Posts from ‘August, 2011’

By James Paton – Aug 22, 2011 8:09 AM GMT+0100

Arrow Energy Ltd., owned by Royal Dutch Shell Plc (RDSA) and PetroChina Co., offered about A$520 million ($540 million) for Bow Energy Ltd. (BOW), seeking more resources to underpin a proposed liquefied natural gas project in Australia.

Arrow, a coal-seam gas explorer and producer in Queensland state, offered A$1.48 a share in cash, Brisbane-based Bow said today in a statement. That’s 67 percent more than Bow’s price of 88.5 cents in Sydney trading on Aug. 19. The shares surged 60 percent today to A$1.415 at the 4:10 p.m. close.

The bid “does significantly undervalue the stock compared with where we think it should be,” said Andrew Williams, a Melbourne-based oil and gas analyst at RBC Capital Markets, who has a price target of A$1.75 on Bow’s shares. “It still leaves scope for upside and more play to come.”

Arrow plans a fourth LNG venture on Queensland’s Curtis Island, following approvals for more than $50 billion in rival developments led by BG Group Plc (BG/), Santos Ltd. (STO) and ConocoPhillips (COP) to meet rising demand in Asia. Bow has been the subject of takeover speculation since Santos, Australia’s third-largest oil and gas producer, agreed last month to pay about A$730 million to buy the shares in Eastern Star Gas Ltd. (ESG) it didn’t already own.

Bow has been in talks to supply gas to the companies developing the LNG projects in Queensland as it targets a more than fivefold gain in reserves by next year, Chief Executive Officer John De Stefani said in an Aug. 3 interview. Bow increased its proven and probable reserves to 238 petajoules last month and aims to reach 1,250 petajoules in 2012, enough gas to support an LNG plant producing 1 million metric tons of the fuel annually over 20 years, De Stefani said.

‘LNG Opportunity’

The offer values Bow at about 6 Australian cents a gigajoule of gas reserves that may be recoverable, 33 percent less than the price Santos agreed to pay for Eastern Star and the amount Shell and PetroChina paid last year for Arrow, John Young, a Melbourne-based analyst at Wilson HTM Investment Group, estimated today. Those deals valued the targets at 9 cents a gigajoule, he said.

“Bow is still working to demonstrate conversion to 2P reserves,” from proven, probable and possible reserves, “whereas Arrow and Eastern Star were probably more advanced,” Young said, adding he thinks a rival bid is unlikely.

Dart Energy Ltd. (DTE), a Sydney-listed company developing coal bed methane resources in countries including Australia, rose 6.7 percent to 56 cents in Sydney, the most in four months. Exoma Energy Ltd. (EXE), a natural gas explorer in Queensland, climbed 21 percent to 14.5 cents in Sydney, the most since July 1.

A transaction with Bow would help Arrow increase the size of its first two LNG processing units, Chief Executive Officer Andrew Faulkner said today in a statement. Arrow initially plans to produce 4 million tons of LNG a year from each of the first two units, the company said this month.

‘Complementary’ Businesses

Shell is “quite happy” to wait to develop the Arrow LNG project as costs to develop ventures rise, Peter Voser, chief executive officer of The Hague-based company, told analysts in July. Arrow expects a final investment decision to proceed with its development in late 2013, Faulkner said in June.

“Shell’s public statements indicate that they didn’t mind being last, and they were willing to wait,” RBC’s Williams said. “Now it looks as though they may want to accelerate it. It’s a clear signal there is an LNG opportunity out there.”

Bow recommends that shareholders take no action at this stage, the company said in the statement.

“It makes sense for both companies to explore business opportunities given the proximity of both companies’ coal-seam gas assets and the complementary nature of our businesses,” Arrow’s Faulkner said. “Arrow has the technical capability, capital resources and guaranteed market that may assist Bow Energy realize the potential of its assets.”

Conoco and Sydney-based partner Origin Energy Ltd. (ORG) last month approved the first phase of a $20 billion project in Queensland. Santos said in January its venture would cost $16 billion, while BG in October said it would invest $15 billion.

To contact the reporter on this story: James Paton in Sydney jpaton4@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net.

SOURCE ARTICLE

GUY ROGERS | 22 August, 2011 00:44

The petroleum company heading calls for the Great Karoo to be opened up for exploration for natural gas has admitted that it cannot guarantee the safety of its operations.

This concession by Shell SA boss Jan Willem Eggink was made as the findings of a UN investigation of oil-industry pollution in Nigeria, with particular reference to the culpability of Shell, were released.

Shell wants to explore the Karoo for natural gas and recover it using hydraulic fracturing, or “fracking”.

In fracking, shale several kilometres beneath the surface is ruptured to release tightly bound gas.

Fracking has been outlawed elsewhere in the world because it has been shown to pollute ground water reserves.

At a dinner in Port Elizabeth last week, Eggink said that though Shell could not guarantee the integrity of its well casings when fracking, an accident would be simple to clean up

“If things are done properly, there should not be problems … [but that] doesn’t mean there couldn’t be,” said Eggink.

“It’s a point zero zero zero possibility … if it were such a small chance, would you not consider going ahead?” he said.

Shell has applied to explore for gas across a 90000ha swathe of the Karoo.

SOURCE ARTICLE

“Shell’s poor regard for safety and their terrible communications over the last 10 days should be ringing major alarm bells…”

Last week’s North Sea oil spill was not the first time Shell had found itself in trouble. Environment Editor Rob Edwards reports

Shell has been officially censured for breaking safety rules 25 times in the last six years and has one of the worst safety records of the major oil companies in the UK, an investigation by the Sunday Herald has revealed.

“More steps need to be taken to promote a culture of openness and transparency…”

21 August 2011

The public must have better information on oil incidents in UK waters, the Scottish government has said.

The plea came in the wake of the oil leak near the Gannet Alpha platform, in the North Sea.

Shell initially faced criticism that it was not being open enough about the incident, which happened last week.

Oil industry regulation is reserved to Westminster, but Scottish ministers have asked the UK government to hold a review on the issue.

Shell has been dealing with the release of what is estimated to be 218 tonnes of oil after a leak from a relief valve near the platform, 113 miles (180km) off Aberdeen.

Scottish Environment Secretary Richard Lochhead said issues of disclosure had raised serious questions about how information was given to the public in such circumstances.

Mr Lochhead, who has asked UK Energy Secretary Chris Huhne to look into the matter, said: “The oil and gas industry is vitally important and with so much activity and infrastructure in our seas there is always a risk of incidents.

“Not only should every effort be taken to minimise these risks, but when incidents do happen openness and transparency must be the guiding principles.

Royal Dutch Shell has finally managed to stop oil from spilling into the North Sea after a 12-day battle with the Gannet field leak.

Scottish government launches investigation into safety procedures after worst oil spill in UK waters for a decade

• Fiona Harvey, environment correspondent
• guardian.co.uk, Friday 19 August 2011 19.56 BST

The Shell oil spill in the North Sea. The marine coastguard has estimated that the oil on the sea surface covers about 6.7 sq km. Photograph: Marine Scotland

By Damian Kahya Business reporter, BBC News 19 August 2011

Environmental groups are furious that the largest North Sea spill in a decade was not revealed to the public for three days.

Why did it happen and will Shell’s recent environmental problems affect the company’s ambitious plans?

On 10 August, a routine helicopter flight over the North Sea spotted a “sheen” on the sea’s surface near Royal Dutch Shell’s Gannet Alpha platform.

The oily sheen covered just 0.5 sq km to begin with, according to figures provided to the BBC by Shell.

But it was an indication that below the surface, something was leaking.

Shell immediately informed regulatory bodies, including the Department of Energy and Climate Change (DECC) and the government’s Joint Nature Conservation Commitee.

The DECC says, however, that it remained up to Shell to decide when and how to make the information public.

Finding the leak

The company initially struggled to find the source of the leak.

“On Wednesday this slick, or sheen, was unattributed, so it could have come from anywhere,” said Hugh Shaw, the government’s representative for maritime salvage and intervention, during a press conference a week later.

Shell had reported no loss of oil inventory alerting it to a spill.

“To try and identify the source has been quite frustrating at times, it’s taken some time, it’s meant Shell systematically shutting down the system to see what the impact of shutting down certain valves was and that has helped us come down to this source,” said Mr Shaw.

It is during these first two days that most of the estimated 1,300 barrels of oil were discharged into the North Sea, in the area’s largest spill for a decade.

By Thursday morning, the spill covered a surface area of 1.3 sq km squared – then by the evening, it had spread to 21 sq km.

The reason for the rapid change is not yet known. Extra oil could have reached the surface, but it is also likely rough weather spread out the existing sheen over a wider area.

Lack of information

Despite the now substantial sheen, Shell still did not inform the media or the public about the spill.

Shell deployed a remote-operated vehicle to find the leak in a pipe flowing between an oil well and the Gannet Alpha platform.

The company shut off the well and depressurised the pipeline, stemming the flow of oil.

On Friday afternoon, an oil industry journal, Upstream, ran a short article about the spill- based on its own sources.

Shortly after being contacted by the magazine, Shell issued a press release saying it had “stemmed” the leak significantly.

Shell says it delayed releasing information on the leak until it had established the nature of the problem.

“We released the information when we were confident about the information,” said Glenn Cayley, technical director of Shell’s exploration and production activities in Europe.

Even then, the company could not, or would not, specify the exact size of the leak.

‘Dumb’ move

The lack of information provoked fury amongst environmental groups.

Some groups, such as the Royal Society for the Protection of Birds, have expertise in dealing with any environmental impact from a spill.

“We want to and need to be informed at absolutely the earliest opportunity because we have a considerable degree of expertise on these sorts of things,” says James Reynolds from RSPB Scotland.

Other campaigners, including Greenpeace, Friends of the Earth and oil pressure group Platform, have joined the criticism.

The RSPB has called for a transparent inquiry into the incident and the company’s procedures in the North Sea.

Shell has since apologised for the lack of information and say it was not a deliberate attempt to cover up the spill.

“It seems to me more dumb than planned,” said Frederic Hauge from Bellona, a Norwegian environmental group which monitors the North Sea.

“My impression has been that Shell learned the lesson after Brent Spa when it came to communications and it’s maybe time to read those papers again,” he added.

The company says that since Saturday, it has used social media to give information, with 35,000 followers on Twitter.

North sea leaks

Although major leaks have been few, small problems in the North Sea have beset the industry.

In the Gannet field, figures obtained under the Freedom of Information Act by the Guardian newspaper – and now publicly available – show there were 10 incidents reported to the Health and Safety Executive (HSE) between 2009 and 2010, one of which was classed as “significant”.

The company has also had problems in its Brent field, one of the first major oil fields explored in the North Sea, which recently benefited from a £1.3bn upgrade.

On 1 July this year, the HSE issued Shell with a prohibition notice on the field’s C platform, because of a release of gas.

“HSE can confirm that a prohibition notice was served on Shell on 1 July over hydrocarbon release issues on the Brent C platform. The rig is currently ‘shut in’, which means it has complied with the prohibition notice ordering activity to stop,” said an HSE spokesperson.

“Shell continues to progress work on Brent Charlie. Production will not resume until all necessary work is complete,” said a Shell spokesman.

Nigeria liability

Shell has also had problems further afield. The company has been involved in continuing legal action in London regarding its activities in Nigeria.

In August, Shell admitted liability for two spills in 2008.

The company claims about 4,000 barrels of oil were spilt, although this figure is disputed by environmental pressure groups.

It also claims that most spills in the region are due to sabotage, but it tries to clean up the spill, whatever the cause.

However, a recent report by the United Nations Environment Agency said that 10 out of 15 investigated sites which Shell said it had completely cleaned up still had pollution exceeding Shell and the Nigerian government’s best practice levels.

Shell says that, despite this, more than 90% of samples taken by the UN at the sites were within standards.

Bottom line

But such worries do not mean the company is performing badly.

“Every company has leaks,” says Iain Reid, an oil company analyst at Jeffries Investment group.

At 1,300 barrels so far, the North Sea leak is a tiny fraction of BP’s Macondo well spill in the Gulf of Mexico last year.

And in July, Shell reported second quarter profits up 77%.

“The shareholders are happy, even if the journalists aren’t,” adds Mr Reid.

But shareholder performance depends, to an extent, on securing new reserves of oil and gas.

At the start of August, Shell received conditional approval in the US to drill four exploratory wells in Alaska’s Beaufort Sea.

But the decision is subject to appeal and environmental groups, such as Greenpeace, are watching events in the North Sea closely.

“Any relevant information with regard to Shell’s operational competency will be included in this appeal, when it is relevant to a specific permit,” said Vicky Pryce from the pressure group.

The DECC has confirmed that the UK investigation may also lead to fines.

“Incidents like the one we’ve seen in the North Sea clearly will influence how much trust people have in how well and responsibly oil companies can exploit the oil and gas in the Arctic,” says Daniel Litvin, director of advisory firm Critical Resource.

His firm provides independent analysis to the major resource companies on corporate responsibility issues and political risk.

For now, Shell will be focused on stopping the spill, which it says is down to less than one barrel a day.

Then it will need to handle potentially wider regulatory and political implications that come from any spill.

SOURCE ARTICLE

Extracts from the Financial Times

By Anna Fifield in Washington, Alex Barker in Brussels, James Blitz in London and Daniel Dombey in Istanbul: 18 August 2011

With the sweeping sanctions it has imposed on Syria’s energy sector, the Obama administration has stepped up its efforts to isolate Bashar al-Assad’s regime, which earns as much as one-third of its income from oil exports.

The measures certainly look punitive – Washington has prohibited any Syrian petrol products from being imported into the US, and has forbidden any US citizens and companies from involvement in Syria’s oil sector or exporting any products to Syria.

Royal Dutch Shell and France’s Total are both big players on the production side…

FULL FT ARTICLE

Royal Dutch Shell PLC (RDSA) has interests in three production licences in Syria covering some 40 oil fields, with its share of production in 2010 approximately 20,000 barrels of oil equivalent a day. It also has exploration interests in the south of the country.

By Laurence Norman

Of DOW JONES NEWSWIRES

BRUSSELS (Dow Jones)–The European Union for the first time Thursday called on Syrian President Bashar al-Assad to step down as EU leaders threatened strong new sanctions, which could include an embargo on imports of Syrian crude oil and a ban on refined product sales to the country, a person familiar with the situation said.

In a statement promising further sanctions, the EU’s High Representative for Foreign Affairs Catherine Ashton condemned the continued crackdown on protesters.

“The President’s promises of reform have lost all credibility as reforms cannot succeed under permanent repression. The EU notes the complete loss of Bashar al-Assad’s legitimacy in the eyes of the Syrian people and the necessity for him to step aside,” Ashton’s statement read.

A separate joint statement from French President Nicolas Sarkozy, German Chancellor Angela Merkel and U.K. Prime Minister David Cameron said the Syrian government had “ignored the voices of the Syrian people and continuously misled them and the international community with empty promises,” and the leaders back further EU sanctions. The comments followed a call by U.S. President Barack Obama for Assad to quit and the announcement of strict new sanctions.

EU ambassadors will meet Friday to discuss a range of options for further sanctions, diplomats told Dow Jones Newswires.

On Thursday, the EU’s foreign service circulated an options paper–that will form the basis of Friday’s discussions–which says possible targets for sanctions include the energy, financial and telecommunications sectors, according to an official who has seen the document.

The EU is Syria’s largest trade partner and second-largest export market, with EUR7.2 billion in bilateral trade last year. Energy exports mark the bulk of Syria’s exports to the 27-nation bloc. The EU also accounts for around 95% of Syria’s oil exports.

The paper suggests measures to target the country’s energy sector, comprising bans on Syrian crude oil exports, EU sales of refined products to Syria, the sale of specialized equipment Syria needs for exploration and production, and ‘investment bans’ that could deny it other energy expertise.

However, the paper says EU member countries should avoid measures that have “clear repercussions” for the Syrian population, the official said. A U.K. Foreign Office official said Thursday the EU had so far “aimed to ensure that sanctions are carefully targeted…and do not impact on ordinary Syrians.”

“At present we are looking at tightening these. But we do not rule out further options if the situation continues to deteriorate.”

Nonetheless, the official who had seen the options paper said a much broader EU sanctions regime is needed to send “the message of a strong and decisive EU” response to Assad’s violent crackdown.

“The EU should broaden its sanctions beyond the current regime…Certain sectoral sanctions should be considered,” the paper says, according to the official, who added that at least a dozen individuals and entities will be added to the list of 35 people and four government bodies that have already been targeted by an EU arms and travel embargo and asset freezes.

Royal Dutch Shell PLC (RDSA) has interests in three production licences in Syria covering some 40 oil fields, with its share of production in 2010 approximately 20,000 barrels of oil equivalent a day. It also has exploration interests in the south of the country.

The company declined to detail what impact the U.S. sanctions could have on its activities in the country but said in a statement it observes all relevant legislation pertaining to the countries in which it operates. “Shell complies with all relevant sanctions and laws,” it said.

-By Laurence Norman, Dow Jones Newswires; 32-2741-1481; laurence.norman@dowjones.com

(Alexis Flynn in London contributed to this article)

SOURCE ARTICLE

Shell said it needed to improve its inspection policies. “We’re making every effort to improve our inspection program and revisit our maintenance priorities,” Cayley added.