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Posts under ‘Shale Gas’

Oil market spiral threatens to prick global debt bubble, warns BIS

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By Ambrose Evans-Pritchard6:33PM GMT 05 Feb 2016

The global oil industry is caught in a self-feeding downward spiral as falling prices cause producers to boost output even further in a scramble to service $3 trillion of dollar debt, the world’s top watchdog has warned.

The Bank for International Settlements fears that a perverse dynamic is at work where energy companies in Brazil, Russia, China and parts of the US shale belt are increasing production in defiance of normal market logic, leading to a bad “feedback-loop” that is sucking the whole sector into a destructive vortex.

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What goes down

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By Ed Crooks: January 29, 2016

The week has been a reminder that oil prices can go up as well as down. By Thursday night, Brent crude was 25 per cent higher than its low point eight days earlier. At a little under $34 per barrel, though, oil is still at a level that makes the great majority of US shale developments uneconomic. As I wrote in the FT on Saturday, it is pointing towards a radical shake-out in the shale industry.

Concerns about the huge financial strain that $30 crude imposes on oil producers and oilfield services companies has driven the value of junk-rated US energy debt down to its lowest level for more than two decades, at an average of just 56 cents on the dollar.  Markets have also become increasingly concerned about the domino effect from weak oil prices hitting other sectors, such as manufacturing. On balance, however, David Sheppard and Neil Hume argued in the FT, cheap oil is still better for the world economy than expensive oil.

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Stock Prices Sink in a Rising Ocean of Oil

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It could get worse. The nuclear deal with Iran should allow the country to start exporting far more oil, once sanctions are lifted, potentially in a matter of days. Iran could add as much as 500,000 barrels a day to the global markets. Tentative progress in negotiations between warring factions in Libya, battling for control of oil and export terminals, could unleash another flood.

By CLIFFORD KRAUSSA version of this article appears in print on January 16, 2016, on page A1 of the New York edition

HOUSTON — The world is awash in crude oil, with enough extra produced last year to fuel all of Britain or Thailand. And the price of oil will not stop falling until the glut shrinks.

The oil glut — the unsold crude that is piling up around the world — is a quandary and a source of investor anxiety that once again rattled global markets on Friday.

As prices have dropped, the amount of excess production has been cut in half over the last six months. About one million barrels of extra oil is now being dumped on the markets each day.

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Oil Prices Could Collapse To $20

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By Tyler Durden

Extracts from extracts…

Could oil prices collapse to $20? 

The short answer is ‘yes.’

We believe that crude oil prices could fall further unless global oil production is reduced. As shown in Table 2, we estimate that the global oil market could be oversupplied by roughly 920,000 bpd in 2016. The key assumptions are year-over-year growth in global demand of 1.2 million bpd, Saudi Arabia, Iraq and Libya hold production at current levels, Iran ramps up production at moderate pace over the course of the year and the U.S. rig count remains at current levels.

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Shell’s £40bn takeover of BG Group edges closer despite tumbling oil price and shareholder discontent

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By CITY & FINANCE REPORTER FOR THE DAILY MAILPUBLISHED: 21:55, 21 December 2015

Tumbling oil prices and shareholder discontent have not prevented Royal Dutch Shell’s £40billion takeover of BG Group entering the final stages.

The deal could complete in February after BG applied to the High Court to hold the shareholder meetings to vote on it in the new year.

The tie-up has been unpopular with some investors and experts who argue it does not make sense when the oil price is so low. 

The price of Brent crude plummeted to an 11-year low yesterday as excess supply continued to flood the market. 

Oil production is running close to record highs and Brent futures fell by as much as 2 per cent to a low of just above $36 a barrel, their weakest since July 2004.

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Oil Price Crumbles

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By Ed Crooks
December 4, 2015

Late on Thursday afternoon, after a gathering that took longer than expected and left the markets on tenterhooks, the Opec meeting in Vienna came up with its decision: ministers agreed to do nothing at all, leaving production at current levels.

Before they gathered on Friday the FT team in Vienna wrote on the fundamental conflict inside the oil-exporting countries’ group: Saudi Arabia is prepared to cut output to help stabilise prices, but only if other producers, both inside and outside Opec, are prepared to do the same.

Explaining the reasons behind the plunge in crude prices last year, and the reasons why Opec meetings are now so fraught, Martin Wolf, the FT’s chief economics commentator, looked at the implications of the US shale boom. The FT warned in an editorial that, as remote as the prospect might seem today, an oil shock could still hurt the world economy. By cutting investment in oil production, low prices are choking back future supplies. The Lex column highlighted one example of that: the financial pressures on the US shale oil industry, which are intensifying. The column argues that seeing the signs of strain in the US, “Saudi may be feeling some vindication”.

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Ineos agrees shale gas deal with Shell and ExxonMobil

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A deal to supply energy giants Shell and ExxonMobil with American shale gas from the Ineos plant at Grangemouth has been hailed a “landmark agreement”.

The Fife Ethylene Plant (FEP) in Mossmorran will receive the ethane from US shale gas, which is obtained using the controversial hydraulic fracturing “fracking” technique, from the middle of 2017.

It comes after Ineos signed a long-term sale and purchase agreement with ExxonMobil, which owns and operates the FEP plant, and Shell, which has 50% capacity rights.

The FEP, which was officially opened by the Queen in 1986, was the first plant specifically designed to process natural gas liquids from the North Sea.

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In defence of Shell CEO Ben van Beurden

By a regular contributor

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Only one member of the EC is directly involved in North American activities, Marvin Odum. 

Perhaps worth noting is that investment decisions on the scale of the recent Shell write-offs would have required approval by the entire EC in the Hague long before BvB was around. Few of the EC members who made those decisions are still present. 

It seems strange that so many of the huge projects which have been abandoned are in North America, and serious questions need to be asked about why approval was given by the EC for these huge projects. Only one member of the EC is directly involved in North American activities, Marvin Odum. 

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Shell share price: Company’s problems extend beyond oil prices, analyst says

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Screen Shot 2015-10-27 at 12.33.24Big bets on shale “destroyed huge amounts of capital” and the company has few growth assets…the firm is far more likely to remain a laggard than become a leader among the oil majors for the rest of this decade…

by Veselin Valchev: Tuesday, 27 Oct 2015

Royal Dutch Shell Plc (LON:RDSA) carries hefty baggage and even if oil prices were to recover back to $100 per barrel, it would not solve all the firm’s problems, argued senior Morningstar analyst Stephen Simko.

Big bets on shale “destroyed huge amounts of capital” and the company has few growth assets, Simko said.

The notable exception is the potential addition of BG Group’s Brazilian operations, should the proposed merger complete successfully. BG’s interests in the Santos Basin are estimated to hold more than three billion barrels of recoverable oil resources and are projected to break even at only $30-35 per barrel.

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New Concern Over Quakes in Oklahoma Near a Hub of U.S. Oil

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Screen Shot 2015-10-15 at 10.41.53By MICHAEL WINESOCT. 14, 2015

A sharp earthquake in central Oklahoma last weekend has raised fresh concern about the security of a vast crude oil storage complex, close to the quake’s center, that sits at the crossroads of the nation’s oil pipeline network.

The magnitude 4.5 quake struck Saturday afternoon about three miles northwest of Cushing, roughly midway between Oklahoma City and Tulsa. The town of about 8,000 people is home to the so-called Cushing Hub, a sprawling tank farm that is among the largest oil storage facilities in the world.

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Shell had to write-down some of its shale assets in the U.S., after spending $24 billion on a bet that failed to pay off, with company executives regretting ever having made the investment.

By James Stafford: Wed, 14 October 2015

A new report finds that the largest oil companies are set to cut spending on exploration by at least half, potentially leading to very few new oil discoveries in the years ahead.

The report from investment bank Tudor, Pickering, Hold & Co., and reported by Fuel Fix, estimates that exploration budgets among the oil majors will drop to $25 billion in 2016, down from $50 billion from just a few years ago. Obviously, low oil prices are taking their toll, forcing deep spending cuts in a desperate attempt to shore up profitability. But the cuts have large implications for the energy sector, increasing the chances that some large oil fields remain undeveloped for years.

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Russia abandons hope of oil price recovery and turns to the plough

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Russia has abandoned hopes for a lasting recovery in oil prices, bracing for a new era of abundant crude as US shale production transforms the global energy market.

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President Vladimir Putin answers questions during an interview for Russian television

Ambrose Evans-Pritchard: 14 Oct 2015

The Kremlin has launched a radical shift in strategy, rationing funds for the once-sacrosanct oil and gas industry and relying instead on a revival of manufacturing and farming, driven by a much more competitive rouble.

“We have to have prudent forecasts. Our budget is based very conservative assumptions of oil at around $50 a barrel,” said Vladimir Putin, the Russian president.

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Shell’s Positioning For Better Russia And Iran Relations Is Part Of Its Global Gas Strategy

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Screen Shot 2015-06-18 at 22.09.48Zoltan Ban: 23 July 2015

Summary

  • Shell has been showing long-term interest in moving more towards natural gas for a while, with natural gas production surpassing its oil production in 2013.
  • Aside from its major acquisition of BG group, it is forming an alliance with Gazprom and is looking to be among the first in Iran.
  • The overall big picture suggests that Shell is giving up on North American shale gas and focusing on being a major player in conventional gas and LNG.

Before Royal Dutch Shell (RDS.A, RDS.B) acquired BG Group, it was already a major player in the gas industry. Its upstream production has been more than half natural gas since 2013 already. It is constantly looking to expand its downstream presence, with plans such as the ethylene plant it wants to build in Pennsylvania, in order to take advantage of the cheap gas in the North-Eastern part of the United States. It also has a gas to liquids plant in Qatar, which is the world’s biggest. It should be no surprise then to see Shell actively involved in setting up a tighter partnership with both Russia and Iran.

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Shell expects oil price recovery to take several years

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Screen Shot 2015-04-30 at 09.37.24Ron Bousso, Karolin Schaps and Dmitry Zhdannikov, Reuters

LONDON (Reuters) – Royal Dutch Shell expects oil prices to recover gradually over the next five years, with progress slowed by persistent global oversupply and receding Chinese demand growth.

The Anglo-Dutch energy giant is betting on crude rising to $90 a barrel by 2020, a key assumption in its move to buy rival BG Group for $70 billion to help transform it into a leading player in the costly deepwater oil production and liquefied natural gas (LNG) markets.

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Shell Chief says U.S. shale producers under pressure from Saudi Arabia -FT

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Screen Shot 2015-06-03 at 22.37.09Wed Jul 1, 2015

OPEC’s decision, led by Saudi Arabia, to not cut oil production has put pressure on U.S. shale gas producers which in turn has put brakes on America’s energy boom, the chief executive of Royal Dutch Shell Plc said in an interview with the Financial Times published on Wednesday.

Ben van Beurden said in an interview that OPEC’s decision in the face of soaring U.S. output and weaker-than-expected demand had sent a strong signal that Riyadh would not “underwrite the price” by utilizing its supplies to balance the market. (on.ft.com/1gbNJ8b)

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Royal Dutch Shell Delivers Latest Blow To European Shale

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Royal Dutch Shell may be looking to exit Ukrainian shale as conditions in the region have prompted a delay

Royal Dutch Shell Plc (ADR) (NYSE:RDS.A) has delivered the latest blow to European shale, as it considers withdrawal from its last Ukrainian exploration well.

With Nadra Yuzivska as its partner, the European oil major signed a production sharing agreement (PSA) to explore the Yuzivska shale gas field, which was discovered in 2010.

However, the recent conflict between Russia and Ukraine has prompted Shell to put the project on hold for almost a year, as it has not been able to fulfill its commitments for the Yuzivska project.

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U.S. Ousts Russia as Top World Oil, Gas Producer

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Screen Shot 2015-06-10 at 23.24.56Article by Rakteem Katakey published 10 June 2015 by Bloomberg.com

The U.S. has taken Russia’s crown as the biggest oil and natural-gas producer in a demonstration of the seismic shifts in the world energy landscape emanating from America’s shale fields.

U.S. oil production rose to a record last year, gaining 1.6 million barrels a day, according to BP Plc’s Statistical Review of World Energy released on Wednesday. Gas output also climbed, putting America ahead of Russia as a producer of the hydrocarbons combined.

The data showing the U.S.’s emergence as the top driller confirms a trend that’s helped the world’s largest economy reduce imports, caused a slump in global energy prices and shifted the country’s foreign policy priorities.

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BP sees ‘tectonic shift’ in world energy production

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BP sees ‘tectonic shift’ in world energy production

Oil giant’s chief economist says energy consumption slowed dramatically last year as China cutback and Opec battled US shale drillers for supremacy of world markets

By Andrew Critchlow, Commodities editor:10:00AM BST 10 Jun 2015

Global energy consumption slowed to its slowest rate of growth since the late 1990s last year in what BP’s chief economist Spencer Dale has described as a “watershed” moment as production of oil outside the Opec cartel surged.

Total energy consumption growth slowed to just 0.9pc, while in China consumption growth slowed at the fastest rate since 1998, according to BP’s closely watched Statistical Review of World Energy.

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Saudi Arabia Lets The World Drown In Oil

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Article by Nathan Vardi: Forbes Staff: Friday 5 June 2015

To the surprise of nobody, Saudi Arabia and the other OPEC member states decided in Vienna on Friday to maintain production targets of 30 million barrels a day, making sure the world remains flooded with oil. The fact that OPEC—particularly the core countries of Saudi Arabia, Kuwait and the United Arab Emirates—have refused to play their traditional stabilizing role and cut oil production makes it less likely that oil prices will rebound to the $115 a barrel level that was reached about one year ago.

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Shell CFO Expects Oil Rebound as Shale Fails to Fill Supply Gap

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Simon Henry, CFO, Royal Dutch Shell Plc

Simon Henry, CFO, Royal Dutch Shell Plc

Article by Firat Kayakiran and Jonathan Ferro published 3 June 2015 by Bloomberg.com

Royal Dutch Shell Plc sees oil prices increasing because supply from shale drilling in the U.S. won’t be enough to meet increasing global demand.

The industry needs to find an additional 4 million barrels to 5 million barrels a day of supply every year to meet rising demand and replace depleted fields, Shell Chief Financial Officer Simon Henry said in an interview on Tuesday.

“Lower oil prices increase demand and reduce investment, and it already has,” Henry said. Global demand of about 93 million barrels a day is increasing by 1 million every year, he said in London.

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OPEC Seen Backing Saudi Arabia’s Plan to Keep Supplies Elevated

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by Grant Smith and Maher Chmaytelli: Bloomberg.com: 27 May 2015

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When Saudi Arabia argues next week that OPEC should keep up production to fight the rise in U.S. shale oil, prices will be on its side.

Crude plunged for eight of nine weeks prior to the group’s November gathering, when the kingdom faced down opposition from the majority of fellow members, who advocated output reductions to tackle a global glut. With oil companies around the world cutting investment, U.S. output peaking and prices up, Saudi Arabia’s strategy will be extended at OPEC’s semiannual meeting on June 5, say Societe Generale SA and Bank of America Corp.

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No Shell Arctic Oil Until 2030’s

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By: MICHEAL KAUFMANPublished: May 26, 2015 

Royal Dutch Shell Plc’s (ADR) (NYSE:RDS.A) head of oil and gas production in Americas, Marvin Odum has told the Financial Times (FT) in an interview that the company’s Arctic drilling operations would take at least a decade to extract oil reserves, which would then be sent to production.

The leading executives dealing with this particular exploration project stated that there are enormous difficulties that the company is facing during the process of securing environmental approvals. Amid strong opposition from environmental groups, to obtain the needed approvals is taking longer than the expected time.

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Shell’s Arctic voyage marks beginning of peak oil era

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Anglo-Dutch company’s search for resources in the Arctic is a sign that the world is running out of options for new oil reserves

By Andrew Critchlow, Commodities editor

In his critically acclaimed 2005 book ‘Twilight in the Desert’, the prominent oil economist Matthew R. Simmons predicted that Saudi Arabia’s oil wells would soon run dry.

His argument was based on the age of the seven main fields, which the kingdom still to this day depends upon to pump the bulk of its 10m barrels per day (bpd) of crude. These fields in the main have been producing for over a generation and, despite official figures placing Saudi Arabia’s proven reserves at over 260bn barrels, Mr Simmons argued that the kingdom would struggle to increase its output to keep pace with the projected increases in the demand over the next half century marking the beginning of a period known as “peak oil”.

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Energy earnings run dry in Americas

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By Ed Crooks, Christopher Adams and David Crouch

ExxonMobil and ConocoPhillips of the US on Thursday reported that they lost money on oil and gas production in their home country in the first quarter.

Meanwhile, Royal Dutch Shell disclosed a $1.1bn loss at its upstream exploration and production business in the Americas, and suggested that came mostly from its shale oil and gas operations.

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FULL FT ARTICLE

Fracking lobby calls the tune on commission shale-gas panel

An article by PASCOE SABIDO, PUBLISHED BRUSSELS, TODAY, BY EUOBSERVER.COM

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2015 is a big year for climate in Europe: the UN talks in Paris, this December; the implementation of the EU’s 2030 climate targets; mapping out the Energy Union.
Judging by the European Commission’s public statements, one would think the EU was firmly on its way to transforming our energy system towards efficient and renewable energy.

But in reality, its recently-established advisory group for the evaluation of shale gas development is opening the back door to this harmful and polluting technology across Europe, despite massive public opposition.

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Shell, Exxon set the scene for future oil-price shock after $US114 billion cuts

Screen Shot 2015-01-02 at 23.58.26Article by Bradley Olson published 22 April 2015 by The Sydney Morning Herald

Shell, Exxon set the scene for future oil-price shock after $US114 billion cuts

As the oil patch grows accustomed to a new world of $US50 to $US60 crude, it’s now looking ahead to a different but equally daunting sort of cliff.

Oil companies are warning there will be a price to pay – a much higher price – for all the cost cutting being done today to cope with the collapse in the crude market. Big projects intended to start pumping oil and natural gas 5 to 10 years from now are being canceled or put on hold as the price crash forced $US114 billion in spending cuts on the industry.

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Chevron A Safer Bet Than Shell

Screen Shot 2015-04-14 at 17.26.47SeekingAlpha.com article published 13 April 2015

Chevron A Safer Bet Than Shell

Shell has lost a huge amount of money in its shale bets in North America to the tune of $900 million alone in 2014. As a result, Shell is cutting spending by 20% to lower its North American shale exposure to try and keep losses at a minimum.

Summary

  • Shell’s shale bets has been disastrous in North America. The company lost $900 million alone in 2014 and continues to hemorrhage profits.
  • Shell’s refining operations need to be restructured, as its current operations will likely affect profitability negatively over the next few years.
  • Chevron has a lower debt-to-equity ratio than Shell. If oil drops to $30 a barrel, Chevron has more resources to keep rewarding shareholders vs. Shell.

Income investors are attracted to Royal Dutch Shell (NYSE:RDS.A) because of the very attractive yield of 6%+. Nevertheless, as income investors we need to do more fundamental work on our underlyings instead of just looking at dividend payouts. In my opinion, Shell’s yield is not backed up by the fundamentals presently. We don’t necessarily need huge capital gains in our underlyings (as we manage an income portfolio), but protecting the downside is always our priority.

Let’s take a look at Shell and I’ll explain why, in my opinion, there are better opportunities in the energy space — such as Chevron (NYSE:CVX) — at the moment, irrespective of the high yield Shell is currently paying out. To start, we have to look at Shell’s track record. Why? Because the company is promising a $15 billion all cash dividend in addition to the repurchase of $25 billion of stock between 2017 and 2020.

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Shell Betting Its Future On LNG

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Screen Shot 2015-04-08 at 08.12.04Article By Nick Cunningham published Sun, 12 April 2015 by OilPrice.com

Shell Betting Its Future On LNG

Could the largest energy deal in over a decade begin a new wave of mergers and acquisitions? Is LNG really the future? How Will ExxonMobil Respond? And perhaps more importantly, does the mega-deal between Royal Dutch Shell (RDS.A) and BG Group (LON: BG) portend the end of the bear market for oil?

Shell announced on April 8 that it agreed to buy BG Group for an eye-popping $70 billion.

The move was surprising, in the sense that a lot of companies in recent years have reined in their spending on high-cost projects outside of North America. Shell, in the midst of its own two-year $15 billion divestment campaign to shed unwanted assets, was thought to be trying to make itself leaner and meaner. Having passed on the U.S. shale revolution, it is interesting that Shell’s big splash once again avoided North America.

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Shell paid too much to buy BG Group

ARTICLE BY STEPHEN SIMKO, MORNINGSTAR PUBLISHED APR. 11, 2015 BY BUSINESS INSIDER

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On April 8, Royal Dutch Shell (RDS.A) (RDS.B) (RDSA) (RDSB) announced its intention to acquire BG Group (BRGYY) (BG.) in a $70 billion cash-and-stock deal that values BG’s equity at GBX 1,350 per share, or 11% above our GBX 1,200 fair value estimate for BG at the time the deal was announced.

The deal will be roughly 70% stock and 30% cash, and it’s expected to close in early 2016. Our BG thesis has been that near-term execution problems and political issues in Brazil and Egypt were creating an attractive entry point for long-term investors.

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Shell’s Huge Gas Bet Underscores Big Oil’s Push to Replace Coal

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Article by Javier Blas and Rakteem Katakey published 10 April 2015 by Bloomberg.com

BP Plc coined the slogan “Beyond Petroleum.” The new industry mantra might be “Beyond Oil and Into Gas.” Oh, and while we’re at it, “Down With Coal.”

Consider Royal Dutch Shell Plc’s recent $70 billion acquisition of BG Group Plc — clearly a huge bet that natural gas will prove to be its cash cow of the future.

The petroleum industry’s move toward gas is hardly new — the hydraulic fracturing shale revolution is in its second decade, after all. Still, Shell’s move is an emphatic confirmation that some among the Big Oil family firmly believe gas will play a growing role in meeting the energy demand of emerging countries such as China and India that are trying to move away from dirtier coal.

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Motiva to integrate Norco, Convent refineries in Louisiana

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(Reuters) – Motiva Enterprises said on Thursday that operations at its Convent and Norco, Louisiana, refineries will be integrated to take advantage of increased production of lower-cost U.S. shale oil.

Motiva, which is co-owned by Royal Dutch Shell Plc and Saudi Aramco, said the first step in the integration project is the construction of the Maurepas pipeline system that will bring advantaged crude to the Norco refinery and connect the production systems at the two plants.

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New Federal Rules Are Set for Fracking

Screen Shot 2015-03-21 at 09.12.24FROM AN ARTICLE BY CORAL DAVENPORT PUBLISHED IN THE NEW YORK EDITION OF THE NEW YORK TIMES ON 21 MARCH 2015

New Federal Rules Are Set for Fracking

Extracts

WASHINGTON — The Obama administration on Friday unveiled the nation’s first major federal regulations on hydraulic fracturing, a technique for oil and gas drilling that has led to a significant increase in American energy production but has also raised concerns about health and safety risks.

The Interior Department began drafting the rules, focused on drilling safety, in Mr. Obama’s first term after breakthroughs in the technology, also known as fracking, led to a surge in the production of oil and gas.

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Non-U.S. Shales Prove Difficult to Crack

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By JUSTIN SCHECK and SELINA WILLIAMS: WALL STREET JOURNAL

March 18, 2015 11:20 p.m. ET

Exxon, Shell and others are pulling back from once-promising shale finds in Europe, Asia

After spending more than five years and billions of dollars trying to re-create the U.S. shale boom overseas, some of the world’s biggest oil companies are starting to give up amid a world-wide collapse in crude prices.

Chevron Corp. , Exxon Mobil Corp. and Royal Dutch Shell PLC have packed up nearly all of their hydraulic fracturing wildcatting in Europe, Russia and China. 

“The pace of development outside North America is slower everywhere than people thought it would be,” Simon Henry, Shell’s chief financial officer, said in a recent interview.

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Prices Fall to a Six-Year Low for U.S. Oil

Screen Shot 2015-03-16 at 23.38.17Article by Stanley Reed published 17 March 2015 in the New York edition of the New York Times

Prices Fall to a Six-Year Low for U.S. Oil

Oil prices fell to six-year lows on Monday in the face of concerns that a glut in the United States was outpacing already-brimming storage facilities.

Additionally, the Organization of the Petroleum Exporting Countries published a report suggesting that the cartel remained reluctant to intervene to prop up prices.

The direction of oil prices, which had risen sharply from January lows, has fallen back in recent days. Traders are now focused on the second quarter of the year, when demand for oil is traditionally weak because of the end of winter and scheduled refinery shutdowns for maintenance.

On Monday, the price of West Texas Intermediate crude, the main United States benchmark, fell about 2 percent to about $44 a barrel, a six-year low, while Brent crude, the international benchmark, fell by about 2 percent to about $53 a barrel.

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Price of crude oil resumes its descent

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Screen Shot 2015-03-14 at 09.07.31Article by Stanley Reed published New York Times New York Edition 14 March 2015under the headline:

Oil Prices Drop as Production Hums Along Despite a Brimming Supply

LONDON — Just as the oil market appeared to be stabilizing, the price of crude resumed its descent on Friday.

The drop, of about 4 percent, came after a report from the International Energy Agency warning that oil pouring into tank farms in the United States might “soon test storage capacity limits.”

The agency, whose reports are closely monitored by oil traders, said that overflowing storage “would inevitably lead to renewed price weakness.” American production of oil continues to increase despite recently announced cutbacks in new drilling by producers.

The price of West Texas Intermediate, the American benchmark, fell to around $45 a barrel on Friday, while Brent, the international benchmark, fell below $55 a barrel.

The Department of Energy has proposed adding five million barrels of oil to the Strategic Petroleum Reserve. The purchase, which requires congressional approval, would be added in June and July. But 9.4 million barrels of oil a day are being produced in the United States. Kevin Book, an analyst with ClearView Energy Partners, said that the proposed purchase was not an attempt to support falling prices but instead “appears to derive from a statutory obligation.”

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Keystone and the Riddle of the Tar Sands

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BY MARK DOWIE 2/25/15 AT 10:49 PM

Late 21st-century graduate students of business studying the growing problem of stranded assets will almost certainly focus on the history of Canada’s Athabasca Oil Sands (a.k.a. the tar sands). The case studies they read will either describe the gradual abandonment of the world’s largest reserve of bituminous crude or they will read about the tar sands’ miraculous last-minute escape from becoming the world’s largest stranded asset.

For either outcome, the turning point they will look back on is just about now.

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The credibility of Royal Dutch Shell oil demand forecasts

By John Donovan

Forecasts of future oil demand and oil prices made by Royal Dutch Shell CEO Ben van Beurden have been widely reported.

See syndicated Reuters article.

He is not exactly a disinterested independent observer, as his personal income and the well-being and profitability of the oil company he leads, depends on these issues.

Some might consider his forecasts to be wishful thinking.

It is an appropriate moment to look back on directly related forecasts made 7 years ago by one of his predecessors.

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Big Oil Unable To Increase Reserves To Counter Declining Production

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Bidness Etc discusses why major oil firms have been unable to replace their new reserves, despite crude production level falling since last year amid tumbling crude price

By: MICHEAL KAUFMANPublished: Feb 8, 2015 at 8:40 am EST

According to the quarterly results announced during the past few weeks, major oil companies have reported a mediocre performance for last year, as far as exploration and production of crude oil and natural gas reserves is concerned. At the same time, companies have also reduced their capital spending budgets for this year, which might exacerbate their lower production problem.

Over the last decade, some of the biggest oil companies have seen their production drop and their growth of reserves stutter, even though oil price was going up for the most part. Royal Dutch Shell plc (ADR) (NYSE:RDS.A), BP plc (ADR) (NYSE:BP), ConocoPhillips (NYSE:COP), Exxon Mobil Corporation (NYSE:XOM), and Chevron Corporation (NYSE:CVX) are five of the biggest global oil and gas companies, which saw their production drop 3.25% year-over-year (YoY) on average last year, while failing to replace the crude oil and natural gas – they extracted last year – with new reserves.

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Fracking failures lead to environmental harm

Screen Shot 2014-03-11 at 14.07.51Comment: These events appear to have happened on Paul Goodfellow’s watch?: According to his current Linked-in profile Goodfellow was Shell VP Unconventionals from 2012-2013

FROM AN ARTICLE BY SUSY KELLY PUBLISHED 28 JAN 2015 BY THE HERALD-STANDARD UNDER THE HEADLINE:

“Report: Fracking failures lead to environmental harm in area and state”

Extract

A report released Tuesday by a nonprofit environmental research group shows that despite assurances to the contrary, companies who develop unconventional natural gas wells have polluted the environment in Pennsylvania and will continue to do so under current regulatory standards.

In April 2013, EQT, Chevron Appalachia, Consol and Shell formed the Center for Sustainable Shale Development (CSSD), promising not only that safe, sustainable shale resource development was possible, but that they would do it of their own accord, according to the report. Data from the state Department of Environmental Protection (DEP) shows those four companies failed to uphold state requirements at least 100 times, according to PennEnvironment’s research.

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Exxon Mobil, Royal Dutch Shell, and Petrobras In Trouble?

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By: MICHEAL KAUFMANPublished: Jan 20, 2015

James Chanos is a renowned short-seller, hedge fund manager, and the founder of Kynikos Associates – an investment firm which specializes in short-selling. In an interview with CNBC last Friday, Mr. Chanos cited serious problems for some of the largest oil producers, leading him to short some major oil companies for a couple of years, including Exxon Mobil Corporation (NYSE:XOM), Royal Dutch Shell plc (ADR) (NYSE:RDS.A), and Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR).

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Goodfellow or Badfellow?

Screen Shot 2015-01-19 at 23.17.45By John Donovan

There have been a number of posts on our Shell Blog by insiders welcoming the apparent departure of Paul Goodfellow, Vice President US Unconventionals for Upstream Americas.

e.g.

POSTING BY “F-150”

So, Christmas has finally arrived in The States with the announcement that Goodfellow is finally leaving. After seeing the havoc he has inflicted in Deepwater and Unconventionals it will be good for folks like Crouching Tiger to see the damage non-Americans can do to shareholder value. Remember Walter, Phil and David Greer?

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BP sees $50 oil for three years

Screen Shot 2014-12-04 at 20.54.03BP can’t be immune to the upheaval. Today its job announcement is focused on the UK. But it won’t be long till it announces staff reductions in Houston, another of its important centres.

Robert Peston article published by BBC News 15 Jan 2015

BP sees $50 oil for three years

BP’s job announcement later today, including a few hundred job losses in Aberdeen, is being made because it does not expect the oil price to bounce any time soon.

The oil price has dropped around 60% since June, to $48 a barrel, and I understand that BP expects that it will stay in the range of $50 to $60 for two to three years.

Although no oil company has a crystal ball, this matters – especially since it has a big impact on its investment and staffing ambitions.

So plans that it had already initiated to reduce costs have taken on a new element, namely postponement of investments in new capacity that have not been started, and shelving of plans to extend the life of older fields where residual oil is more expensive to extract.

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Shell, Total Lead Energy Shares Lower – $45 a barrel

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From an article by Alan Soughley published by BloombergBusinessweek 13 Jan 2015 under the headline: 

“European Stocks Decline; Shell, Total Lead Energy Shares Lower”

Extracts

Royal Dutch Shell Plc and Total SA led energy-related companies lower…

A gauge of energy stocks slid 1 percent today, for the worst performance of the 19 industry groups on the Stoxx 600. Oil extended losses to trade below $45 a barrel amid speculation that U.S. crude stockpiles will increase, exacerbating a global supply glut that’s driven prices to the lowest in more than 5 1/2 years.

FULL ARTICLE

Screen Shot 2015-01-13 at 09.23.28From an article by Clifford Krauss published by The New York Times (NY edition) 13 Jan 2015 under the headline:

“Oil Prices Fall to Lowest Since 2009”

Extracts

HOUSTON — Oil prices took another sharp turn downward on Monday to levels not seen since the depths of the 2009 recession. Several international banks predicted even lower prices later this year because of an oversupplied global crude market.

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High Noon on oil prices: OPEC vs U.S. Shale

From an article by Catherine Ngai published on 6 Jan 2015 by Reuters under the headline: Screen Shot 2015-01-06 at 21.31.03

“High Noon on the Gulf Coast: Canada, Saudi oil set for showdown”

NEW YORK (Reuters) – As a test of wills between OPEC nations and U.S. shale drillers fuels a global oil market slump, a brewing battle between Canadian and Saudi Arabia heavy crudes for America’s Gulf Coast refinery market threatens to drive prices even lower.

While the stand-off between the oil cartel and U.S. producers of light, sweet shale oil has captured the limelight in recent months, the clash over heavier grades – playing out in the shadowy, opaque physical market – may put even more pressure on global prices that have halved since mid-2014.

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Investors Freak: Oil on its way down to $20 A Barrel?

Screen Shot 2015-01-02 at 23.58.26From an article by Christopher Helman published by Forbes.com on 6 Jan 2015 under the headline:

“Investors Freak As Saudi Inaction Could Sink Oil To $20 A Barrel. Time To Buy?

OPEC is not going to come to the rescue. It is up to American producers to cut oil supplies.

The world freaked out over oil Monday. U.S. crude fell as low as $49.77 a barrel, down about 6%. Brent crude is at $53. This is the lowest price since early 2009, when oil bottomed at $35 less than nine months after hitting a record high of $147.

The Dow Jones Industrial Average fell 331 points Monday. Many reports have blamed oil for the stock market weakness, but that doesn’t really make much sense. All else equal, low oil prices are a boon to economic growth. And besides, considering how high the Dow has risen, 330 points just ain’t what it used to be — merely a 1.8% move. Back in 2008 the Dow suffered 11 days with losses of 4% or more.

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Jesse Colombo, the economic analyst who predicted the oil prices bust 

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FULL CREDIT TO THE EXPERT WHO CORRECTLY PREDICTED THE OIL PRICE CRASH

Screen Shot 2014-12-22 at 21.08.35By John Donovan

In June of this year Forbes.com published an extensive prescient article by Jesse Colombo, an economic analyst, under the headline:

“9 Reasons Why Oil Prices May Be Headed For A Bust”

His prediction made 6 months ago:

“There are a growing number of reasons, however, why crude oil prices are likely to finally experience a bust in the not-too-distant future.”

Jesse Colombo correctly predicted an event of huge significance. Ask Putin or Shell’s Ben van Beurden.

Some further extracts from his brilliant article, which deserves reading in full.

While extreme aggregate trading positions can persist for quite a while, as is the case in the crude oil market for the past few years, they are still a reliable indication that a powerful market reversal is likely to occur when the proper catalyst eventually appears and sends speculators heading for the exits. So far, no bearish catalyst has presented itself in the crude oil market, but the other points that I’ve listed in this piece may combine to form a perfect storm that finally causes the oil market to crack.

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PETER VOSER JOINS ANOTHER SCANDAL RIDDEN COMPANY 

By John Donovan

A posting today on our Shell Blog…Screen Shot 2014-12-18 at 17.05.41

When Peter Voser’s departure as CEO was announced, it was explained that Peter wanted time for his family, hobbies and to give back to society. Today it was announced that he’s being proposed as Chairman of ABB (his previous employer) and he also took a directorship at a Singaporean Sovereign Invetsment house some months ago. This makes his departure story look suspicious. Maybe the board was aware that he overpaid for unconventional acreage in the USA and that his China adventures were quickly going nowhere but down. Is it time for the RDS board to be a bit more forthcoming with its justification?

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Will falling oil prices curb America’s shale boom?

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This time some of the pain will be taken by the big integrated energy firms, such as Exxon Mobil and Shell. After a decade of throwing shareholders’ cash at prospects in the Arctic and deep tropical waters to little effect, they began cutting budgets in 2013.

Extracts from an article published by The Economist on 6 December 2014

In a bind

Screen Shot 2014-12-04 at 21.34.15Abundant oil and gas have been extracted from underground rocks by blasting them with a mixture of water, chemicals and sand—“fracking”, in the jargon.

…the firms responsible embody an all-American formula of maverick engineers, bold entrepreneurs and risk-hungry capital markets that no country can match.

Yet now that oil prices have fallen by almost 40% in six months, these firms’ mettle is being tested. Across America shale-shocked executives will spend Christmas overhauling their strategies to cope with life at $70 per barrel, even as investors dump their firms’ shares and bonds.

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Oil company shares slumped

OPEC’s decision on Thursday not to cut production in order to prop up oil prices sent markets reeling. Oil company shares slumped, wiping billions off firms’ market value… As they come to terms with the new oil regime, companies will cut spending by up to 10 percent in 2015… and delay new project approvals.

LONDON, Nov 28 (Reuters) – With oil company revenues set to drop on the back of a rout in prices, boards will have to cut investments and increase borrowing to maintain their cherished dividend payouts.

OPEC’s decision on Thursday not to cut production in order to prop up oil prices sent markets reeling. Oil company shares slumped, wiping billions off firms’ market value and leaving dividend payouts as the only solace for shareholders.

The world’s top oil companies, or majors, including BP , Royal Dutch Shell, Total, ExxonMobil and Chevron are already in the midst of a painful belt-tightening process.

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Shell admits fracking failure in Ukraine

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Screen Shot 2014-10-30 at 09.22.43By John Donovan

The Russian News Agency Tass is reporting that Graham Tiley, the country manager of Shell Ukraine has admitted in a meeting with a local high-ranking official that Royal Dutch Shell has failed to achieve the desired progress in the Yuzovka gas field in Ukraine’s east.  Tiley blamed the fracking failure on the situation in the neighbouring Donetsk region.

TASS REPORT

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