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Germans attack BP, Shell for over-charging for petrol

May 27th, 2011
by John Donovan.
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Five big oil companies, including BP and Shell, are in trouble with the German regulator for over-charging drivers at petrol stations.

Petrol has become a contentious issue for households across Europe as prices at the pump have risen in line with the soaring oil price above $120 per barrel.

Rowena Mason
By Rowena Mason 6:59PM BST 26 May 2011

The German cartel regulator accused BP, ExxonMobil, Shell, ConocoPhillips and Total of running an “oligopoly” with a stranglehold on 65pc of the market.

The findings, which were vigorously denied by the oil companies, could not come at a more sensitive time for motorists and fuel retailers.

Petrol has become a contentious issue for households across Europe as prices at the pump have risen in line with the soaring oil price above $120 per barrel.

Oil has since gone down by $10 a barrel this month, but this led to only a 0.5p drop in the average price of a litre of petrol in the UK – when the AA calculates the drop should be more like 4p.

Average petrol prices hit 137.43p per litre earlier this month – a 1.64p rise on the mid-April average.

Luke Bosdet, of the AA said the motoring group would welcome a Europe-wide investigation into why petrol prices are still so high. He said: “We want an explanation for why petrol prices have reached the record levels of 2008 when the oil price is 15pc to 20pc lower than in 2008.

In Germany, the competition watchdog found that the prices at most major petrol stations are higher than necessary and do not reflect competition in the industry.

The investigators claimed that the “oligopoly” manipulate the market to increase prices before weekends, public holidays and school holidays, with Fridays being the most expensive day.

It banned any further takeovers or expansion of the five big companies’ petrol station operations without close scrutiny from the regulator.

The Cartel Office found no evidence of deliberate collusion but said the companies were quickly following each other in raising prices above the level they should be.

It said it could not force the retailers to lower their prices but urged consumers to shop around to find the cheapest prices for their

Peter Ramsauer, the German Transport Minister, has long been pushing for tougher competition to “stop the excesses in pricing at the petrol pump”.

However, a spokesman for BP in Germany vigorously defended the market against the accusations of the regulators. “There is no control of the market by an oligopoly,” he said. “What the Cartel Office’s observations do not mention is the fact that the members of this alleged oligopoly run only one half of the approximately 14,800 retail stations in Germany. In other words, consumers are free to choose who they go to.”

He also said there were legitimate reasons why petrol prices would be higher at weekends than the week.

“Currently, prices are often highest on Fridays and lowest on Sundays and Mondays. The reason for this is that price competition at the weekend has increased drastically in the last few years and, in consequence, prices fall more steeply. The same applies to public holidays.”

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Royal Dutch Shell in Rosneft Arctic talks

May 25th, 2011
by John Donovan.
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Royal Dutch Shell has begun talks with Rosneft on “potential exploration” in the Arctic – the week after BP’s flagship deal with the Russian state oil company collapsed.

BP and Rosneft announced a £10bn share swap and Arctic exploration deal at a high-profile ceremony flanked by politicians and dignitaries in January this year. Photo: ALAMY

Rowena Mason
By Rowena Mason 6:46PM BST 25 May 2011

Peter Voser, the chief executive of Shell, was last night in Moscow for meetings with Russian deputy prime minister Igor Sechin, intensifying speculation that Rosneft is prepared to replace BP with another company.

The Russian government said the meeting focused on Shell’s current projects off Sakhalin Island, which may be extended, and the potential development of Arctic oil fields held by Rosneft.

Eduard Khudainatov Rosneft’s chief executive, was also present at the talks, placing Shell in pole position among analysts to become the Kremlin’s new foreign oil partner.

BP and Rosneft announced a £10bn share swap and Arctic exploration deal at a high-profile ceremony flanked by politicians and dignitaries in January this year.

However, they cannot proceed because BP’s existing partners, four oligarchs, successfully argued in court that they have an exclusivity agreement with with the British company on deals in Russia. BP could still manage to strike a deal if it buys out the four Russian billionaires from their joint venture TNK-BP, but so far, the two sides have failed to agree the terms of a sale.

Rosneft initially said that it is still considering BP as a partner for Arctic exploration if the issues can be resolved.

But over the weekend, Russia’s energy minister Sergei Shmatko said he does not expect the deal in its current form to be revived.

Industry experts agree that BP has the best technology and experience in deepwater drilling in extreme conditions, making it a desirable partner for Rosneft in the Arctic.

However, Rosneft has admitted talking to other parties, such as Shell, Chevron and ExxonMobil, since the frustration of the deal.

A spokesman for Shell said: “Shell welcomes the constructive talks in Moscow this week regarding potential exploration co-operation with Rosneft in the Arctic, broader strategic co-operation and technology development for the Arctic and other areas as well as opportunities for Rosneft to join Shell in developments outside Russia.”

Shell already has an “strategic agreement” with Rosneft, signed in 2007, to co-operate on exploration in Russia. The right to look for oil in the Arctic is a great prize for foreign companies as there is the potential for major discoveries in an area the size of the North Sea.

A spokesman for the Russian government said: “The negotiations touched on prospective long-term cooperation in geological exploration and the development of oil and gas resources around the Arctic shelf and the Black Sea.”

There was no discussion about any share swap.

At Shell’s annual meeting earlier this month, Mr Voser said the company had always been keen to exploit the Arctic area. “We are interested in exploring in Russia, and we have made no secret of that,” he said.

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Shell shuts Caspian office, $50bn Kashagan project on ice

May 24th, 2011
by John Donovan.
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Royal Dutch Shell will shut its Caspian office for the giant Kashagan oil field at the end of this month, effectively putting the crucial £30bn ($50bn) project on ice for at least two years.

Staff at Shell Development Kashagan in Atyrau have been laid off or relocated and the office closes on May 30. Photo: ALAMY

Richard Orange
By Richard Orange, in Aktau 3:32PM BST 24 May 2011

The move followed the Kazakh government’s decision to reject a new lower-cost design for the crucial main development phase of the oilfield which has the potential to produce more than 1m barrels a day.

Staff at Shell Development Kashagan in Atyrau, a port on Kazakhstan’s Caspian coast, have been laid off or relocated over the past few weeks, and on May 30, the office will be closed.

The move follows a warning from Karim Massimov, Kazakhstan’s prime minister, that the project would not go ahead unless the disagreements on cost were overcome.

“This is an issue about cost,” he told Financial Times in an interview published on Monday.

Shell is shutting down Shell Development Kashagan, the orders of the North Caspian Operating Company (NCOC), the joint venture which manages the development.

SDK is tasked with managing offshore development for the crucial second phase, and its closure means that NCOC is convinced that the start of project will be delayed at least two years.

This could push first production well into the next decade, making it all but impossible for Shell and its partners to make an acceptable profit before the contract expires in 2037.

When Kashagan was discovered in 2000, it was the biggest oil discovery in more than 30 years, with commercial reserves of some 9bn-13bn barrels of oil. But it is also one of the world’s most difficult fields, and under Italy’s ENI, the company chosen to operate it, costs soared to $136bn, making it the costliest project anywhere in the world.

At the end of last year, a set of new lower cost design options, drawn up by Shell’s Kashagan Cost Reduction Team – one of which reduced development costs for the second phase from $68mn to $50bn – was presented to the Kazakh oil ministry by the project partners.

But the Kazakh oil minister Sauat Mynbayev in January rejected the new designs as “inefficient from an economic point of view.”

On February 14, NCOC gave the order to wind down the work on the crucial second phase.

According to a report this month from Wood Mackenzie, the oil industry consultants, the decision was confirmed in April.

Shell Development Kashagan’s main office in The Netherlands is also being shut down and all staff will be moved elsewhere by June 30.

The team which developed the Kashagan Cost Reduction Plan will refine the low-cost design for NCOC, and submit it again to the Kazakh oil ministry in the second half of the year.

Wood Mackenzie’s report estimated that a delay of two years would bring the Kazakh government an extra $400m a year in revenues from the time the field goes into production at the start of 2013 until 2017, and up to $600m if it then only approves a gradual development.

State oil company Kazmunaigas (KMG) is already struggling to meet its share of spending, which was $1.4bn this year alone.

Wood Mackenzie argues that the Kazakh government will ultimately pay the highest price for the delay, however. It estimated that a delay of two years would cut $8.5bn from the $79.8bn net present value of the project for the government, but only $5.2bn from the $70.7bn net present value for Shell and its partners.

The delay also makes it unlikely that the field will ever reach the 1.5bn barre-per-day peak originally envisaged. The first phase of the project will take oil production to 370,000 b/d, the second phase was supposed to push that to 1m b/d.

The Kashagan consortium is led by Shell, ENI, France’s Total, ExxonMobil, and KMG, which each have 16.81pc stakes in the field. ConocoPhillips, from the US, and Japan’s Inpex each hold 8pc.

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Shell to present Alaska deep-water drilling plans to US government

May 2nd, 2011
by John Donovan.
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Royal Dutch Shell is pushing ahead with plans for deep-water drilling in Alaska, despite environmental concerns caused by BP’s disastrous spill in the Gulf of Mexico.

The Arctic Ocean region in Alaska reportedly contains enough reserves to provide fuel for 25m cars for 35 years.

Amanda Andrews

By Amanda Andrews 7:05PM BST 02 May 2011

The oil giant will present a detailed proposal to the US federal government this week, asking for its permission to drill up to 10 exploratory oil wells beneath Alaska’s Arctic waters.

The move comes five years after BP’s decaying Prudhoe Bay pipeline spilt 200,000 gallons of oil across Alaska.

The Arctic Ocean region in Alaska reportedly contains enough reserves to provide fuel for 25m cars for 35 years.

President Barack Obama is understood to have requested extra safety assurances about Shell’s plans.

Shell has said it will not drill in Alaska if it cannot do so “safely and responsibly” and said the characteristics of the fields are different to those in the Gulf of Mexico.

It is believed that a spill in the Arctic’s inaccessible waters would be even more damaging than the Gulf of Mexico accident.

A Shell spokesperson said: “Shell remains committed to employing world-class technology and experience to ensure a safe, environmentally responsible Arctic exploration programme.”

Administration officials said in reports from the US that they will review Shell’s new proposal cautiously.

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Tax hike may mean Centrica gas field stays shut 02 May 2011

Shell sued over oil spill in Niger Delta 02 May 2011

BP should look to rival Shell to help refine the way forward 28 Apr 2011

Profits rise at Shell and Exxon on oil spike 28 Apr 2011

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Shell sued over oil spill in Niger Delta

May 2nd, 2011
by John Donovan.
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Royal Dutch Shell has been hit with a class-action lawsuit in London by the Bodo community of Nigeria, which suffered a “devastating” oil spill when a key pipeline burst in the summer of 2008.

The new lawsuit against Shell has been sparked by a leak allegedly coming from the Trans-Niger pipeline, which the community says started flowing into the Bodo creek in August 2008.  Photo: AP

Rowena Mason
By Rowena Mason 7:45AM BST 02 May 2011

The community filed a lawsuit last month at the High Court against both Royal Dutch Shell and Shell Petroleum Development Company of Nigeria, raising the possibility of a drawn-out legal battle for compensation.

More than 69,000 people live in Bodo in the Niger Delta, which has seen 9m to 13m barrels of oil spilt from the pipelines of various companies over the years – more than double the volume of BP’s Gulf of Mexico leak. UN figures show more than 6,800 spills between 1976 and 2001.

Much of those spills has not been cleared up because oil companies face regular attacks on their staff and pipelines by militants who have targeted the industry since 2006. The militants claim Nigerian people do not see enough profit from their natural resources.

The new lawsuit against Shell has been sparked by a leak allegedly coming from the Trans-Niger pipeline, which the community says started flowing into the Bodo creek in August 2008 and continued for four months. Shell claimed it was only made aware of the problem on October 5 that year but the pipeline was not fixed until a month later. There were later reports of a second leak on the pipeline in February 2009.

More than two years later, the Bodo people are still claiming that the livelihoods of fishermen and farmers have been destroyed by the spill.

A report by Amnesty International calls the oil leak “devastating” and says that Shell came to assess the site in spring 2009, when oil was still affecting the land.

“As of May 2009, the site of the spill had still not been cleaned up and there was controversy over the clean-up contract,” the Amnesty report said. “On 2 May 2009, eight months after the spill, Shell staff reportedly brought food relief to the community, which they rejected as inadequate.”

According to Nenibarini Zabbey of the Center for Environment, Human Rights and Development: “Shell Petroleum Development Company officials arrived at the palace of the paramount ruler of Bodo on Saturday 2 May, 2009, and presented as relief materials 50 bags of rice, 50 bags of beans, 50 bags of garri, 50 cartons of sugar, 50 cartons of dry peak milk, 50 cartons of milo tea, 50 cartons of tomatoes and 50 tins of groundnut oil. Given the population, the Bodo people consider the offer by Shell as insulting, provocative and beggarly.”

It is understood Shell has received letters of claim relating to the two alleged oil spills but has not yet been formally served with a writ.

Shell declined to comment on the lawsuit or the Bodo spill but a spokesman said that, in general, “the great majority of spills in the Niger Delta are the result of third party interference, mainly sabotage, theft of equipment or leaks caused by thieves drilling into pipelines or opening up wellheads to steal oil. On average, such third party interference has accounted for more than 75pc of all oil spill incidents and more than 70pc of all oil spilled from Shell facilities in the Delta over the last five years.”

Last year, Shell says it spilt approximately 3,500 tonnes of oil into the Niger Delta. This was down significantly from the 14,000 tonnes of oil spilt in 2009, when military violence in the region was at a peak.

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BP should look to Anglo-Dutch rival Shell to help refine the way forward

Apr 29th, 2011
by John Donovan.
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One of the most striking features of the oil industry in recent times has been the divergent fortunes of Royal Dutch Shell and BP.

BP has well-publicised problems that explain its recent under-performance, such as uncertainty over its future in Russia and the shock of last year’s Deepwater Horizon drilling rig explosion in the Gulf of Mexico’s Macondo area, which left 11 workers dead. Photo: REUTERS

Damian Reece
By Damian Reece, Head of Business: 29n April 2011

The past two years has seen Shell outperform the All-Share index by 7pc, while BP has under-performed by 58pc.

Results on Thursday from Shell once again underlined the companies’ differences, such as profitability and prospects, which are driving investor sentiment.

BP has well-publicised problems that explain its recent under-performance, such as uncertainty over its future in Russia and the shock of last year’s Deepwater Horizon drilling rig explosion in the Gulf of Mexico’s Macondo area, which left 11 workers dead.

Going further back, under Lord Browne’s regime we had his own troubled exit, the Texas City refinery blast, the Prudhoe Bay spill, problems in the Gulf’s Thunder Horse field and price-fixing allegations in New York.

If you consider the Texas City blast, which killed 15, was back in August 2005, BP has been beset by serious problems for nearly six years. This begs the question, can BP ever really change?

However unpalatable it might be, chief executive Bob Dudley could look across at his age-old rival, Shell, for the answer. Shell had its own Macondo moment back in 2004, with its reserves scandal. For nearly 10 years prior to that, Shell had been trying to change its culture, a process that had been largely ineffective.

Since the reserves scandal, under chief executives Jeroen van der Veer and latterly Peter Voser, it has changed tack, focusing on more investment upstream in exploration and production, more investment in OECD countries to reduce political risk and to replace its declining heart lands, more investment in gas and more large projects.

It has developed four key strategic partners in PetroChina, Gazprom, Aramco and Qatar Petroleum and shaken up its downstream refining and retail operations. Internally, Shell workers are now subject to a continuous improvement programme that stresses the speed of decision-making, the operational effectiveness of its assets and their integrity in terms of safety.

Another crucial difference has been the creation of the modern BP from a strategy of acquisitions (Amoco, Arco and Burmah Castrol, to name a few) bequeathing different cultures within the group.

Shell, an Anglo-Dutch construct, was a federal structure that found it difficult to issue shares to pay for deals, so stuck to organic growth. Even since adopting a unified structure it has avoided major deals. It is arguably a more unitary culture than BP.

This, then, is all the boring nitty-gritty behind Shell’s numbers on Thursday. But it goes a long way to explaining the increasingly marked difference between Shell and BP.

Oil investors rank companies in terms of what they deliver today in terms of earnings, the prospect of improving on that with more assets and management’s credibility and strategic vision. BP is struggling in all these departments. Maybe Bob Dudley should consider what he can learn from the way Shell has learned from past problems before deciding on how BP moves on from its own.

damian.reece@telegraph.co.uk

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Leaked email from Cameron CEO Jack B. Moore: Deepwater Horizon

Apr 20th, 2011
by John Donovan.
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From: Harrell, Rosemary On Behalf Of Moore, Jack B
Sent: 20 April 2011 16:05
Subject: Letter from Jack Moore
Importance: High

April 20, 2011

Dear Fellow Employees,

A year ago today a tragic accident on the Deepwater Horizon took the lives of 11 men and injured many others.

One year later, our industry still mourns the loss of Jason Anderson, Dale Burkeen, Donald Clark, Stephen Curtis, Gordon Jones, Roy Wyatt Kemp, Karl Kleppinger, Blair Manuel, Dewey Revette, Shane Roshto and Adam Weise. Examination of the causes and consequences of the accident continues, as does the evaluation of its ongoing impact on the energy industry and our national economy.

I want to take this opportunity to once again acknowledge and thank those of you who gave so freely of your time and talents to help design and construct solutions to contain and ultimately shut in the Macondo well.

Recent events all over the world remind us of the crucial role that energy plays in our day-to-day lives. Unrest in Egypt, Libya, Syria and other countries has contributed to oil prices exceeding $100 a barrel and gas prices topping $4 a gallon, while the earthquake and tsunami in Japan became a major energy issue when the Fukushima nuclear plant was affected.

As we watch these events unfold, we need to heed their warnings: We simply have to make the U.S. more energy-secure, both by ensuring the safety of our existing energy infrastructure and by reducing our dependence on foreign oil supplies.

While the Macondo spill was an event that never should have happened, it does not represent an insurmountable technical challenge that should shut down oil and natural gas drilling. The U.S. has not elected to shut down the nuclear industry in the wake of the disaster in Japan, just as we do not shut down the airline industry after a crash.

This country needs the energy resources that can be safely developed offshore. We’ve safely drilled more than 50,000 wells in the Gulf over the years. We know the processes and procedures to follow, and the lessons learned from Macondo will make drilling even safer. The memory of those who were lost on the Macondo well remains a stark reminder that safety is priority one as we continue to explore and develop offshore oil and natural gas.

Thank you for your continued dedication in making Cameron a leader in this endeavor.

Best regards,

Jack B. Moore
President & CEO

1333 W. Loop S., Suite 1700
Houston, TX 77027
Phone: 713-513-3452
Fax: 713-513-3455

Related article published today:

BP’s Gulf of Mexico oil spill bill could hit $60bn, Moody’s warns

The final cost to BP from the Gulf of Mexico oil spill is likely to “remain uncertain for years to come” and could reach $60bn (£37bn), according to new analysis from Moody’s, the rating agency.

It is now a year to the day since the Deepwater Horizon rig exploded and sunk, killing 11 men Photo: AP

By Rowena Mason, Energy Correspondent 5:30AM BST 20 Apr 2011

BP is budgeting for maximum final costs of $41bn to settle fines, compensation and clean-up operations, based on the assumption that it will not be found guilty of any allegations of gross negligence.

However, estimates from Moody’s say the figure could be much higher, with BP’s estimate of the cost at the very bottom end of expectations.

“We still do not know the total cost and penalties from the spill, but our analysis suggested the figure would be roughly $40bn-$60bn,” Moody’s analysts said.

It is now a year to the day since the Deepwater Horizon rig exploded and sank, killing 11 men. Moody’s points out it will take until late 2012 to get any legal outcomes that determine the size of fines for BP.

The rating agency believes that BP can still afford to pay liabilities of $60bn, based on the fact that it has more than $30bn of free cash flow and is disposing of $30bn in assets. It said BP’s A2 credit rating is not likely to suffer.

It is, however, sceptical about whether BP will share the burden of fines among all its contractors. Despite official reports spreading blame for the accident among multiple parties, Moody’s expects Halliburton and Cameron will escape hefty penalties. The White House Oil Spill Commission found Halliburton’s cement job on the well was not secure. Cameron made the blow-out preventer that failed to stop the explosion. Both deny any wrongdoing.

Moody’s analysts said: “A quick look at the five Macondo companies in the year since the accident reveals that legal matters remain far from certain for BP, Anadarko and Transocean, but at this point, we expect little long-term financial fallout for Halliburton or Cameron.”

A spokesman for BP pointed to the basis for its provisions in the company’s annual report.

He said: “What we have said before is that the provisions we have made in our accounts have been made on the basis that we are not guilty of gross negligence. We also believe there is still uncertainty in the flow rate, on which certain fines and penalties will be based.”

Detailed information about BP’s projected liabilities for the oil spill only emerged in its annual report, after the US Securities and Exchange Commission wrote twice to the company demanding more information.

Following the letters, BP disclosed a detailed breakdown of what it expects the $41bn to be spent on, including:

• About $3.5bn for fines under the Clean Water Act. Under this law, penalties can be higher if charges of gross negligence are brought. BP also disputes the official US estimates that 4.9m barrels of oil may have been spilt and used an estimate of 3.2m barrels when calculating its potential liability.

• Just over $15bn for charges related to litigation and claims, including items be paid out under the official compensation fund.

• More than $7bn related to any additional amount that needs to be taken out of the official $20bn compensation fund beyond the expected $13bn in claims.

• Charges related to the oil spill response of $13bn.

BP says the $41bn provision does not reflect any potential fines and penalties except for those relating to the Clean Water Act, as “it is not possible to estimate reliably either the amount or timing of such additional items”.

In its correspondence with the SEC, BP’s finance director Byron Grote said the company “agreed to change or supplement the disclosure in our future filings”, but “not because we believe our prior filing is materially deficient or inaccurate.”

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Shell and Gazprom talk on Japan gas

Apr 12th, 2011
by John Donovan.
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Royal Dutch Shell has cemented its partnership with Gazprom by discussing asset swaps and how to increase shipments of gas to Japan, where the Fukushima nuclear disaster has caused an energy shortage.

Shell revealed last year that it would let Gazprom share some of its projects abroad if it is allowed to help develop the third and fourth stages of the lucrative Sakhalin island in Russia. Photo: EPA

Rowena Mason
By Rowena Mason 7:57PM BST 12 Apr 2011

Peter Voser, Shell chief executive, flew to Moscow for meetings with Alexey Miller, the head of Gazprom, where they talked about deals related to Siberia and Asia.

“While discussing the situation on global energy markets, both sides considered the issue of increasing LNG [liquefied natural gas] supplies to Japan from the Sakhalin-2 project as the fastest way to stabilise power supply for its consumers,” a Gazprom spokesman said.

Shell revealed last year that it would let Gazprom share some of its projects abroad if it is allowed to help develop the third and fourth stages of the lucrative Sakhalin island in Russia. Deals could even take the form of asset swaps, as Gazprom seeks to increase its presence on the international stage. Sakhalin is thought to contain reserves of more than 14bn barrels of oil equivalent.

Tuesday’s talks appear to continue a remarkable turnaround in historically strained relations between Shell and Russia.

It was four years since Russia forced Shell to cede control of its $22bn (£14bn) Siberian field, Sakhalin-2, to Gazprom, but it appears that cordial relations have been re-established.

The Anglo-Dutch oil giant was forced to sell down its 55pc stake in Sakhalin-2 to Gazprom in 2006 in a powerful display of Russian resource nationalism.

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Kazakhstan to delay work on vast oil field by three more years

Apr 5th, 2011
by John Donovan.
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Kazakhstan is planning a three-year halt to work on the main phase of the super-giant Kashagan oil field development, as international oil companies Royal Dutch Shell and Exxon Mobil fight to convince the country’s oil ministry to back a simplified design, which would slash costs by $18bn (£11bn) to $50bn.

The Kazakhs are considering shelving the new simplified design, and keeping the field producing at its initial rate of 375,000 barrels per day (bpd) for at least three years. Photo: Getty

Richard Orange
By Richard Orange, in Astana 11:30PM BST 04 Apr 2011

The delay, if approved, could push the start of full production from the field well into the next decade, making it all but impossible for Shell and its partners to make an acceptable profit before the contract expires in 2037.

The Kazakhs are considering shelving the new simplified design, and keeping the field producing at its initial rate of 375,000 barrels per day (bpd) for at least three years, after which the NCOC consortium could use a greater understanding of the geology to produce a better design for the second phase, when production is expected to hit 1.5m bpd.

When the oil field was discovered in 2000, it was the biggest find in more than 30 years, with reserves of 9bn-13bn barrels. But under Italy’s ENI, the company chosen to operate the project, costs soared to $136bn.

The start date also slipped from the target of 2005.

NCOC’s new design for the field was informally presented to the Kazakhs at the end of last year. An official said Kazakh oil ministry officials were unhappy with NCOC’s decision to use a new geological model of the field, which was presented last month by Exxon.

“Frankly, we laugh at their model,” the official said. “It’s based on too many assumptions and the data is very doubtful.”

Over the next three months, the consortium will present their model of how oil will flow as it is produced, after which the Kazakhs will make a final decision on the freeze.

Shell, Exxon Mobil, Total and KazMunaiGaz all have a 16.81pc stake in the field. ConocoPhillips has 8.4pc, and Japan’s Inpex 7.56pc.

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Shell wins approval to drill new Gulf of Mexico deepwater wells

Mar 22nd, 2011
by John Donovan.
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Royal Dutch Shell has won approval to drill the first new deepwater oil wells in the Gulf of Mexico almost a year after a spill by rival BP halted the industry’s expansion.

An offshore crude oil rig platform (left) sits peacefully in the Gulf of Mexico, USA. By contrast, the Deepwater Horizon oil rig, is seen burning after an explosion last April.

Richard Blackden

By Richard Blackden, US Business Editor 11:38PM GMT 21 Mar 2011

US authorities have given the green light to the Anglo-Dutch company’s plan to drill three wells to a depth of about 2,950 feet in a field 130 miles off the coast of Louisana.

Shell will still be required to apply for specific permits for each well it drills.

The award is significant because the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) has so far only handed out a small number of deepwater permits to resume work on wells on which work had started before last April’s explosion at BP’s Macondo well.

The authorities said on Monday that under new regulations brought in since the spill, Shell had been required to assess the environmental impact of each new well, rather than just the whole field.

The decision to approve the plan “unmistakably demonstrates that oil and gas exploration can continue responsibly in deep water,” insisted Michael Bromwich, the director of BOEMRE.

The White House has faced intense pressure to allow the resumption of deepwater drilling in the Gulf from the oil and gas industry, which claims thousands of jobs have already been lost. A moratorium on deepwater drilling, which was imposed in the weeks after the fatal explosion, was lifted a month early. A sharp rise in the oil price in the wake of upheaval in North Africa and the Middle East has only added to those calls for a resumption of drilling.

Shell said that the decision by authorities reflects “Shell’s robust and comprehensive approach to responsible offshore development.”

There are currently 13 exploration other plans that the BOEMRE is reviewing. However, the decision by authorities is likely to cause unease among critics who claim that BP’s spill showed that containing and cleaning up a spill quickly is beyond the ability of the industry.

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