “Please don’t blame us for $93 oil… The market is out of control.” He said that the oil market is “very confused”, but added that this had nothing to do with an imbalance between supply and demand, but to factors outside Opec’s control.

However, major energy users believe one solution to the current problems would be for Opec to open the taps. “If oil is going up, keeping at this level may hurt the economy, especially nonoil-producing developing countries,” said Nobuo Tanaka, executive director of the International Energy Agency, which advises large oil-consuming countries.

The head of the US Energy Information Administration, Guy Caruso, said: “Our view continues to be that the market is fundamentally tight. We think that the market still needs more barrels as we head out into the next year or so.”

US oil futures fell by $3.02 to $90.51 a barrel yesterday, after hitting a record high of $93.80 in the previous session. In London Brent fell $2.40 to $87.92, down from Monday’s peak of $90.49.

Oil analysts at Goldman Sachs, which in July predicted that oil may reach $95 a barrel, told investors yesterday that it was time to “sell” oil.

http://www.telegraph.co.uk/money/main.jhtml;jsessionid=BCCHXC3SPPDM5QFIQMFSFFWAVCBQ0IV0?xml=/money/2007/10/31/cnopec131.xml 

OLUSOLA BELLO & EJIOFOR ALIKE on 31 October, 2007

Why is Royal Dutch Shell planning to drop Basil Omiyi as the managing director of Shell Petroleum Development Company (SPDC)?

Contrary to speculations over age and length of service as reasons for his imminent removal, Omiyi may be removed to pave way for his deputy, Dale Rollins, an expatriate, to emerge as the managing director.

The move is propelled by government’s bid to review the joint-venture agreement, and there may be no stopping Shell’s parent company in The Hague, Netherlands from installing an expatriate.

A company source says putting Rollins on the seat is to ensure that the interest of the foreign company is protected as it is envisaged that a Nigerian managing director may place national interest above corporate interest.

“A Nigerian at the helm of affairs may compromise on certain issues that may affect the interest of the company. The parent company would want somebody that will represent its interest by the time the joint-venture agreement is being reviewed,” the source said.

Shell officials, who volunteered information on the issue on condition of anonymity, said Omiyi had never wielded powers as the managing director of the company.

According to them, the actual executive powers reside with the deputy managing director.

The expatriate, they say, may have been directed to take over the duties of the managing director, while Omiyi will remain the country chair of Shell companies in Nigeria.

A top official said the company directors in charge of production, exploration and facilities were responsible to the deputy managing director, while Omiyi spent most of his official time in Abuja, or elsewhere, attending to other official duties.

The SPDC in July 2004 became the first western oil major to appoint Nigerians to top executive posts for its operations.

This followed increasing pressure from government on international oil companies operating in the country to appoint Nigerians to responsible positions, particularly in the wake of the restructuring by foreign oil majors.

Omiyi was appointed managing director of Shell Nigeria on July 20 2004, while the deputy managing director, Joshua Udofia, was made senior adviser-Nigeria on September 1 2004. He replaced Egbert Imomoh as senior advisor and was based in Shell’s London headquarters.

Before his appointment as the deputy managing director, Udofia was the manager, western operations of SPDC after which he moved to the eastern operations as manager.

He also held managerial positions in other subsidiaries of Shell, both in the country and abroad.

Omiyi replaced Chris Finlayson, who became the chief executive of Shell exploration and production (E&P) in Africa.

Finlayson had succeeded Ron van der Berg mid-2003 as the managing director of SPDC before he was placed in charge of Shell’s African E&P operations, including Nigeria as well, in 2004.

Chima Ibeneche, another Nigerian, took charge of Shell Nigeria Exploration and Production Company (SNEPCO), a Shell unit in charge of deep-water exploration and production.

Omiyi’s previous position was Shell production director, before then he was director for external affairs. A graduate of chemistry from the University of Ibadan, Omiyi joined Shell in 1970 and had worked as a production engineer, divisional chief production engineer and operations manager. He had also been on cross posting twice to Shell UK, EXPRO and SIPM in The Hague.

Also in 2004, Ademola Adeyemi-Bero was made deputy managing director, taking over from Joshua Udofia when the latter moved to the company’s office in London.

Adeyemi-Bero was the southern swamp manager until 2003 when he was sent on cross posting to Shell Netherlands as director in the E&P division in The Hague.

Shell is the biggest operator, talking of the joint-venture agreements. It accounts for almost half of the country’s oil production capacity. Shell is also the biggest gas supplier to industries and the power sector. The Shell Group comprises Shell Petroleum Development Company (SPDC), holding 30 percent and acting as operator; NNPC has 55 percent (reduced from 60 percent when the cash-starved state company was compelled to cede 5 percent as it could not pay its full share in funding the group’s development plan); Total has 10-percent (raised from 5 percent out of NNPC’s 60 percent), and Agip holds 5 percent.

Total and Agip are among the main oil operators in the country that are partners in the Shell-led LNG venture, the biggest project in this country

http://businessdayonline.com/National/836.html

Posting on Live Chat by Guest 1116

Guest 1116: Sakhalin Project Team morale at all time low this morning on this remote island as Schoolmaster Craig and Helpless Huijskes swing axe wildly and despatch our OPF Project Manager, Bernt Granas for no reason at all !!!!! Neither Craig nor Huijskes know anything about project management and even less about how to manage people. Cold, heartless, insensitive, incompetent and worthless managers. No wonder the project is delayed and wildly over budget. Time for all of us to get out of here before these

(unfinished comment)

Ian Craig is the Chief Executive of Sakhalin Energy Investment Company.

guest_4054 : Its not sad on Sakhalin, its hilarious. Helpless Huisjkes has also given away pipeline contract management to Nerd Nijsse(not nice at all) as he clearly believes he has no need for engineers or project managers. The project, according to Huijskes, will be built and controlled by accountants. Its hilarious to watch.

guest_1328 : Bring back the General – the only true leader at SEIC who was man enough and had the cojones to stand up to the crap we now have to endure

guest 6830: Anybody know what skills Seargant Bilko Rob Ryan brings to a technical position in either subsurface or project engineering issues like Sakhalin, he one of the smooth talking yank powerpoint and excel clowns from central command.

guest 5832: 6830 – you are so right. Ryan compares very well to polyfilla which one uses to superficially fill cracks in a wall before decorating. Unfortunately, the cracks (or structural deficiencies remain and return to haunt one later. Unless of course, the house has been sold! Ryan is indeed another superficial, upward managing bull shitter with the inter personal skills (and demeanour) of a prison camp warder. He gets where he is by the all American traits of bluster, B/S, hype, hypocrasy and hyperbole

guest 5832: BTW, just as a matter of interest, has anyone counted the incredible number of Americans in senior and very senior positions in Shell? The influx really began in the mid-’90s at which point Shell lost the plot. But hey ho – it will all become better when an American woman is in charge – wont it?? guest_5832 : continued – of the style typified by “let’s go kick butt in Iraq”. Sakhalin people – BEWARE.

guest 3479: Wouldn’t you think that Shell’s most visible project would be seen as requirng the best management? The Skhalin story is shameful.

Tue Oct 30, 2007 6:01 PM GMT

DOHA, Oct 30 (Reuters) – Construction is on schedule at the project that has attracted Royal Dutch Shell’s largest foreign investment, a super-clean fuels plant in Qatar with a cost of up to $18 billion, a senior executive said on Tuesday.

“We’re broadly on schedule for a start up by the end of the decade,” said Shell’s Qatar Country Manager Andrew Brown, who is also managing director of the 140,000 barrels per day Pearl gas-to-liquids project.

Brown declined to say in which year the plant would start. Qatar’s oil minister said in June that start up would be in 2009.

Shell’s cost estimate for the plant at $12 billion to $18 billion was also unchanged, Brown said.

Spiralling costs took the price tag estimate for the Pearl plant, which will be the world’s largest GTL facility, to up to $18 billion from an original budget of $5 billion.

Cost inflation led Qatar and Exxon Mobil to scrap plans earlier this year to build another large GTL plant.

Shell was funding the entire cost of the project from the balance sheet, so had encountered no problems with financing due to the global credit crunch, Brown said.

“We’ve put 100 percent of the capital forward,” Brown said. “That gives us lots of flexibility and is appropriate for a project of this nature.”

Despite the large cost, Shell was not looking for another partner for the project, he said.

Based on current oil prices, the pay back time for the project would be short, Brown told the conference earlier. Aside from the 140,000 bpd of super clean fuels such as diesel that the plant will produce from gas, Shell will also have about 120,000 bpd of condensates to sell from the project.

The project had avoided some of the congestion in Qatar that has dogged other projects by building its own import facility for construction facilities, Brown said.

The Pearl plant will cover an area the size of London’s Hyde Park and employ 35,000 workers during the construction phase, he said. 

——————————————————————————–
 
© Reuters 2007. All rights reserved.
 

By John Donovan

Publication on a daily basis of top secret Royal Dutch Shell internal documents relating to the reserves scandal (first revealed to an astonished world in *January 2004) began yesterday on the website royaldutchshellplc.com. The site has been described by the Financial Times as being “anti-Shell”.

*The Times: How Shell blew a hole in a 100-year reputation (Jan 10, 2004)

http://www.shellnews.net/2004%20Documents/todds/thetimeshow%20shellblewahole.htm 

*Daily Telegraph: Shell drops ‘bombshell’ on reserves (Jan 10, 2004)

http://www.shellnews.net/2004%20Documents/DAILY%20TELEGRAPH/dailytelegraphshelldropsbombshellonreserves.htm

Some of the most important documents published yesterday have been modified so that they are now searchable online.

Both parts of the SHELL EP Business Plan – Volume 2: Exploration and Production Committee – a document marked as being “MOST CONFIDENTIAL” are now searchable.

The same applies to Part 1 of the “REPORT OF DAVIS POLK & WARDWELL TO SHELL GROUP AUDIT COMMITTEE” which is marked as being “HIGHLY CONFIDENTIAL”.

It is believed that certain parties have very good financial reasons to be interested in the details set out in these highly confidential documents published for the first time on the open Internet.

This is the link to the webpage containing links to the updated information. Most if not all of the documents are published as pdf files.

http://www.shellnews.net/2007/royal-dutch-shell-reserves-litigation-may-2007.html

Further highly confidential Shell internal communications and other confidential Shell documents will be posted on the same webpage later today.

Interested parties are advised to take copies of the files while they can, as there is a possibility that Shell will take action to try to prevent the continued publication of damaging information contained in these highly confidential documents.

We give this warning bearing in mind that many pages are marked “FOIA Confidential Treatment Requested”. This appears to be a reference to the U.S. “Freedom of Information Act” – in other words, Shell apparently requested that the relevant documents lodged with the Court be exempt from the disclosure rules under the FOIA. If this assumption is correct, it is an indication of the concern for secrecy which Shell attaches to the information.

Shell has already set aside $500 million in the hope of settling the last class action and preventing the release of associated documents, the contents of which are damaging to Shell’s reputation.  royaldutchshellplc.com is acting to thwart the latter ambition. As many articles as possible are being published before the files are sealed by the court in the event of a settlement. In this regard, the information from a Shell insider is that the end game is in progress.

The documents obtained by royaldutchshellplc.com will remain accessible on the website as a long term testimony to the dishonesty of Shell senior management which brought about one of the biggest corporate frauds in history.

Amazingly, some of the senior Shell directors who signed Form 20F submissions filed with the U.S. Securities & Exchange Commission, which contained inflated hydrocarbon reserve figures designed to fool the market, remain at the helm of Shell.

By Hector Gutierrez, Rocky Mountain News
October 30, 2007

Rocky Mountain Arsenal is expected to remain contaminated beyond 2010 when a cleanup was scheduled to be completed, according to an assessment released Monday by the Colorado attorney general.

The Natural Resource Damage Assessment Plan found that hazardous substances will continue to move into groundwater from contaminated soils below the surface and “thus groundwater at the Arsenal will not be clean for the foreseeable future.”

The assessment was prepared on behalf of Attorney General John Suthers, the Department of Public Health and Environment, and the Department of Natural Resources.

Shell Oil Co. and the U.S. Army have been responsible for cleaning up contaminants at the arsenal. During World War II, the Army produced chemical warfare agents and incendiary munitions, including mustard gas, napalm and nerve agents.

After the war, the Army leased parts of the arsenal to Shell. The oil firm then manufactured pesticides, insecticides and herbicides on the site from 1952 to 1982.

Thousands of wildlife died over the years due to the contaminants.

Officials from the attorney general’s office, the public health department and the natural resources departments have been negotiating with Shell and the federal government for several months to reach a settlement on remediation and compensation.

“Although we applaud the clean-up work that Shell and the Army have completed on the Arsenal so far, that effort merely reduces additional harm to our environment, however, harm remains,” Jim Martin, Colorado’s public health and environment executive director, said in a statement.

The release of the assessment plan is part of the process for the arsenal’s cleanup, and the public will be allowed give its input after it is formally published.

“So we’re not surprised about this or concerned about this, the fact that they put out this plan,” Michael Gaughan, Shell spokesman, said.

Gaughan added that he and Shell officials have not had an opportunity to read the plan.

http://www.rockymountainnews.com/drmn/local/article/0,1299,DRMN_15_5734994,00.html

By Fred Pals

Oct. 30 (Bloomberg) — Qatar, the world’s largest shipper of natural gas, said natural gas is “very, very undervalued” compared with oil.

“I’m unhappy, unsatisfied with the gas price,” Qatari Oil Minister Abdullah bin Hamad al-Attiyah said at an oil conference in London today. The fuel is more environmentally friendly, and projects to construct liquefied natural gas plants have become very expensive, he said.

“The world is underestimating the importance of gas,” Al- Attiyah said.

Qatar, which has the world’s third-largest gas reserves after Russia and Iran, has LNG projects with foreign oil companies including Royal Dutch Shell Plc and Exxon Mobil Corp. It supplies LNG to India, Japan and Korea. Qatar’s proved gas reserves are estimated at about 900 trillion cubic feet of gas, according to BP Plc’s Statistical Review of World Energy.

Qatar’s plans to increase LNG exports won’t be affected by current prices, al-Attiyah said. “Qatar is committed to producing 77 million tons a year by 2010,” he added.

LNG is gas chilled and condensed to liquid form so it can be transported by ship.

To contact the reporter on this story: Fred Pals in Amsterdam at fpals@bloomberg.net

Last Updated: October 30, 2007 07:14 EDT

The Associated Press
Published: October 30, 2007

LAGOS, Nigeria: Six foreign oil workers who were kidnapped from an offshore oil field in the Niger Delta were released Tuesday after three days in captivity, officials said.

The Indian and Polish workers are in good health, Italian energy giant Eni SpA said.

Gunmen in speedboats kidnapped the workers at dawn Friday from the Mystras, some 50 miles (80 kilometers) offshore. Another Nigerian worker was reported to have been wounded in the leg in the attack.

The hostages were freed unconditionally and no ransom was paid, police spokeswoman Ireju Barasua said, confirming the release.

The Mystras is capable of producing 80,000 barrels of crude oil per day.

Militants have kidnapped more than 150 foreigners this year to press their demands for local control of oil revenues. The attacks since late 2005 have cut Nigeria’s regular output by about 20 percent, helping send crude prices toward all-time highs.

Locals have for years demanded a greater share of the wealth in Africa’s largest crude producer, and the region remains desperately poor despite its great natural bounty.

The government of President Umaru Yar’Adua has stepped up efforts to maintain calm in the Niger Delta, and violence has waned since he took power May 29. But the latest attacks could set back plans for formal talks between the government and the main armed groups.

A militant group, the Movement for the Emancipation of the Niger Delta, has claimed responsibility for Friday’s attack.

Also this week, MEND said it was responsible for an attack Sunday on an offshore oil field operated by Royal Dutch Shell. Militants kidnapped seven workers — Nigerian, British, Croatian and South African — but released them after two days.

The group, which threatened last month to resume attacks after one of its leaders was arrested in Angola, vowed to continue the violence.

On the Net:

http://www.eni.it

http://www.iht.com/articles/ap/2007/10/30/africa/AF-GEN-Nigeria-Oil-Unrest.php#Scene_1

MOSCOW (Thomson Financial) – Russian oil firm GazpromNeft is in talks with StatoilHydro, Chevron and Royal Dutch Shell on forming a joint venture to develop oilfields off Sakhalin island and the north Russian province of Chukotka, said its president Alexander Dyukov.
 
As yet the western companies have not given a response to Gazprom Neft’s proposals, the head of the Gazprom unit was quoted as saying by the Ria-Novosti agency.

The Sakhalin block, which Gazprom Neft bought from rival TNK-BP, is estimated to contain 50-60 mln tonnes of oil.

StatoilHydro became Gazprom’s second western partner on the huge Shtokman Barents Sea gas field earlier this month.

tf.TFN-Europe_newsdesk@thomson.com jlw/jms
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Copyright Thomson Financial News Limited 2007. All rights reserved.
 PLC – Serious Investment ResearchHemscott PLC – Serious Investment Research

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