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Royal Dutch Shell Plc .com News Round-up 12 August 2014

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A frosty reception for Shell sponsorship; Oil and Gas company debt soars to danger level; Shell a gigantic flea

By John Donovan

UK

The Telegraph City Diary column has commented on Shell’s embarrassment at arts sponsorship monies being returned to the  company in Ireland. “First the Antarctic, now Ireland. The list of countries where Royal Dutch Shell receives a frosty reception continues to lengthen. The energy major has been told that its sponsorship money for the Emerald Isle’s biggest folk festival, the Fleadh Cheoil na hEireann in Sligo, is no longer acceptable, after eco-campaigners kicked up a storm.”

The Telegraph has published an alarming article under the headline: “Oil and gas company debt soars to danger levels to cover shortfall in cash” It warns: “The world’s leading oil and gas companies are taking on debt and selling assets on an unprecedented scale to cover a shortfall in cash, calling into question the long-term viability of large parts of the industry.”

Related: “Saudi Arabia gas project has failed, admits Shell”: 05 Jul 2014

AUSTRALIA

An article published by The Gladstone Observer contains a memorable comment on Shell’s long-standing shareholding in Woodside Petroleum. “The fact is that it has been a mutually detrimental relationship according to the Woodside board, which regards Shell as a gigantic flea in the company’s ear.”

Nigeria

The Nigeria Sun newspaper has published an article about the failure of Shell and the Nigerian government to clean up severe environmental pollution arising from Shell’s activities in the Niger Delta. “A United Nations Environment Programme (UNEP) detailed assessment of pollution in oil-producing areas of the region published in 2011 had earlier stated that it would take up to 30 years to clean up affected areas.”

1 Comment on “Royal Dutch Shell Plc .com News Round-up 12 August 2014”

  1. #1 Zik Gbemre
    on Aug 12th, 2014 at 15:50

    August 12, 2014

    With the above post that “the world’s leading oil and gas companies (which includes the Royal Dutch Shell), are taking on debt and selling assets on an unprecedented scale to cover a shortfall in cash, we could not help but wonder if this is the main reason for Shell’s gradual but steady exit and sell of its onshore oil and gas assets/facilities in the Niger Delta region of Nigeria? Were debt and the shortfall in cash the main reasons Shell has practically sold all of its assets in Delta State, Nigeria for instance?

    For those who do not know, the Shell Petroleum Development Company (SPDC) of Nigeria Limited, which the Nigerian branch of the Royal Dutch Shell Plc, had divested all of its onshore oil, gas and condensate assets/interests in Delta State, some of which include OML 34, OML 30, OML 38, OML 41, OML 26 etc. And the Federal Government of Nigeria, through the Ministry of Petroleum Resources, had directed the Nigerian Petroleum Development Company (NPDC), which is a subsidiary of the Nigerian National Petroleum Corporation (NNPC), to take over these divested interests as ‘operating partners’ with other indigenous oil companies, which they have done and had started full operations since January 2013. In fact, as we write this, the Shell Main Office in Warri, Delta State, is empty and under lock and key, as it has been vacated by Shell (SPDC).

    The interesting thing about this development was that it all started first as a rumour over a decade ago when it was being speculated that Shell (SPDC) was planning to pull out of Warri, Delta State, to the extent that authorities of Shell (SPDC) were one time invited by the Delta State House of Assembly for clarification. But they have always denied these rumours all these years, stating that it was all just propagandas, until when it became public knowledge that Shell (SPDC) had actually sold all of its oil and gas assets in Western Division, and the company is currently divesting all of its assets in the Eastern Division as well, to focus more on deep-offshore operations. Shell (SPDC) has two divisions in Nigeria-The Western Division based in Warri, in Delta State and the Eastern Division based in Port-Harcourt, Rivers State. The Central Division – Bayelsa State, was only added some few years ago. Shell (SPDC) equally has a Liaison Office in Abuja and another Corporate office in Lagos, Nigeria.

    The crux of the matter is that Shell has sold all their assets in the Land areas and some parts of the swamp areas in its Western Division, and the company is doing same in its Eastern Division. In the Western Division for instance, the whole of Urhobo, Isoko and Ndokwa, including all their Gas Plants located in the land areas; these are: Utorogu Gas Plant, Ughelli East Gas Plant, Sapele Gas Plant and Oben Gas Plant, have all been sold to indigenous companies.

    The flimsy excuse given by Shell (SPDC) for its divestment and exit from Delta State for instance, was that the oil wells in Delta State were getting dry; and they also sighted the issue of insecurity. But that is obviously not the main issue, as the above subject report has indicated. Come to think of it, if the oil wells in Delta State are getting dry as they claim, why would other indigenous companies scramble to acquire them? As we all know, no oil and gas corporate company would like to acquire what it cannot profit from. Then again, the issue of insecurity can always be managed, if that the reason Shell is looking at. Besides, Shell (SPDC) was fully on ground in Delta State when the militants and their hostilities were hottest in the Niger Delta region.

    Let us also reiterate the fact that, this was the same Shell (SPDC) that one time described the Utorogu Gas Plant in Iwhrekan Community, OML 34, as the “gas hub of West Africa.” This was hinged on the fact that the Utorogu is the life wire of Nigerian Power Stations and domestic industries. And Utorogu is also where gas is supplied to neighboring West African countries through the West Africa Gas Pipeline Project (WAGPP). This obviously negates Shell’s earlier claim that the company’s exit from Delta State was that the oil wells were getting dry. Even the current operations of the Utorogu Gas Plant and the ongoing New Utorogu Gas Plant Phase 11 (aka Utorogu NAG-2) Project, which are handled by the NPDC, clearly shows that Shell was never sincere with its earlier claim for exit.

    Interestingly, with the above post that the world’s leading oil and gas companies are taking on debt and selling assets on an unprecedented scale to cover a shortfall in cash, which calls into question the long-term viability of large parts of the industry, it clearly hit the nail on the head as to the main reason for Shell’s actions in the Niger Delta region. According to the post: “The US Energy Information Administration (EIA) said a review of 127 companies across the globe found that they had increased net debt by $106bn in the year to March, in order to cover the surging costs of machinery and exploration, while still paying generous dividends at the same time. They also sold off a net $73bn of assets. This is a major departure from historical trends. Such a shortfall typically happens only in or just after recessions.

    For it to occur five years into an economic expansion points to a deep structural malaise.” Perhaps, this is the reason oil giants like Shell are eyeing deep-offshore and the Arctic. As noted in the report: “The oil majors like Shell are having to replace cheap legacy reserves with new barrels from much more difficult places,” said Mark Lewis from Kepler Cheuvreux.

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