Book Title: The Reform of Class and Representative Actions in European Legal Systems: Book by Christopher Hodges, MA (Oxon), PhD (Lond), FSALS: June 2008: Front Cover, Chapter 3 Court Rules for Multiple Claims – Extracts from Pages 75 & 76, plus Back Cover.

ISBN 978-1-84113-902-9 (Hart Publishing Limited)

The Netherlands

Case Study: Shell Hydrocarbon Reserves

On 9 January 2004, following an internal review, Shell (Royal Dutch and Shell Transport, the two former parent companies of the ‘Shell Group’) announced that it would re-categorise approximately 3.9 billion barrels of oil equivalent (‘boe’) out of its reported proved reserves. The re- categorisations were based on a determination that the reserves did not strictly comply with the definition of ‘proved’ reserves established by the US Securities and Exchange Commission (‘the SEC’). On 24 August 2004, the UK Financial Services Authority and the SEC announced final settlements of their investigations with respect to Shell. As a result of the settlement, Shell, without admitting or denying the SEC’s findings or conclusions, entered into a consent agreement with the SEC and paid a civil penalty of $120 million.

A number of putative class actions were filed in the United States against Shell in relation to the re-categorisation. One class action was commenced in the US District Court for the District of New Jersey. A non-US shareholder, Mr Peter M Wood, was recruited into that action through an appeal on the website (<http://www.royaldutchshellplc.com> accessed 10 June 2008). The US District Court for New Jersey initially ruled that Mr Wood could represent all non-US shareholders, but a new judge reversed the ruling on the issue of ‘subject matter jurisdiction’.

After the announcement of the re-categorisations, the price of Shell’s shares fell. Shell made an offer to compensate certain non-US shareholders for losses alleged as a result of the price fall, without any admission of wrongdoing, illegal conduct or causation of loss. Shell entered into an agreement with a foundation (the Shell Reserves Compensation Foundation) and various associations that represent the interests of retail shareholders and the institutional investors, including the Dutch Equity Holders’ Association and others, under which non-US Shell shareholders would receive $352 million. The agreement called on the SEC to distribute $96 million of the $120 million fine to the non-US investors, an amount that corresponded to their share of investor base. The non- US arrangement would benefit both the shareholders who were parties to the agreement and other shareholders who fell within the definition of participating shareholders. That agreement was contingent on the US District Court of New Jersey declining jurisdiction over the non-US investors, which it did on 13 November 2007, and on approval by the Amsterdam Court of Appeal, which is expected to rule in early 2009. An agreement approved in this way would be expected to be enforceable throughout the EU.

In March 2008, Shell announced settlement in principle of the US shareholder class action claims for an additional $79.9 million plus $2.95 million, being proportional to the amounts payable under the proposed Dutch settlement, plus legal costs, subject to approval by the US Court. If the Dutch and US settlements are achieved, the combined cost would be around $600 million, including the $90 million paid in 2005 to the US employee shareholders. The US legal fees would be approved by the court as a percentage of the total recovery paid.

In practice, it should be understood that the Netherlands has two systems for collective claims. In addition to the Settlement Law discussed above, the litigation system permits a foundation or association to bring a collective claim without an individual lead plaintiff. Under that mechanism, there is no court supervision over appointment of lead counsel and it is only possible to bundle claims if there are no individual issues. No damages are claimable, but it has instead been the practice to request a declaration that there has been a breach. Res judicata only applies between the parties, and this is problematic for defendants, who want to avoid more cases.

EXTRACTS END

INVOLVEMENT OF JOHN DONOVAN AND THIS WEBSITE IN THE ROYAL DUTCH SHELL RESERVES LITIGATION

In September 2004  we published an appeal by U.S. class action lawyers, Bernstein Liebhard & Lifshitz LLP for evidence in respect of the above US class action law suit brought against Shell in relation to an oil and gas reserves recategorisation. The law firm subsequently confirmed that Shell insiders contacted them in response to the appeal.

Bernstein Liebhard & Lifshitz LLP were the court appointed lead plaintiff attorneys representing The Pennsylvania State Employees Retirement System and The Pennsyvania Public School Employees Retirement System.

Following the filing with the U.S. Courts by Bernstein Liebhard & Lifshitz LLP of an Amended Complaint, our main contact at the law firm, Mr Steven J. Peitler, supplied me with a copy of the court document for publication on our website. Several hundred visitors to the website subsequently downloaded the relevant files and as a result, I received the following email.

From: “Steven J. Peitler” <Peitler@bernlieb.com>
Date: 29 September 2004 15:22:11 BST
To: “John Donovan” <john@purplex.net>
Subject: RE: Royal Dutch Shell

Thanks, I will give him a call in a few days.  I am swamped with people calling me after reading the compliant.

Steven J. Peitler
Investigator
Bernstein  Liebhard & Lifshitz LLP
10 East 40th Street
New York,  NY 10016
Peitler@BernLieb.com

In March 2006 the litigation was initially given permission to proceed as a global class action against Royal Dutch Shell. This was after we found a Shell shareholder to represent all non holders of Royal Dutch Shell stock following a further appeal on this website on behalf of the law firm, which we published on 20 January 2006. The successful appeal on our website followed a telephone conference call between the senior partners of Bernstein  Liebhard & Lifshitz LLP (Stanley Bernstein and Jeffrey Haber) and John Donovan (arranged by Mr Peitler during email correspondence).

Subsequent developments are covered in the extracts from the book by Christopher Hodges.

Jan. 27 (Bloomberg) — Essar Oil Ltd., operator of India’s second-largest non-state refiner, said a deal to buy three refineries from Royal Dutch Shell Plc will take more time.

“It’s going to be a few more months before we have a clear decision on the transaction,” Prashant Ruia, chief executive officer of the Essar Group, said in an interview with Bloomberg TV at Davos in Switzerland today. “It’s a bit too early to talk about the value of the transaction.”

Essar and Reliance Industries Ltd., India’s biggest company by market value, are bidding for refineries in the U.S. and Europe as companies such as Shell and Valero Energy Plc sell unprofitable plants and cut expenses. Essar, which bought a 50 percent stake in Kenya Petroleum Refineries Ltd. in July, wants to add capacity in Europe to access markets and pipelines, a person familiar with the matter said in August.

Essar Oil shares declined 4 percent to 137.50 rupees at 1:25 p.m. in Mumbai trading, the lowest level since Dec. 23. The benchmark Sensitive Index fell 2.1 percent.

Essar and Shell have been in exclusive talks since Oct. 30. The three refineries Shell plans to sell have more than double Essar’s current capacity of 210,000 barrels a day, according to data compiled by Bloomberg.

The refinery at Stanlow, Britain’s second-largest processing plant, can process 233,000 barrels a day. Shell’s plant at Hamburg in Germany has a capacity of 110,000 barrels a day and the refinery at Heide can process 91,000 barrels.

To contact the reporters on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net; Francine Lacqua in Davos at flacqua@bloomberg.net.

Last Updated: January 27, 2010 03:32 EST

REUTERS

* Shell Qatar investments at $21 bln, surpasses Exxon

* First output from Pearl GTL plant expected early 2011

* Shell to get free gas from Qatar for Pearl, so costs low

By Simon Webb

DOHA, Jan 26 (Reuters) – Royal Dutch Shell (RDSa.L) $21 billion investment in energy projects in Qatar would make it the largest private investor in the country, surpassing rival ExxonMobil (XOM.N), a senior company executive said on Tuesday.

Shell expected to complete construction by the end of 2010 on the world’s largest energy project, a $19 billion plant to produce superclean fuels from gas, said Gerrit-Jan Smitskamp, the company’s regional vice-president for finance.

The plant would cost up to $19 billion. That investment, in addition to the $2 billion it is spending on building a new liquefied natural gas (LNG) plant in the country that would also be completed this year, would make Anglo-Dutch oil giant Shell Qatar’s largest private investor, he said.

The Pearl gas-to-liquids (GTL) plant is divided into two production lines, or trains. The first would be completed by the end of 2010 and the second in early 2011, Smitskamp said at a MEED projects conference.

“With the first train, we will start commissioning by the end of the year, moving to first production by 2011,” he said.

The LNG production facility, also known as a train, was also due for completion by the end of the year, he said.

Qatargas train 7, with capacity to produce 7.8 million tonnes per year of gas, would be the last of new LNG trains in Qatar’s current expansion plan. It would take capacity in the world’s largest LNG exporter to 77 million tpy.

Shell has a 30 percent stake in the plant, with the rest belonging to state oil firm Qatar Petroleum.

PROFITABLE

Despite the huge investment, the 140,000 barrels per day GTL project would still be profitable, Smitskamp said.

“We took the final investment decision (FID) when the oil price was around $40, and we envisaged the project would run there so at $70 to $80 its probably the same,” he said.

The plant’s margins would also benefit from free gas, Smitskamp said. Free feedstock was part of the original agreement with Qatar to build the plant, he added.

“Unlike a crude oil refinery that has to pay for crude oil as a feedstock, gas is free for us. So we only have operating costs.”

The Pearl project is employing around 50,000 people, who have poured twice as much concrete as that used to build the world’s tallest building, the recently-opened Burj Khalifa in Dubai, Smitskamp said.

Most of the fuel produced at Pearl would be sold into Shell’s global supply system, rather than contracted out to individual buyers on a long-term basis, he said.

Some of the jet fuel produced may go to Qatar Petroleum, while some gas oil may be mixed with Shell’s current blend, he said.

Following are the refined fuel products that will be produced at Shell GTL’s plant in Qatar.

Shell GTL total capacity – 140,000 bpd oil products

Product streams: – 35,000 bpd naphtha and paraffin

- 25,000 bpd kerosene

- 50,000 bpd gas oil

- 30,000 bpd base oil.
Non-oil product output from the GTL project being marketed by
Tasweeq:

- 30,000 boepd ethane

- 30,000 bpd LPG

- 60,000 bpd condensates

(Writing by Luke Pachymuthu and Simon Webb; Editing by Sue Thomas)

SOURCE ARTICLE

Growth: Shell will rely on more conventional oil and gas reserves

The chief executive of Royal Dutch Shell today announced the firm would scale back growth in Canadian tar sands amid a growing backlash from shareholders and environmentalists.

Peter Voser said Shell plans to rely more on conventional oil and gas reserves for future growth.

“We have enough other growth opportunities,” he told the Financial Times.

Protestors have opposed oil sands projects over their impact on the environment, while shareholders are worried about the cost of climate change legislation.

Shell is raising its tar sands production at the Athabasca Oil Sands Project in Alberta to 255,000 barrels a day – far less than the 700,000 planned.

SOURCE ARTICLE

Energy Report – 26 January 2010

Shell, the company most affected by the years of violence in the Niger delta and the other difficulties of working in Nigeria, has finally had enough

In December, it invited offers for a swathe of its onshore fields and last month underlined its new stance with a statement from Peter Voser, group chief executive, that “we no longer depend on [Nigeria] for our growth aspirations.”

In – for Shell – surprisingly forthright comments about the country in which it has been the dominant oil and gas producer for over 50 years, Voser cited “uncertainties about the future of the fiscal structure” and the government giving “priority to maintaining oil production over reducing gas flares”, in addition to the “sabotage and attacks on installations” as reasons for its decision. Not depending on Nigeria for growth “gives us more flexibility in deciding when and how to develop oil and gas resources” in the country, he said.

COMPLETE ARTICLE (ACCESS VIA FREE TRIAL)

By Rebecca Mowbray, The Times-Picayune

January 26, 2010, 10:51AM

(Bloomberg) — Motiva Enterprises LLC will shut a crude unit and reformer at its Convent, Louisiana, refinery on Jan. 28 for five to six weeks of planned maintenance, people familiar with the plant’s operations said.

The crude unit has a capacity of 130,000 to 140,000 barrels a day and is the larger of the plant’s two crude units, said the people, who declined to be identified because they are not authorized to speak for the refinery.

“I can’t comment on operational issues,” Kevin Hardy, a spokesman for the Convent refinery, said in an e-mail. “We don’t comment on anything that could have an impact on business.”

Motiva is a refining and marketing joint venture of Saudi Refining Inc., a subsidiary of Saudi Aramco, and Shell Oil Co., a unit of Royal Dutch Shell Plc.

The 235,000 barrel-a-day plant is one of two that Motiva operates in South Louisiana. The other is in Norco.

Norco is the 25th-largest U.S. refinery by capacity and Convent is the 26th-largest, according to the Energy Department. Together, they account for about 5.4 percent of the refining capacity on the Gulf Coast.

SOURCE ARTICLE

On Monday, my main assignments for the day were positively mundane: first, to get a plumber to fix the burst pipe at the office, and then head over to the oil ministry, where Exxon Mobil and Royal Dutch Shell were signing a 20-year deal to develop a supergiant Iraqi oil field. The agreement had been heralded as a cornerstone for the future of an Iraq safe enough for investors to unload tens of billions of dollars, perhaps one that would see Iraq surpass Saudi Arabia in oil production.

Tue Jan 26, 2010 8:52am GMT

DOHA, Jan 26 (Reuters) – Royal Dutch Shell (RDSa.L) expects first production from its gas-to-liquids (GTL) plant in Qatar in 2011, a senior company executive said on Tuesday.

The cost of the Pearl super-clean fuels plant in Qatar was pegged at $18 billion to $19 billion, the company’s regional vice-president for finance, Gerrit-Jan Smitskamp said during a MEED conference.

The GTL project will be the world’s largest and will have a capacity of 140,000 barrels per day (bpd).

Total investment in Qatar’s GTL and liquefied natural gas projects (LNG) was at $21 billion, he said earlier.

(Reporting by Simon Webb; Editing by Sue Thomas)

REUTERS ARTICLE

THE WALL STREET JOURNAL

JANUARY 25, 2010, 9.32 A.M. ET

By MATTHEW CURTIN

These days, you have to corral an army of engineers in the desert to build an enormous factory to transform natural gas into a liquid to be used like oil. The capital cost of Royal Dutch Shell’s Pearl gas-to-liquids plant in Qatar is a cool $18 billion or more—10% of its market capitalization. Like Chevron’s Gorgon liquefied-natural-gas project offshore Australia, it shows what big integrated oil companies are capable of.

Associated PressShell has bumped up its exploration budget to $3 billion.

But have they neglected bread-and-butter exploration for lower-risk, lower-return engineering projects? Certainly, investors are unimpressed. A decade ago, the international oil companies, or IOCs, accounted for 79% of energy-sector market capitalization and nearly all its net income. Today the figures are 53% and 62%, according to Sanford C. Bernstein. Shell trades at a discount of 13% and 36% respectively to the 2010 forward price-to-earnings multiples at Petroleo Brasileiro and BG Group. But their estimated five-year average output growth is 5% and 9% compared with Shell’s 3%, around the IOC average.

If there is a premium on growth, why haven’t the IOCs spent more on exploration? The question is a little unfair. The majors are so big they spend billions simply replacing the barrels they produce. Geopolitics and resource nationalism have narrowed growth options.

It takes a big discovery to move the needle. Shell more than doubled its exploration budget to $1.4 billion between 2004 and 2008 when it represented 3% of net cash from operations. But contrast that with the 16% of net cash from operations spent by the smaller BG, which has made exciting finds offshore Brazil, alongside Petrobras, and in West Africa. That is why Bernstein analyst Neil McMahon questions whether IOC executives have sufficiently examined the merits of exploration over one-off engineering marvels. Facilities like Pearl have to be built on giant, long-life gas fields, which are rare.

Intriguingly, Shell, scaling back development of its high-cost Canadian tar-sands operation, has bumped up its exploration budget to $3 billion, around 10% of capital spending. But could it spend even more? With their huge upfront cost sunk in 2011, Shell’s two Qatar projects will generate $4 billion a year in cash flow. They will be nicely geared to any rise in oil prices at a modest unit cost of $6 per barrel of oil equivalent. Few IOCs may be as well placed as Shell to take on more exploration risk.

Write to Matthew Curtin at matthew.curtin@dowjones.com

WSJ ARTICLE