Posts under ‘Daily Telegraph’

The Movement for the Emancipation of the Niger Delta (Mend) called off its ceasefire just hours before an attack on three fuel pumping stations operated by Royal Dutch Shell. The company confirmed on Monday it was forced to partially shut down production following the sabotage assault on the facilities, in the south-eastern Bayelsa state.

Peter Voser, Shell’s chief executive, has pledged to concentrate on developing biofuels and clean coal, as part of the company’s attempt to reduce its carbon dioxide emissions.

Sunday Telegraph

BP expected to exend gap with Shell in the battle of oil giants

The British oil major, now the biggest in Europe, is currently winning the race against its Anglo-Dutch rival

By Rowena Mason
Published: 8:12PM GMT 30 Jan 2010

Royal Dutch Shell is likely to endure more humiliation at the hands of BP this week, when it posts profits an estimated $1.7bn lower than its rival.

BP, which recently stole Shell’s crown as Europe’s largest oil company by market value, is likely to report profits of $4.6bn (£2.9bn). This 80pc up from $2.6bn in the last quarter of 2008 on a “replacement cost basis – a measure used by oil companies to strip out the effect of changing inventories.

BP is reaping the harvest of an aggressive $4bn cost-cutting drive that began before the recession and doubled in pace last year.

Meanwhile, analysts have been downgrading the forecasts for Shell’s profits over concern that its refining business has been performing below expectations.

According to consensus estimates, it is likely to report that profits have fallen to $2.9bn from $4.8bn in same quarter of the 2008, when it reports on Thursday.

Shell started cutting costs much later than its rival, resulting in 5,000 job losses during the downturn.

Its chief executive Peter Voser warned last week at the Davos economic summit that there were likely to be more redundancies this year.

“It’s normal in any business that you have to go further and you have to operate your operating expenditure in a very tough way,” he said, sounding a cautious note on global recovery. “As part of that, it may also mean that some more people have to go.”

Both the companies’ profits are expected be down sharply for the year – in the case of BP, 40pc lower at $15bn, and more than 60pc down at $11.4bn for Shell.

The first US oil company to report, Chevron, showed on Friday the difficulty of maintaining healthy profits when refining margins remain low, with hefty losses in that division.

The corporation posted a 37pc fall in quarterly profits, as the cost of producing petrol and diesel prices failed to keep up with a big rise in the cost of crude oil.

The second-largest oil company in the US made a net profit of $3bn between October and December, down 37pc from in 2008.

Data from BP shows that companies are now making just $1.49 per barrel of petrol product, compared with $5.19 a year ago.

Downstream divisions – responsible for refining, marketing and selling petrol-based products – are expected to suffer at all the majors, owing to lower demand in the recession. Many oil companies are frantically trying to offload their refineries, concerned about overcapacity in the industry.

Shell is in the process of selling its UK-based Stanlow refinery in Cheshire to Indian company Essar and three others in Europe.

A higher oil price of $76.13 in the fourth quarter – almost a third above last year – will have supported profits in the exploration and production arms.

But BG Group, the oil and gas producer, is still likely to report pre-tax profit of £1.05bn on Friday – down 10pc from £1.16bn a year earlier, with annual profits 23pc below last year’s £4.1bn.

Analysts often see discrepancies between BP and Shell’s performance as merely part of the cycle of rivalry between the two companies.

BP rose by 19pc on the stock market this year and boosted production to 3.9m barrels, while Shell fell by 3pc and saw its output drop below 3m barrels.

“Shell began restructuring last year, so is lagging BP, and furthermore its massive capex expenditure in recent years does not see new volumes start to kick in until 2011-2012,” said Richard Griffith, an analyst for Evolution Securities. “On balance, earnings won’t look great when they’re announced but we see more scope for positive surprises at BP and less dividend risk.”

Most industry experts are more concerned with the expected dash for new production assets in the aftermath of the recession than any temporary drop in profitability.

Citi analyst Mark Bloomfield said: “We expect the focus to shift from a defensive cost-saving mode towards pursuit of opportunities for expansion.”

This shift in emphasis towards new projects has led some City investors to favour Shell over BP.

Mr Voser has promised that Shell would commit to record capital expenditure. It is forecast to see a boost in output from European gas and Nigeria this year and, looking to 2013 and beyond, it will see new prospects at its Qatar gas-to-liquids project, and the Canadian oil sands come on stream. The company has staked its future on a number of technically difficult fields, including unconventional reserves in Canada and deepwater projects in the Gulf of Mexico and Brazil.

BP will also increase production over the next couple of years and is exploring deep drill sites in the Gulf of Mexico and under the Arctic ice.

However, it lacks its competitor’s big flagship projects to lift future output.

Sunday Telegraph Article

If successful, Mrs al Musawi’s case could set a legal precedent that would invalidate all the agreements that Iraq secured last year – with BP, CNPC, ExxonMobil, Petronas, Royal Dutch Shell, Eni, Gazprom and Lukoil.

Daily Telegraph 18 January 2010

A coalition of institutional and private shareholders are calling on Royal Dutch Shell to provide transparency on risks associated with its controversial Canadian oil sands project.

The protesting shareholders, who hold a combined £156m stake in the oil company, will make their case to Shell’s management at its annual general meeting on May 18.

Environmentalists, such as this demonstrator at a protest in Dublin, have raised concerns about the energy intensive extraction.

Oil companies have come under pressure at Copenhagen to scale back investment in production from tar sands, as Royal Dutch Shell was branded the world’s second worst corporate lobbyist for its support of the industry.

…companies such as BP and Royal Dutch Shell, which have bailed out of some unproductive renewable energy sources, are directing most of their environmental attention towards next-generation biofuels designed to alleviate these problems. Shell, for example, is experimenting with cellulosic ethanol made from plant waste such as straw and wood chips and biodiesel made from algae, which can be grown in the sea. However, technologically advanced versions are unlikely to be widespread for another 10 years at least.

Daily Telegraph

Gas will be at the heart of Royal Dutch Shell’s production strategy ahead of oil as the world attempts to reduce carbon dioxide emissions, according to the energy group’s new chief executive, Peter Voser.

By Rowena Mason
Published: 8:17PM GMT 24 Nov 2009

Delivering an update on Shell’s two flagship gas projects in Qatar, which are costing the group $21bn (£12.6bn), Mr Voser admitted that one – a liquiefied natural gas (LNG) plant – would overrun by about 10 months.

However, he said construction was on track for Pearl, the other development, to start producing in 2011. It will be the world’s largest gas-to-liquids facility when completed, having spiralled in cost from $5bn to $19bn since 2003.

Both projects will lift Shell’s output by 10pc – or 350,000 barrels per day – and contribute $4bn per year in revenues. “Qatar is key to Shell’s revival,” one analyst from Deutsche Bank said.

Increased capital expenditure is part of a turnaround strategy implemented by Mr Voser that will also see Shell shed 5,000 jobs and ramp up production.

Despite Shell’s history as Europe’s largest oil company, Mr Voser made it clear that gas production would overtake oil production by 2012, as 1bn electric cars hit the world’s roads over the next few years. A few years ago, Shell’s production was split 60:40 in favour of oil.

The International Energy Agency has forecast a gas glut and depressed prices until 2015, but Mr Voser insisted the medium to long-term outlook for demand was strong.

“We are intensifying our gas production because clearly it is the fossil fuel that has the lowest carbon dioxide content,” he said. “We will be more than 50pc gas by 2012 and increasing afterwards.”

The company will add 1m barrels per day to capacity by the end of 2012 – a growth rate of 2pc. But Mr Voser said that while Shell was impressed by the Nigerian government’s efforts to ensure a ceasefire in the troubled Delta oil region, the company would no longer aim for growth in the area.

The chief executive said Alaska could be the “next big area” for oil producers, adding that Shell would deliver proposals to Russia for a major gas development in Yamal by next Spring and is still negotiating on the Kirkuk oil field with the Iraqi government.

He also emphasised the potential of carbon capture and storage technology as key to Shell’s strategy to mitigate emissions from fossil fuels.

Mr Voser ranked it as the most important issue to be discussed at the Copenhagen climate change summit next month, but warned that Europe and the UK are losing leadership in this area as a result of being slow to grant funding and subsidies.

He also admitted for the first time that Shell would accept a minimum price on carbon credits to incentivise investment in clean energy. He said it ought only to be used in the early years of a global system.

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SOURCE ARTICLE

The Sunday Telegraph

November 15, 2009

Ministry cannot account for where £1bn went in Saudi oil-for-jets affair

DAVID HENCKE

DETAILS OF a damning secret report into Britain’s biggest ever arms deal, which raises questions over how the Ministry of Defence spent more than £lbillion, can be disclosed for the first time by The Sunday Telegraph.

A National Audit Office (NAO) investigation into the controversial £20 billion al-Yamamah arms deal between Britain and Saudi Arabia found that:

• The MoD could not properly account for nearly £1billion of cash it paid to British Aerospace (now Bae Systems) at the time of the deal;
• Bae also “failed to account” for the £1billion;
• A£30.3 million management fee was paid to Bae even though there was no “legal or contractual obligation” to do so – a payment described by auditors as “irregular”.

Documents also outline how auditors demanded that the Govemment investigate Bae accounts to find out what had happened to the money, and reveal the fears that led to the report being kept secret for 17 years.

The deal, agreed in 1985, saw British Aerospace-built warplanes exported to Saudi Arabia in exchange for oil, which was sold on the open market by the British Government. The deal has long been at the centre of corruption allegations.

The disclosures are certain to raise new questions as to whether millions of pounds were paid in secret commissions to middlemen.

The revelations could not come at a worse time for Bae Systems, which is facing a Serious Fraud Office investigation over other arms deals.

The al-Yamamah deal involved a series of complex transactions. Saudi oil was given to the Government, which then sold it on the open market. The money raised was then used to buy Tornado fighter and ground attack air-craft and Hawk trainer jets
from Bae, which were then exported to Saudi Arabia.

While the NAO report is still secret, correspondence between the MoD and the NAO has been seen by The Sunday Telegraph.

An internal NAO memo, written by auditor J Parsons on July 12, 1991,reveals that “payments of £30.3 million (redacted) have been netted off in a suspense account.  This is contrary to the fundamental principle of gross accounting and as such is irregular.”

It added that “the department have not accounted in their suspense payments for nearly $ 1.5billion [£1billion] of receipts and payments.

“By any definition, failure to account for $1.5billion indicates a certain weakness in control.” In a draft letter, Sir John Bourn, the former auditor general, urges Michael Quinlan, the then permanent secretary at the MOD, to push Bae to account for the money it had been paid.

He demands that the ministry’s auditors go to the company and insist on seeing its accounts.

The letter to Mr Quinlan goes on: “A thorough investigation into the profitability of the sale would reveal whether substantial commissions have been paid. There are, of course, guidelines to cover such circumstances. We would need to see evidence that these have been followed.”

At the time, the NAO had no power to examine the accounts of a private company.

The documents reveal why the report was kept secret.

Under normal circumstances, the ministry’s accounts would have had to be published and qualified by Sir John, leading to a hearing by MPs on the Commons public accounts committee, then chaired by Sir Robert (now Lord) Sheldon.

Such a scenario provoked panic in Whitehall, since the Government had agreed with the Saudis to keep all the details of the deal secret and it could have led to the cancellation of the order for the jets.

By any definition, failure to account for $1.5billion indicates a  certain weakness

One letter from an auditor warns that it could “blow up”. Another says that the whole business was “a murky area”.

Whitehall invoked national security reasons to prevent public reporting of the accounts. Instead, a secret hearing attended by Lord Sheldon, his deputy Michael Shaw, Mr Quinlan and Sir John was held. In that way, the obligation to inform Parliament had been fulfilled, even though the report itself had not been made public.

The hearing must have raised concerns because it led to Sir John’s demand for an audit of Bae’s al-Yamamah accounts, though it is not clear whether this ever happened.

Information on the deal is to be published under Freedom of Information rules this week.

However, many documents are still being kept secret and the NAO has told the Information Commissioner that an entire file on the contract, dating between 1995 and 2002, has been destroyed.

ARTICLE ENDS (Link will be added when available)

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