By Fred Pals

March 15 (Bloomberg) — Royal Dutch Shell Plc, vying with BP Plc to be Europe’s largest oil and gas ompany, will outline a plan tomorrow to increase output every year until 2020, a person familiar with the company’s strategy said.

Chief Executive Officer Peter Voser, due to brief investors at an annual strategy update in London, will say Shell has a pipeline of more than 20 projects with the potential to sustain low single-digit average annual production growth in the second half of the decade, the person said, asking not to be indentified because the presentation hasn’t yet been made.

Shell is seeking to revive oil and gas output with projects in Qatar, Malaysia and Brazil after production fell for a seventh consecutive year in 2009. The company, based in The Hague, hasn’t previously given annual targets beyond 2012, saying only its reserves will allow it to increase production in the second half of the decade.

Voser has targeted $1 billion in cost savings this year and will cut 1,000 more jobs in an effort to weather the economic slowdown, which has reduced fuel demand in the U.S. and Europe. The Swiss CEO, who succeeded Jeroen van der Veer in July, will reiterate the need to cut costs and indicate capital spending plans beyond 2012, the person familiar with his strategy said.

A spokesman at Shell’s press office declined to comment on the briefing when contacted by phone today.

Voser will say Shell expects gas-to-liquids and liquefied natural gas projects in Qatar, the BC-10 project in Brazil and Perdido in the Gulf of Mexico to be on schedule, the person said.

Production Drop

Shell’s production fell 3 percent to 3.152 million barrels of oil equivalent a day in 2009 from 3.248 million barrels a day in 2008. The company’s London-traded shares have gained 17 percent in the last year, trailing a 35 percent gain for its closest rival BP Plc.

BP on March 2 announced plans to increase pretax profitability by $3 billion over the next two to three years by boosting production and making the refining and marketing business more efficient. BP intends to raise average annual oil and gas output by 1 to 2 percent through 2015.

Shell has earmarked net capital spending of $28 billion this year, about $8 billion more than BP.

–Editors: Will Kennedy, Stephen Cunningham.

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

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

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March 9 (Bloomberg) — Royal Dutch Shell Plc and PetroChina may need to increase their bid for Arrow Energy Ltd. by as much as 18 percent to A$3.9 billion ($3.5 billion) based on similar transactions in Australia, Sanford C. Bernstein & Co. said.

March 9 (Bloomberg) — Royal Dutch Shell Plc and PetroChina Co.’s A$3.3 billion ($3 billion) bid for Arrow Energy Ltd. may spur more takeovers of Australian producers of coal-bed gas, a growing source of supply for Asian energy importers.

By Stanley Reed and Robert Tuttle

March 4 (Bloomberg) — Royal Dutch Shell Plc spent $19 billion, triple the original estimate, to build the world’s largest gas-to-liquids plant. Now, it’s pay-off time and the company says the project may generate $6 billion a year.

Shell needs the plant, known as Pearl, to bolster output, which fell for a seventh year in 2009 in part because rebel violence hampered oil ventures in Nigeria. Qatar, the arid Gulf state that’s become the world’s biggest exporter of gas on ships, may account for 10 percent of the company’s production after Pearl and a liquefied natural gas project start deliveries next year.

Shell’s work in Qatar is “like creating a new Nigeria,” Andrew Brown, the company’s executive vice president for the country, said in an interview in the capital, Doha. Pearl will begin processing gas toward the end of this year and start delivering fuel in early 2011, he said.

Gas-to-liquids technology, a relatively expensive way to make diesel and jet fuel, makes more sense given today’s disparity between natural gas and oil prices. Converted into barrels of oil, gas is less than half the price of crude, which doubled to near $80 in the last year. At full capacity, Shell said Pearl will churn out 140,000 barrels a day of liquid fuel and 120,000 barrels equivalent of ethane gas and condensate, a by-product that’s like a light crude oil.

“GTL is a very expensive, energy intensive process,” said Iain Anderson, an analyst at brokers Brewin Dolphin Holdings Plc in London. “But the result you get is fantastic.” Pearl could be paid off in five years, Anderson said.

Airlines, Cars

Since the fuel Pearl will produce is purer than traditional crude-based products, Shell may be able to sell its production at a premium. Pollutants such as sulfur are stripped out of the gas, making it well-suited to green-minded airlines or clean diesel for cars.

Operating costs at Pearl will be about $6 a barrel, Brown said, and the company can reclaim the cost of building the plant through the production-sharing agreement it has with Qatar. With crude at $70 a barrel, Pearl would generate about $6 billion a year in profit for Shell and Qatar, he said.

“GTL starts to make sense when there is a spread between oil and gas prices,” said Ross Cassidy, an analyst at Edinburgh-based Wood Mackenzie Consultants Ltd.

Ras Laffan

Pearl’s webs of tanks and piping sprawl over a 4-square- kilometer (1.5-square-mile) area at Qatar’s Ras Laffan site. An estimated 51,000 workers, their necks draped in cloth to ward off the blazing Gulf sun, weld joints, dig ditches and direct traffic with red and green flags. The workers, mostly men, wear color-coded helmets indicating their roles. White hats are for managers, red for scaffolders, yellow for pipefitters.

Shell project engineer Wiliam Keij said that the start-up will last for months as unit after unit is fired up. At the heart of Pearl will be twenty-four 1,200-metric-ton reactor vessels filled with pipes where gas will be converted into paraffin through interaction with catalysts. The paraffin then flows on into refinery-like units where it will be broken down into kerosene for jet fuel, gasoil for diesel, naphtha for plastics and base oils for lubricants.

The technology and energy required to make gas-to-liquids work mean it has rarely been used to bring natural gas resources to consumers. The 34,000-barrel-a-day Oryx GTL, Qatar’s only operating gas-to-liquids plant, reached full power last year after hitting snags following its start in 2006. Oryx is a venture between state-controlled Qatar Petroleum and South Africa’s Sasol Ltd.

Ironed Out Kinks

Shell said it has ironed out a lot of the kinks of gas- to-liquids at a smaller plant it’s operated in Malaysia since 1993. Bintulu, which had early glitches, has been generating about $200 million a year in earnings. At 14,700 barrels a day, Bintulu is only about a 10th of the size of Pearl.

Alongside Pearl, Shell has a 30 percent stake in Qatargas 4, part of the world’s largest LNG complex, due to start exports in 2011. With oil prices at $70 a barrel, the two projects should generate more than $4 billion a year for Shell after revenue sharing with Qatar, Brown said.

Last year, Shell had a net income of $12.5 billion as New York oil futures averaged $62.09 a barrel. The company’s oil and gas production averaged the equivalent of 3.15 million barrels a day, according to company filings on Bloomberg.

In Nigeria, Shell’s share of production for its onshore fields dropped to 150,000 barrels a day after an oil spill shut a pipeline, Chief Financial Officer Simon Henry said last month. At full capacity, output from the fields is more than 350,000 barrels a day.

When Pearl and Qatargas 4 are both up and running they will add 350,000 barrels a day to Shell’s total production.

–Editors: Will Kennedy, Amanda Jordan

Mar/04/2010 00:01 GMT

To contact the reporters on this story: Stanley Reed in Doha, Qatar on sreed13@bloomberg.net; Robert Tuttle in Doha, Qatar at rtuttle@bloomberg.net.

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

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March 03, 2010, 12:52 AM EST

By Dulue Mbachu

March 3 (Bloomberg) — Royal Dutch Shell Plc’s Kokori oil flow-station in the southern Niger River delta was attacked by the People’s Patriotic Revolutionary Force, the group said in an e-mailed statement yesterday.

The group said with the attack it was resuming “fresh and final hostilities in the Niger-Delta and beyond.”

The group called on international oil companies “to vacate the Niger-Delta region with immediate effect.”

Shell Nigeria spokesman Precious Okolobo didn’t didn’t immediately respond to a message left on his phone seeking comment.

To contact the reporter on this story: Dulue Mbachu in Lagos at dmbachu@bloomberg.net

To contact the editor responsible for this story: Ana Monteiro at amonteiro4@bloomberg.net

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March 2 (Bloomberg) — BP Plc, vying with Royal Dutch Shell Plc as Europe’s largest oil company, plans to increase annual pre-tax profitability by $3 billion over the next two to three years by bolstering production and cutting costs.

March 02, 2010, 10:34 AM EST

By Greg Stohr

March 2 (Bloomberg) — The U.S. Supreme Court bolstered the ability of oil companies to change their leases with independent service station owners, blocking a Massachusetts lawsuit against Shell Oil Co. and Motiva Enterprises LLC.

The Supreme Court today unanimously said the suit by a group of station owners can’t go forward under the U.S. Petroleum Marketing Practices Act, a 1978 law that gave independent station owners more power in their dealings with oil companies.

The station owners said Shell and Motiva used rent increases to try to end their franchise arrangements so the companies could take over operation of the stations.

The station owners at one point won a $3.3 million jury verdict. A federal appeals court upheld part of the award and both sides appealed to the Supreme Court.

The cases are Mac’s Shell Service v. Shell Oil Products, 08-240, and Shell Oil Products v. Mac’s Shell Service, 08-372.

–Editors: Jim Rubin, Laurie Asseo.

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net.

To contact the editor responsible for this story: Jim Kirk at 1-202-654-4315 or jkirk12@bloomberg.net

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By Anne-Sylvaine Chassany and Fred Pals

Feb. 23 (Bloomberg) — Royal Dutch Shell Plc, which is seeking to focus on exploration and production, may sell its liquefied petroleum gas distribution unit, four people with knowledge of the plan said.

Shell hired Credit Suisse Group AG to manage a sale of the division, which is valued at more than 800 million euros ($1.1 billion), said three of the people, who declined to be identified because the talks are private. The company sent information last week to potential bidders including private equity firms, they said. Rainer Winzenried, a spokesman for The Hague-based Shell, declined to comment.

Shell aims to save $1 billion this year and will cut 1,000 more jobs in an effort to weather the economic slowdown, which has led to high inventories of fuels like gasoline and diesel in the U.S. and Europe. Shell processed 9 percent less crude in 2009 and is in talks to sell its U.K. Stanlow refinery and two German plants to India’s Essar Oil Ltd.

Shell in 2004 offered its LPG distribution and marketing business up for sale and sold some LPG units, including those in Portugal, Brazil, Paraguay, Italy and parts of the Caribbean for around $350 million. Repsol YPF SA of Spain bought Shell’s Portuguese business in December 2004 and said it bid for the whole LPG unit. Shell in 2006 said it would keep parts of its LPG business that weren’t already been sold because it wasn’t offered enough for them.

–Editors: Stephen Cunningham, Will Kennedy.

To contact the reporters on this story: Anne-Sylvaine Chassany in Paris at +33-1-5365-5078 or achassany@bloomberg.net Fred Pals in Amsterdam at 31-20-589-8563 or fpals@bloomberg.net

To contact the editor responsible for this story: Edward Evans at +44-20-7073-3190 or eevans3@bloomberg.net

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February 21, 2010, 07:10 PM EST

By Eduard Gismatullin and Marianne Stigset

Feb. 22 (Bloomberg) — BP Plc and Royal Dutch Shell Plc may falter in their campaigns to save billions in oil and gas project costs as a resurgence in drilling and demand for engineers threaten to revive inflation in the industry.

Crude prices doubled in the past year, prompting producers to resume projects put on hold during the recession. Oil and gas industry spending will rise 11 percent this year to $439 billion, according to Barclays Capital.

“Oil price inflation and cost inflation are highly correlated, albeit with some delay,” said Paul Wheeler, a London-based managing director in the oil and gas group at investment bank Jefferies International Ltd. “The oil industry is always people constrained. It’s one of the biggest challenges: a lack of young engineers and geologists.”

BP Chief Executive Officer Tony Hayward said Europe’s largest oil company will try to cut costs further this year after saving $4 billion in 2009. Shell’s Peter Voser aims to trim expenses by $1 billion. The respite the economic crisis brought on costs may prove temporary as producers are forced to spend more to recover oil from deepwater reserves, tar sands and gas-bearing rocks.

While the major oil companies may face difficulty holding costs down, the beneficiaries of increased drilling will be oil services companies like Schlumberger Ltd., Baker Hughes Inc. and Petrofac Ltd., hired to work on production projects.

Investor Outlook

Investors prefer the outlook for service companies to oil producers. Shares of Schlumberger, which yesterday agreed to buy drilling lubricants provider Smith International Inc. for about $11.3 billion, have gained 82 percent in the last year. Petrofac has more than doubled. In the same period BP has gained 28 percent and Shell is up 11 percent.

“All the service sector is going to be busy again,” Ayman Asfari, CEO of Petrofac, the U.K.’s biggest oil contractor by market value, said in an interview in London. “All the majors now are realizing they cannot stop investing and they are all coming back.”

Aside from salaries, prices for raw materials such as steel, are the biggest contributor to project costs. World steel prices have recovered 19 percent since reaching a three- year low in May as the global economy returns to growth, according to a tracker index from Steel Business Briefing. That will push up the prices of piping and sheet metal needed to build rigs and processing plants.

‘Log Jam’

“Cost pressures on oil services are bottoming out and the next move is up,” Keith Morris, an analyst at London-based Evolution Securities Ltd., said in a note earlier this month. A “log-jam of projects postponed from 2009 will lead to a scramble for oil services. Spare capacity will get booked up, quickly leading to return of cost inflation.”

London-based BP will invest $20 billion this year, little changed from 2009, as it works on projects in Alaska, Trinidad & Tobago and the Gulf of Mexico. Shell, based in The Hague, expects to spend $28 billion this year and Paris-based Total plans $18 billion.

“We are definitely seeing costs recover slightly,” Total CEO Christophe de Margerie told reporters in London this month.

The trend toward deepwater drilling, liquefied natural gas plants and other high-technology projects is adding to pressure on contractor capacity, de Margerie said.

“The costs of developing assets today are significantly higher than they were five years ago and there is no way we are going back to those levels,” Petrofac’s Asfari said in London. “There is nothing you can do about the underlying costs, like human resources.”

Skilled Workers

In Australia, where San Ramon, California-based Chevron Corp.’s $40 billion Gorgon project is among more than a dozen LNG ventures under development, cost pressures are already starting to show in salaries for skilled workers. Woodside Petroleum Ltd. said in November the cost of its $12 billion Pluto project may surge as much as $1 billion, partly because of labor expenses.

Pressure on skilled oil industry professionals may increase in other parts of the world as projects get up to speed, recruitment consultants said.

“We’re still far away from the pre-financial crisis levels, but there has been an increase in demand for engineers,” said Geir Doelvik, managing director of Manpower Professional Engineering AS, an Oslo-based recruiter for the oil industry. “We haven’t seen salaries increase yet, but we’re going into wage negotiations, so we’ll see what happens then.”

Charges for hiring drilling rigs may rebound after more units were pressed into service in recent months. The number of rigs in use worldwide has risen 40 percent from May’s six- year low, according to data from Baker Hughes.

Talks with producers to cut prices “are behind us,” Andrew Gould, CEO of Schlumberger, the world’s largest oilfield-services provider, said in an interview in Oslo this month. “The danger is that if oil prices accelerate then in the supply industry, certain shortages will appear quite quickly.”

–With additional reporting by Brian Swint in London. Editors: Will Kennedy, Amanda Jordan.

To contact the reporter on this story: Eduard Gismatullin in London at +44-20-7673-2268 or egismatullin@bloomberg.net; Marianne Stigset in Oslo at +47-22-99-6109 or mstigset@bloomberg.net.

To contact the editor responsible for this story: Will Kennedy at +44-20-7073-3603 or wkennedy3@bloomberg.net.

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