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Posts from ‘July, 2011’

Shell to Stop Processing at Australian Refinery by Mid-2013

Jul 27th, 2011
by John Donovan.
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By Ben Sharples and James Paton – Jul 27, 2011 7:19 AM GMT+0100

Royal Dutch Shell Plc (RDSA), Europe’s largest oil company, will halt refining operations at its Clyde plant in Sydney before mid-2013 and convert the facility into a fuel-import terminal.

The plant, which processes about 79,000 barrels a day of crude oil and employs 310 people, is no longer regionally competitive against Asian “mega-refineries,” the Hague-based company said in an e-mailed statement today. The plan was initially announced in April.

Shell said in March it intends to reduce global refining and marketing costs by $1 billion by the end of next year as it seeks to accelerate production growth through 2014. The company, which also operates a second refinery at Geelong in Victoria state, acquired Clyde in 1928 and the plant supplies about 40 percent of Sydney’s petroleum needs.

“Shell must evolve as it strives to remain competitive in a rapidly changing market,” Andrew Smith, vice president of the company’s Australian downstream unit, said on a conference call. “Australia is a growth center for Shell’s global business, particularly in liquefied natural gas, and the company is set to become one of the largest investors” in the country.

Shell said in May it expects to invest about $30 billion in Australian oil and natural gas developments during the next five years. The company that month approved the Prelude floating LNG venture off the coast of northwest Australia.

Carbon Tax

The plan to end oil refining wasn’t prompted by Australia’s proposed tax on carbon emissions, Shell said. Australia expects to make about 500 polluters pay A$23 a ton for their emissions from next year, before switching to a cap-and-trade system in 2015, Prime Minister Julia Gillard said this month.

There are seven oil refineries in Australia, with others operated by BP Plc (BP/), Caltex Australia Ltd. (CTX) and Exxon Mobil Corp. (XOM)

“Asian refining capacity is increasing, and it will have an impact on the Australian refining industry, but I’m not going to crystal ball gaze on margins,” Smith said. The conversion of Clyde into an import facility won’t impact fuel prices, he said.

Profits from turning crude into fuels such as gasoline and diesel are unlikely to increase as new capacity outweighs demand, Sanford C. Bernstein & Co. said in a June report.

OMV AG (OMV), central Europe’s largest oil company, said in May it started to close its 70,000 barrel-a-day refinery in Romania and turn it into a crude and fuel terminal.

LyondellBasell Industries NV (LYB) also said that month it was seeking a buyer for its 105,000 barrel-a-day Berre plant in southern France.

To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; James Paton in Sydney at jpaton4@bloomberg.net

To contact the editors responsible for this story: Amit Prakash at aprakash1@bloomberg.net; Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net

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BP is now in danger of becoming a ‘jam tomorrow’ business

Jul 26th, 2011
by John Donovan.
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Damian Reece

By 12:17PM BST 26 Jul 2011

Management, led by Bob Dudley, is gradually losing the trust of shareholders who have sat through one failure after another, most recently the Macondo oil spill and then the spectacular blow up of its Russian strategy.

BP

I expect one of the big pictures to emerge form this week’s results from the big oil companies is the marked divergence in the fortunes of BP and Royal Dutch Shell. Since BP’s fatal accident in the Gulf of Mexico, its shares are off a third while Shell is up 15pc.

BP has slumped to a market value of £89bn while Shell, the world’s biggest dividend payer, is valued at £144bn. The latter seems to have a far more settled and cogent strategy, including an overarching desire to diversify away from oil and have gas production account for half its business.

Production was down 11pc from a year earlier and BP is in danger of becoming a “jam tomorrow” business, constantly promising better days ahead but having a patchy delivery record. The company’s woes have now led to analysts highlighting the break up value of this once great company.

Dudley is already embarked on a post-Macondo sell off of some fields but analysts have now come to the inevitable conclusion that after the year it has had, the business is trading at a substantial discount to the sum of its parts, that discount being attributable to a lack of confidence in management.

HSBC suggests an accelerated “shrink to grow” strategy which could add 160p a share to the company’s value. JP Morgan Cazenove has said a full break-up would create $100bn of cash for investors. Clearly these City figures place far more reliance on Dudley’s ability to sell assets than growth them.

Today’s results continue to give that view credence.

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Shell rapidly expanding its positions in unconventional gas (tight gas, shale gas and coal-bed methane)

Jul 25th, 2011
by John Donovan.
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From pages 31 & 32 of “Royal Dutch Shell and its sustainability troubles” – Background report to the Erratum of Shell’s Annual Report 2010

The report is made on behalf of Milieudefensie (Friends of the Earth Netherlands)
Author: Albert ten Kate: May 2011.

Unconventional gas and high-volume fracking

Not only for oil, but also for gas Shell is resorting to unconventional production methods. In December 2010, Shell-CEO Peter Voser stated: “In recent years, Shell has increased investment in natural gas projects in countries like Qatar, Australia, Russia, the United States and Canada, with a special focus on tight gas, shale gas and coal-bed methane – together these are known as unconventional gas. We’re currently exploring the potential for unconventional gas outside North America in countries like China and South Africa, as well as some European countries.” The Shell-CEO proceeds: “I know by 2012 Shell will be producing more gas than oil, and, I know, when it comes to natural gas supplies, a revolution is under way. (…) Shell is set for strong growth in tight gas.”

Conventional natural gas is usually found trapped in the pore space of rock types like sandstone in underground geologic formations. Compared to unconventional gas, conventional gas flows rather easily to drilled wells. For unconventional gas, often high-volume fracking is used as a technique to get the gas to the surface. Fracking (or hydraulic fracturing) involves injection of water, mixed with sand and chemicals to ease production of natural gas and oil by breaking up rock formations. Fracking has been done around the world for many years. However, high- volume fracking is a rather new phenomenon and causes much more environmental damage and health risks. From this point of view, the revolution that is under way according to Shell-CEO Peter Voser, may in fact be a quite worrying revolution.

Tony Ingraffea, professor of Civil Engineering at the Cornell University in the U.S. State of New York, has conducted much research on fracking. During a radio interview in February 2011, he asked himself the question: “What is high-volume fracking, compared to the traditional historical kind that no one seems to be complaining too much about?” His answer was: “The difference is about a factor of hundred in just about everything, predominantly the amount of fluids that are necessary to do the fracking [including the amount of chemicals; the professor mentions this later in the interview], the amount of fluids and other waste products produced from a high- volume unconventional well that’s fracked, the amount of truck traffic, the amount of energy and power that needs to be brought to a well. (….) It’s not the issue of fracking, it’s the entire system of developing gas from an unconventional resource.”

Shell’s positions in unconventional gas

Shell is rapidly expanding its positions in unconventional gas (tight gas, shale gas and coal-bed methane). Below its main present positions around the world are listed:

− North America. Shell’s North American tight gas production amounted to some 140,000 barrels of oil equivalent per day in 2009, an increase of 62% from 2008 levels. Shell expects that its production could double from 2009 to 2015. Its activities in U.S. tight gas began in 2001, with purchases in the Pinedale Anticline in Wyoming State. More recently, Shell secured unconventional gas positions in the Haynesville play in Texas/Louisiana State and in Western Canada (Groundbirch, Deep Basin, Foothills, Klappan). Its 2010 acquisitions are mainly in the Marcellus shale, the biggest natural gas field in the United States, covering most of Pennsylvania state and parts of New York, Ohio and the Virginia states. Another 2010 acquisition was within the Eagle Ford shale play, in South Texas.

− South Africa. Shell wants to start shale gas exploration activities within the Karoo eco-region in South Africa. The exploration area would comprise 90,000 square kilometres, more than two times the surface of the Netherlands.190 Shell has applied for three exploration areas, each comprising 30,000 kilometres. In each area it wants to drill up to eight exploration wells. The formations in the Karoo that are believed to contain recoverable gas are located 1.5 to 4.5 kilometres below the surface.

− China. Shell and PetroChina operate Changbei, a tight gas field in the Shaanxi Province of China. Commercial production in Changbei began in March 2007, supplying 3 billion cubic metres of natural gas a year to Beijing and other cities in eastern China. Late 2007, Shell took over a 55% equity interest in a coal-bed methane venture in Shaanxi Province. In the Sichuan province, Shell works together with PetroChina on developing two tight/shale gas reservoirs of each 4,000 square kilometres.192 Shell provides little information about the environmental impacts of its Chinese operations.

− Australia. In August 2010, Shell and PetroChina (majority owned by the state company CNPC, China National Petroleum Corporation) completed their acquisition of the Australian company Arrow Energy. The 50/50 joint venture called CS CSG (Australia) Pty Ltd. now owns coal seam gas assets in Queensland state, domestic power businesses, and a site to build a liquefied natural gas (LNG) plant for export markets. Coal-bed methane is natural gas contained in coal seams. The new joint venture will be the operator of the coal seam gas assets. The gas production assets are in the Surat and Bowen basin. In the Surat basin, there is no fracking done. In the Bowen basin, there might be.

− Other. Shell also has unconventional gas positions in Sweden, Germany, Ukraine and Brazil.

A further extract from this section of the report will be published in the coming days.

THE COMPLETE 73 PAGE REPORT (with reference sources)

Shell trumps BP in the battle of the oil giants

Jul 25th, 2011
by John Donovan.
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Britain’s biggest oil companies are expected to reveal bumper profits totalling a massive £9.2bn for the quarter, but troubled BP, once industry leader, will be far outstripped by Shell.

By 6:00AM BST 25 Jul 2011

Royal Dutch Shell is set to post quarterly profits of £4bn on Tuesday, a 60pc increase on the year before, while BP’s profits are up just 21pc at £3.6bn despite rocketing oil prices.

BP’s sale of oil fields to pay for its Gulf of Mexico oil spill disaster has eaten into production and profits, with output seen down 11pc in the quarter.

While the Anglo-Dutch giant Shell has benefited from production volume growth in the second quarter compared with other oil groups. Earnings from exploration and production in the second quarter are expected to show a 70pc uplift.

Over the past full year, BP’s share price has risen 17pc, compared with Shell’s increase of 30pc. Taken from the worst of the spill crisis, its price has increased 54pc to 470p per share, while Shell’s share price is up 45pc at £22.86.

Faced by this drab financial performance, BP’s American chief executive Bob Dudley is coming under pressure to come up with a much more radical strategy.

“Investors feel that the company has slightly lost its way,” Paul Mumford, fund manager at Cavendish Asset Management. “You need to have some clear guidance on where the company is going in the future, and how they are going to advance their strategy,” he added.

Some industry experts have suggested that BP should follow the example of ConocoPhillips, which last week spun off its oil-refining and fuel retail unit.

Meanwhile, BG Group, their smaller rival, is expected to have doubled its profits to $2bn for the past three months, compared with the previous year.

Analysts at Barclays Capital expect profits at the oil companies and refiners it follows will increase 42pc in the second quarter, fuelled by a 50pc jump in crude prices and global refining margins.

However, experts claim that the high oil price is masking serious operational challenges in the sector that may soon begin to show.

Despite the big figures and optimistic headlines, Deutsche Bank analysts say oil companies are going to have a tough time keeping up production.

Large oil companies have found it difficult to increase production. Investment in massive, long-term exploration projects is required and access to resources is tougher, with many producing nations restricting oil majors’ access.

“A key facet of a sector bull thesis is that, after a number of years of disappointment, 2012 to 2013 will see the sector return to growth,” a Deutsche Bank spokesman said. “Unfortunately, second quarter 2011 results are unlikely to build confidence in this theme.

“A combination of divestments, maintenance, extreme seasonality [low European gas demand], limited production from Libya and a series of stock-specific issues, drive our expectation for a 7pc year-on-year production decline.”

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BP Breakup Worth $100 Billion to JPMorgan

Jul 25th, 2011
by John Donovan.
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By Brian Swint – Jul 25, 2011 12:01 AM GMT+0100

Robert Dudley (right) could unlock $100 billion for BP Plc (BP/) investors by following ConocoPhillips and splitting up Europe’s second-biggest oil producer.

BP, trying to recover from last year’s Gulf of Mexico disaster, has lagged behind its three larger rivals this year, rising 1 percent in London even as oil peaked at $127 a barrel. Conoco’s decision last week to split its refinery arm from its exploration and production business led analysts at banks including UBS AG, Bank of America and JPMorgan Cazenove to recommend BP look at a similar move.

Chief Executive Officer Dudley’s efforts to revive BP have been undermined by a failed exploration deal with Russia’s OAO Rosneft and the prospect of billions of dollars of fines from the spill. JPMorgan Cazenove said last week BP’s assets are worth about about 800 pence a share, equal to a total market value of about $248 billion. The company currently trades at about $147 billion.

“On a sum of the parts basis, BP is ludicrously undervalued,” said JO Hambro Capital Management Group Ltd.’s Clive Beagles, who helps manage 3.8 billion pounds ($6.2 billion) of securities including more than 100 million pounds of BP shares. “Perhaps that means they need to take as radical a route as ConocoPhillips (COP), or articulate a better strategy.”

BP’s 40 percent discount to the total value of its assets compares with an industry average of 27 percent, JPMorgan Cazenove analyst Fred Lucas said.

ConocoPhillips’s spin-off plan follows a similar move by Marathon Oil Corp. (MRO) Shares in Houston-based Marathon have gained 23 percent since it announced its split on Jan. 13 even as a new refining company with a market value of $14.4 billion was created.

Macondo Spill

BP shares are down 28 percent since the Macondo oil spill, compared with a 13 percent gain for shares of larger rival Royal Dutch Shell Plc (RDSA) over the same period.

BP spokesman Robert Wine said the company has no plans to split up its refining and marketing operations, known as downstream, and the so-called upstream business of exploration.

“The principle of a split deserves a good airing,” said Ivor Pether, a fund manager at Royal London Asset Management, who has about 300 million pounds invested in BP. “The U.S. government would block any such proposal while Macondo liabilities are outstanding, but there are enough notes out there on the possibility to merit a considered response.”

BP may report a profit of $6 billion for the second quarter on July 26 after a record loss a year earlier, a Bloomberg News survey of 10 analysts shows. Two days later, Shell will probably say profit was $6.6 billion for the period, compared with $4.5 billion in the second quarter of 2010.

Legal & General

“Conoco spinning out downstream activities keeps the debate going about the benefits of integration,” said Tim Mann, a fund manager at Legal & General Group Plc (LGEN), the second-largest shareholder of BP and Shell. “For Shell there will be a lot of focus on project delivery, and investors will be interested in any signals on the dividend now a major investment phase is completing.”

Shell sold its first cargo from the Pearl gas-to-liquids plant in Qatar in June. The project, the product of a $19 billion investment, will reach full capacity next year.

Shell will raise its dividend to 46 cents a share from 42 cents a share over the next two years, according to data compiled by Bloomberg based in part on options trading. BP will maintain its dividend at 7 cents a share, half the pre-spill level, until at least 2013.

BP has spent more than a decade paring down its refining arm because of overcapacity in Europe and the U.S. BP plants can process about 2.7 million barrels of crude a day, down from 3.2 million barrels in 2000. The proposed sale of two of its five U.S. refineries will subtract about another 700,000 barrels of capacity.

Upstream Breakup

“Once they’ve sold Carson and Texas City, they won’t have much refining left and it would be difficult to exit completely,” said Iain Armstrong, an analyst at London-based broker Brewin Dolphin that holds about 70 million BP shares. “Why not break up into various upstream businesses? Bob has steadied the ship, but it should be doing better than this.”

Since taking over in October, Dudley has overseen the sale of $25 billion upstream assets in Argentina, Colombia, Pakistan and Vietnam and said he will focus the company on exploration. He signed a $7 billion deal with Reliance Industries Ltd. (RIL) to explore offshore India. The proposed $8 billion tie-up with Rosneft to explore Russia’s Arctic Kara Sea was blocked by the billionaire partners in the TNK-BP venture.

“Splitting up an oil company can make for quicker decision times as well as sharper capital and other resource allocation,” said Andrew Steinhubl, a partner at management consultant Bain & Co. in Houston. “Whether the model fits for the larger companies remains to be seen.”

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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Canary Wharf to transform Royal Dutch Shell site

Jul 25th, 2011
by John Donovan.
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Canary Wharf Group has been chosen to transform five acres surrounding Royal Dutch Shell’s headquarters on London’s Southbank – one of the capital’s last remaining big development sites.

By 6:20AM BST 25 Jul 2011

The oil group has picked a bid by Canary Wharf, which is majority owned by Songbird Estates and Qatari Diar, the property investment arm of the emirate’s sovereign wealth fund, to develop the site. The pair are thought to have offered about £350m to secure the mandate. The deal, which is expected to be confirmed within days, will result in houses, offices and shops being built around the Shell Centre near Waterloo station in central London.

Canary Wharf and Qatari are expected to knock down three low-rise buildings around Shell’s tower and build more than 1.5m sq ft of offices, shops and homes.

However, they will not redevelop Shell’s 27-storey headquarters – designed in the 1950s by the architect Sir Howard Robertson. Some of Shell’s staff will move to a temporary office in Docklands before work begins.

Plans to redevelop the area date back more than a decade. In 1997, the company announced proposals to build shops and a leisure centre in the area although the scheme stalled.

The oil company launched a search for new developers last year. Other bidders are thought to have included Development Securities in partnership with Carlyle, and Chelsfield in partnership with the Livingstone brothers. Development Securities and Carlyle pulled out last week after it became clear that Shell intended to go with Canary Wharf and Qatari Diar.

Canary Wharf is best known for developing 100 acres of offices in London’s Docklands area. The company recently built BlackRock’s City headquarters and is in partnership with Land Securities to erect the 37-storey Walkie Talkie tower.

Other developments currently being built in London include The Shard, by London Bridge station, which is set to become one of the most recognisable landmarks in the capital and will be completed in time for the 2012 Olympics.


The Shard is one of Canary Wharf’s current London projects Photo: BLOOMBERG

Another leukemia patient sues Shell, BP

Jul 24th, 2011
by John Donovan.
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The complaint alleges that Shell has known about the dangers of benzene causing cancer for decades, but publicly minimized and hid those dangers.

By SANFORD J. SCHMIDT: The Telegraph: July 22, 2011 7:58 PM

EDWARDSVILLE – For the third time this year, a victim of an aggressive form of leukemia who spent time in Roxana schools has filed suit against Shell Oil Co. and BP, claiming benzene around its refinery caused the disease.

Greg Wells of East Alton, who formerly lived in Wood River and attended Roxana schools, has been diagnosed with acute myelogenous leukemia.

His lawyer, Christopher Dysart, said his client was diagnosed in May 2010.

The lawsuit filed in Madison County Circuit Court claims Wells will have a shorter life expectancy, suffer mental anguish, will incur medical bills and will have to get treatment for the rest of his life.

The two-count suit seeks more than $50,000 in damages on each count.

The complaint alleges that Shell has known about the dangers of benzene causing cancer for decades, but publicly minimized and hid those dangers.

The suit claims that Shell has known about the risks of benzene exposure entering homes and other property since it performed studies in the 1980s.

The complaint states the Illinois Environmental Protection Agency and the U.S. Environmental Protection Agency have cited Shell for numerous environmental violations.

Dysart claims Shell most recently was cited 41 times in May 2008 for exceeding the standards for the release of benzene and other chemicals into the groundwater of Roxana.

Dysart also represents Scott Monroe, who attended school in Roxana. He also has been diagnosed with acute myelogenous leukemia. Monroe filed suit last month.

Debra Ochs, who died of AML in 2008, was a teacher in the district from 1983 until she died. Her estate filed suit Jan. 20. Dysart’s firm also has filed a class-action suit, claiming the benzene problem has decreased property values in Roxana and surrounding areas.

The problem of refinery emissions in Roxana has come into sharper focus recently as the Illinois Environmental Protection has been digging test wells and taking other actions to detect possible leaks in the area.

State officials said they have detected some emissions recently, but they have downplayed the level and danger of those emissions.

An IEPA official said the agency has been closely monitoring the area around the plant since a benzene release in 1986, when the plant was owned by Shell Oil Co.

Shell has agreed to pick up the tab for the monitoring, because that company was the owner during the 1986 benzene release. Benzene is a component of gasoline but is toxic and may cause cancer.

IEPA officials said there is benzene in the soil around the plant, but it is 40 to 45 feet below the surface.

Shell announced the increased monitoring in 2009. The company said it would check for benzene, which was released from an underground pipeline in 1986.

A total of 8,400 gallons of benzene leaked from the pipeline in 1986. That line extended from the plant to barge loading facilities on the Mississippi River, along a route parallel to Rand Avenue.

The underground pipeline was abandoned and replaced with an above-ground section of pipe.

sanfordschmidt@yahoo.com

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Canary Wharf, Shell to revamp London site: report

Jul 24th, 2011
by John Donovan.
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July 24, 2011, 11:01 a.m. EDT

By London Bureau

LONDON (MarketWatch) — U.K. property developer Canary Wharf is poised to seal a landmark deal to transform the area round Royal Dutch Shell PLC’s (RDSA.LN) London office with financial backing from Qatar, The Sunday Times reports without citing sources.

Shell is expected to announce within a fortnight that it has picked Canary Wharf and Qatari Diar, the property arm of the emirate’s sovereign wealth fund, to transform more than five acres surrounding its tower on the south bank of the Thames. Canary Wharf and Qatar are believed to have offered up to GBP350 million for the deal, the report says.

Other bidders included Development Securities in partnership with Carlyle Group, and Chelsfield PLC in partnership with the Livingstone brothers, the report says. Development Securities and Carlyle pulled out last week after it became clear that Shell intended to go with Canary Wharf and Qatari Diar.

Shell, which is being advised by CB Richard Ellis and Rothschild, said: “We cannot confirm the names of the developers, but Shell is seeking a developer with a vision that reflects the importance we attach to the site.”

Newspaper Web site: http://www.timesonline.co.uk

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Oil companies poised to unveil huge profits

Jul 23rd, 2011
by John Donovan.
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Britain’s three biggest oil companies are set to reveal huge profits totalling almost $15bn (£9.2bn) for the past three months, with market leader Royal Dutch Shell making around $75m (£46m) per day.

High oil prices have boosted the earnings of Royal Dutch Shell, BP and BG Group, with the cost per barrel of crude averaging above $100 for the entire quarter.

Rowena Mason

By

9:30PM BST 23 Jul 2011

High oil prices have boosted the earnings of Royal Dutch Shell, BP and BG Group, with the cost per barrel of crude averaging above $100 for the entire quarter. This has kept UK petrol prices near record highs, touching 140p a litre and causing hardship for millions of motorists.

Profits for the oil companies are expected to be their highest since oil prices rose to $147 per barrel in July 2008, just before the world tipped into financial crisis.

Analysts believe Royal Dutch Shell could this year equal or exceed its record annual profits of $27.5bn in 2008, which is the highest amount ever made by a British company in one year.

Consensus estimates suggest that Royal Dutch Shell will again lead the pack on Thursday with second quarter profits of $6.7bn, up by 43pc on last year.

BP is expected to come in slightly behind with profits of about $5.7bn on Tuesday, up from a multi-billion dollar loss last year caused by the Gulf of Mexico oil spill. BP received Indian government approval yesterday to buy stakes in Reliance Industries’ oil and gas blocks.

Both oil companies measure their profits by stripping out changes in their inventories, describing them as “cost of supply” or “replacement cost” profits.

Meanwhile, BG Group, their smaller rival, is expected to have doubled its profits to $2bn for the past three months, compared with the previous year.

However, analysts claim that the high oil price is masking serious operational challenges in the sector that may soon begin to show.

Despite the optimistic headline numbers, Deutsche Bank analysts Lucas Herrmann, Mark Bloomfield and Elaine Dunphy argue that the oil companies are going to have a tough time maintaining production.

“A key facet of a sector bull thesis is that, after a number of years of disappointment, 2012 to 2013 will see the sector return to growth. Unfortunately, second quarter 2011 results are unlikely to build confidence in this theme,” they said.

“A combination of divestments, maintenance, extreme seasonality [low European gas demand], limited production from Libya and a series of stock-specific issues, drive our expectation for a 7pc year-on-year production decline.”

There may also be pressure among investors for oil companies to investigate breaking off their exploration and production divisions from refining and marketing, like ConocoPhillips has done this month.

BP would be considered the most likely candidate for such a break-up, since its sell-off programme following the Gulf of Mexico oil spill has whet investor appetite for asset sales at much higher prices than book value.

Bank of America Merrill Lynch estimates that BP’s market capitalisation still stands at a 50pc discount to the value of its assets.

Shareholders are going to want to know how BP’s chief executive, Bob Dudley, plans to boost the company’s fortunes, after the Gulf of Mexico oil spill and a failed £10bn deal in Russia with Rosneft. One top 20 investor in BP said: “Break-up is a radical strategy but one whose logic must be considered by the companies in terms of value creation.”

This time last year, BP was in the throes of its Gulf of Mexico crisis, following an explosion on April 20. Over the past year, its share price has risen 17pc, compared with Shell’s increase of 30pc. Taken from the worst of BP’s crisis, its price has increased 54pc to 470p per share, while Shell’s share price is up 45pc at £22.86.

Separately, Centrica will this Thursday release its first set of results since British Gas raised prices substantially this month.

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Shell, ConocoPhillips get draft Alaska air permits

Jul 23rd, 2011
by John Donovan.
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Fri Jul 22, 2011 5:19pm EDT

By Yereth Rosen

ANCHORAGE, Alaska, July 22 (Reuters) – U.S. federal regulators said on Friday they issued draft air-quality permits to Royal Dutch Shell (RDSa.L) and ConocoPhillips (COP.N), a key step for the oil companies’ drilling plans in Arctic waters of Alaska.

The permits cover Shell’s plans to drill two wells annually in 2012 and 2013 on leases in the Beaufort Sea, off Alaska’s northern coast, and ConocoPhillips’ plans to drill a yet-to-be-determined number of wells in 2012 the Chukchi Sea, off Alaska’s northwest coast.

The draft permits are subject to a 45-day public comment period before being made final. Any final permits are also subject to potential administrative appeals.

The U.S. Environmental Protection Agency (EPA) on July 1 issued a separate draft air-quality permit to Shell for a drill rig the company intends to use starting next year in the Chukchi. That permit is a revised version of one that was struck down on Dec. 30 by EPA’s Environmental Appeals Board.

The appeals panel determined the old permit was inadequate and failed to incorporate updated limits for air pollution.

Securing the draft air-quality permits for planned operations in both the Beaufort and Chukchi is an important milestone for Shell, a company spokesman said.

“The issuance of a second draft air permit for our 2012 exploration program is another in a series of recent, positive developments and adds to our optimism that we will be drilling our offshore leases in Alaska by this time next year,” Shell spokesman Curtis Smith said in an email.

Shell had hoped to drill at least one well in the Beaufort this year, but dropped that plan after the EPA Appeals Board rejected the permit that had been issued last year by EPA’s Seattle-based regional office.

Shell now has new detailed exploration plans for both the Chukchi and Beaufort that are being reviewed by the U.S. Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE). Shell plans to drill up to 10 wells total in the open-water seasons of 2012 and 2013.

The company spent $2.1 billion acquiring leases in the Chukchi in 2008 and about $84 million acquiring leases in the Beaufort in 2005 and 2007. In both areas, Shell plans to explore prospects where oil was discovered in the past.

ConocoPhillips, which also acquired exploration tracts in the Chukchi in the record $2.66 billion 2008 lease sale, has not yet submitted an exploration plan to the BOEMRE, company spokeswoman Natalie Lowman said.

“So the number of wells and exactly which rig we will use is undetermined right now,” she said.

(Editing by Bill Rigby and Sofina Mirza-Reid)

© Thomson Reuters 2011 All rights reserved

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