April 28, 2010 Robin Pagnamenta, Energy Editor

Royal Dutch Shell announced a 60 per cent increase in profits this morning, propelled by higher oil and gas prices and growth in production.

Shell, Europe’s biggest oil company, said that the current cost of supply profits, a key industry measure which strips out fluctuations in the price of energy, reached $4.8 billion in the three months to March 31, up from $3 billion a year ago.

The performance was boosted by a 6 per cent increase in the Anglo-Dutch company’s oil and gas production, which hit 3.59 million barrels per day after the ramp-up of the Sakhalin II project in Russia and Parque das Conchas in Brazil.

Together these are producing an extra 120,000 barrels of oil per day, Shell said.

The results reflected a powerful rebound in global oil prices, which averaged $76 during the period, up from just over $41 a year ago.

Peter Voser, the chief executive, said: “Our results have improved considerably with year-ago levels and our profitability has increased from the low levels we saw in the fourth quarter of 2009. This has been driven by higher energy prices, operational and production performance and Shell’s growth programmes.”

Mr Voser said that Shell detected signs of an “improving economic outlook” but emmphasised that “we are not relying on it”. He said that the company was focused on new project start-ups and on cutting costs.

The results also reflect an aggressive turnaround plan at Shell, which started after Mr Voser’s appointment last July.

He has already cut 5,000 jobs, mostly white-collar, and intends to trim a further 1,000 jobs and reduce overall costs by an extra $1 billion this year.

Shell reported an improvement in the performance of its refining and marketing division, compared with the nadir hit at the end of last year when it posted a $1.7 billion loss amid a 20-year low in industry refining margins.

Shell’s downstream business posted earnings of $743 million during the first quarter — 26 per cent lower than the same period a year ago.

The company is planning to sell off part of its global refining portfolio in an effort to rebalance the business.

As expected, Shell said that it was keeping its dividend frozen at 42 cents per share.

Shares in the company opened 1 per cent higher following the announcement at 2009.5p.

“In the draft, Shell tells Mr Blair to discuss positive progress on weapons of mass destruction as well as the investigation into the murder of WPC Yvonne Fletcher outside the Libyan Embassy in London in 1984.”

David Robertson, Business Correspondent

Tony Blair lobbied Colonel Muammar Gaddafi on behalf of Shell in a letter written for him in draft form by the oil company, documents obtained by The Times reveal.

The correspondence, written while Mr Blair was Prime Minister, bears a striking resemblance to a briefing note by Royal Dutch Shell weeks earlier promoting a $500 million (£325 million) deal it was trying to clinch in Libya.

While it is common for government ministers to champion British interests abroad, Shell’s draft reveals an unusual assurance in its ability to dictate Mr Blair’s conversation with the Libyan leader. It also raises questions about the motives behind Britain’s improved relations with Libya and the subsequent release of Abdul Baset Ali al-Megrahi, the Lockerbie bomber. Lockerbie victims have claimed that the Government paved the way for al-Megrahi’s release as part of a deal with Libya to give British companies access to Libya’s lucrative oil and gas industry.

In the draft, Shell tells Mr Blair to discuss positive progress on weapons of mass destruction as well as the investigation into the murder of WPC Yvonne Fletcher outside the Libyan Embassy in London in 1984.

According to the Shell draft, the letter’s objective was “to cause the Leader to instruct the Cabinet to approve/finalise quickly” the company’s deal. Shell tells the Prime Minister to congratulate the Libyan leader on Revolution Day and to comment on the “remarkable year of progress for Libya”. In relation to the Shell deal, the draft letter said: “Understand that all the terms of the agreement have now been negotiated and approved … now waiting for [Libyan] Cabinet approval.”

The Cabinet Office would release only a part of Mr Blair’s official letter but the section on Shell sounds very similar to the draft. “I understand that the necessary technical discussions with the relevant authorities in Libya have been completed satisfactorily,” it states. “All that is needed now are final decisions by the [Libyan] General People’s Committee to go ahead.” The Libyan Cabinet agreed the Shell deal shortly after this letter was written and the contract was signed in May 2005.

Both letters were released after a lengthy Freedom of Information process. The Times first asked for them after al-Megrahi was released last August on compassionate grounds by the Scottish Government, which said that he had only months to live.

Al-Megrahi, who killed 270 people on board Pan Am flight 103 in 1988, celebrated his 58th birthday in Tripoli last month. There was speculation that his release was part of a deal struck between Britain and Libya to improve diplomatic ties between the countries.

The Government denied this, although it emerged that Britain and Libya had signed a prisoner transfer deal in 2007 that included al-Megrahi. Jack Straw, the Foreign Secretary at the time, said that al-Megrahi had been included in the transfer deal “in view of the overwhelming interests of the UK”.

BP has signed a $900 million deal to explore offshore oilfields and BG Group, the former British Gas, is searching for resources in the Libyan Desert. Shell, the Anglo-Dutch oil producer, secured a $500 million deal to build a liquid natural gas terminal on the Libyan coast. BAE Systems, Europe’s largest defence company, also struck a deal to upgrade the country’s air traffic control system.

Last September The Times requested all communication between the Department for Business and these companies. A limited number were released in December. One was an email from Shell to UK Trade & Investment dated September 2004 complaining of slow progress with its Libyan deal. Just months earlier Mr Blair and Colonel Gaddafi had met in a tent outside Tripoli to end Libya’s diplomatic isolation.

Shell declined to comment but sources familiar with the company’s lobbying operation said that it was not unusual for large businesses to discuss diplomatic support with the Government.

TIMES ARTICLE

The Times April 2, 2010

Robin Pagnamenta, Energy Editor

The Sunday Times: March 28, 2010

The company is expected to lodge an offer this week for a network of 800 petrol stations and the Lindsey oil refinery at Killingholme, Lincolnshire. The assets have been put up for sale by Total, the French oil group. It has hired JP Morgan, the investment bank, to sell its UK business, which employs 5,000 people. The business is expected to fetch more than £1 billion.

The prospect of the Kremlincontrolled giant owning key parts of the UK oil infrastructure could worry the government. When Gazprom was rumoured to be looking at a bid for Centrica, owner of British Gas, in 2006, ministers met to examine the “possible consequences resulting from any takeover of a major UK energy supplier”.

The auction is part of a remarkable shake-up of Britain’s oil refining and distribution industry. Half of the refining capacity, built up in the 1960s and 1970s to take production from a booming North Sea, is up for sale as energy giants look to sever ties with the low-margin, low-growth British market.

The most likely buyers are energy firms from the developing world eager for an entry point to European markets.

Chevron Texaco, the American oil group, has hired Deutsche Bank to sell its Pembroke refinery in Wales, which employs 1,400, as well as its network of petrol stations for up to £1.3 billion.

Royal Dutch Shell is in talks with Essar, the Indian conglomerate, to sell its Stanlow refinery near Ellesmere Port, Cheshire.

Gazprom is expected to bid for the Total assets through its oil arm, Gazprom Neft. Included in the Total sale is the 247km underground pipeline from Lindsey to the Buncefield fuel depot, which serves southeast England and Heathrow airport. Much of the site was destroyed in an explosion in 2005 but there are plans to rebuild it.

Other suitors include Essar and Valero, the American refining giant, and at least one private equity bidder. The same players may be interested in Pembroke, which could also attract oil traders such as Vitol.

There is an outside chance a buyer could attempt a takeover of more than one of the refineries, giving it a dominant position in Britain.

SUNDAY TIMES ARTICLE

March 17, 2010: Robin Pagnamenta Energy Editor

Royal Dutch Shell will sell full or part-stakes in as many as 9,000 petrol stations worldwide and cut a further 1,000 jobs as it intensifies its global cost-cutting.

The announcement came as Shell appeared to be edging closer to a deal with Arrow Energy to bolster the group’s position in Australia’s fast-growing industry supplying coal-seam gas to China and South-East Asia.

Peter Voser, the chief executive, said that Shell intends to leave about 30 of the 90 countries in which it operates petrol stations. The move, which is already under way, is part of a focus on more profitable markets and on exploration and production.

“We are leaving retail markets where we have low volumes,” Mr Voser told Shell’s annual strategy briefing in London. These would include Greece, Sweden, Vietnam and New Zealand.

Globally, Shell holds interests in about 45,000 petrol stations, of which just under 30,000 are operated directly by the company. Yesterday it indicated that by 2012 it would sell about 2,000 sites outright and cut the number that it operated directly by almost 7,000.

Sites no longer operated directly would follow a model that Shell has pioneered in America, where its retail sites retain the Shell brand and are supplied wholesale by the company but are operated by third parties.

Shell is selling fuel stations in Spain and Portugal. In France, it will leave many of its smaller, regional stations but plans to retain its more profitable, high-volume motorway network.

Britain, where Shell operates about 900 fuel stations and is the biggest player by volume in the retail market, is not expected to bear the brunt of the sales.

Richard Savage, of Mirabaud Securities, said that the move reflected an effort “to release capital to spend more on production”.

The announcement came as Mr Voser said that Shell expected to boost crude oil production by 11 per cent to 3.5 million barrels a day by 2012, up from 3.15 million — reversing seven years of consecutive declines. “All this is underpinned by a new wave of project start-ups,” Mr Voser said. “Beyond that we have an upstream portfolio that can grow to at least 2020.”

He also announced a further 1,000 job cuts, raising the total expected to 7,000 during 2009-11. Shell employed about 102,000 people before Mr Voser revealed the first phase of his reorganisation last July.

He called for “more focus and more urgency”, adding that most of the cuts would be in refining and marketing — which is struggling in the face of the worst industry downturn in 20 years — and in middle management. “The company had become too complicated and slower to respond than we’d like, so we are sharpening up,” he said.

The chief executive’s remarks came as Arrow Energy said that it was in “active discussions” with Shell and Petrochina over their joint $3 billion takeover offer.

Shell, which confirmed the talks but declined to comment, also announced positive news on the discovery of new supplies of oil and gas. The company said that 2009 was the “best year for exploration in a decade”, after finds in Australia and the Gulf of Mexico gave it new reserves equal to almost three times the amount of oil and gas that it produced.

Shell’s reserves at present production rates had increased from ten years at the end of 2008 to 11.9 years at the end of 2009.

TIMES ARTICLE

• Shell to quit 9,000 petrol stations worldwide

SOURCE ARTICLE

The company has agreed terms for a ten-year lease with Canary Wharf on 200,000 sq ft of Docklands offices

February 24, 2010

A view of the London Eye, located along the Thames River at County Hall, is seen across from the Shell Oil Centre building.

Carl Mortished, World Business Editor

Staff at Royal Dutch Shell will be moved next year from the Shell Centre at Waterloo to Canary Wharf as part of a huge redevelopment of the oil company’s historic London headquarters.

The company has agreed terms for a ten-year lease with Canary Wharf on 200,000 sq ft of Docklands offices at 40 Bank Street, a building close to the tower at One Canada Square.

About 2,000 employees are expected to make the move eastwards as Shell embarks on a huge property investment in Central London with the construction of new office buildings, a project that is expected to last a decade.

The search for alternative accommodation, conducted in secrecy by CB Richard Ellis, was given the code-name Project Thunderbird.

The decision to decant staff to Docklands marks the end of almost ten years of deliberation, false starts and setbacks by Shell as it tried to get a grip on its 50-year endowment of almost seven acres of valuable London real estate, including a 24-storey office tower on the Thames opposite the Palace of Westminster.

A spokeswoman for Shell confirmed yesterday that it was negotiating a deal on 200,000 sq ft at Bank Street. She said that the decade-long move by staff to Canary Wharf was “temporary” while the company redeveloped the low-rise buildings adjacent to the tower.

“Shell has no permanent plans to leave the tower building on the South Bank and will remain a major employer in the area with established connections to the local community,” the spokeswoman said.

Shell’s move to Docklands coincides with another round of cost-cutting by Peter Voser, the new chief executive. He has made his mark as a relentless pruner and trimmer of overheads since taking over from Jeroen van der Veer last year.

The recession took its toll on Shell’s profits in the fourth quarter of 2009 and Mr Voser’s response was to announce a drive for a further $1 billion (£650 million) in savings.

Periodic bouts of internal costcutting and the removal of layers of imperial bureaucracy led to the gradual attrition of Shell’s head office staff during the 1990s.

Shell Centre, next to the then neglected South Bank arts complex, became a windswept wasteland, the public spaces populated by skateboarders and the homeless. The staff bloodletting opened up opportunities for the company to exploit its huge land bank in the centre of London.

It first sold off the White House, one of the downstream low-rise buildings, to residential property developers. Then it drew up plans to convert the ground floor and subterranean levels of the Shell Centre Tower into a leisure and retail complex. The oil company joined forces with Lend Lease, the Australian developer, to bring the project, a 600,000 sq ft design by Arup, to fruition.

However, Shell’s real estate dreams fell foul of local politics in a London borough that had earned a reputation as a property developer’s graveyard.

Lambeth Council scuppered the project, complaining that it was too big and that Shell’s vast retail ambitions would have a negative effect on Lower Marsh Street, a small shopping alley behind Waterloo station.

Shell has yet to choose a new partner for its revived real estate dream and some in the property industry speculate that it might be tempted to sell the site if values recover strongly during the decade-long hiatus of development.

Shell Centre opened in 1963 after six years of construction and contained all the accoutrements of a more paternalistic era.

To accommodate the needs of 5,000 staff, the floors beneath the tower contained a travel agency, a bank, a hairdresser, restaurants and bars, a giant sports hall and gymnasium, a cinema and a near-Olympic size swimming pool.

• Shell investigates posting of personal data

• Shell HQ might be redeveloped

• Shell to cut 1,000 jobs and close six refineries

TIMES SOURCE ARTICLE

TNK-BP and BP declined to comment yesterday on the decision from RosPrirodNadzor, which was reminiscent of the manouvering by Russian agencies that resulted in Shell losing control of its Sakhalin project in the Russian Far East in 2006.

The Times
February 17, 2010

Robin Pagnamenta and Robert Lindsay

Royal Dutch Shell said that it would freeze the salaries of its top directors and reform a generous bonus scheme as the oil giant moved to soothe shareholders’ anger over excessive boardroom pay before its annual meeting.

In a letter to investors, Hans Wijers, the new chairman of the Anglo-Dutch company’s remuneration committee, said that the changes were being made after extensive talks with shareholders, 60 per cent of whom voted down the executive pay plans at a stormy annual meeting last year.

The shareholder revolt triggered the resignation of Sir Peter Job, Mr Wijers’s predecessor.

In the letter, Mr Wijers said that Shell would be capping the salaries of its top three executives — Peter Voser, chief executive, Simon Henry, finance director, and Malcolm Brinded, head of exploration — until 2011. He said that Mr Voser had been appointed last July on a salary 20 per cent lower than that of his predecessor, Jeroen van der Veer, who earned $2 million (£1.3 million) in basic pay in 2008 but $15 million in total compensation. Mr Wijers said that Mr Voser and Mr Henry had received pay rises last year but only because they had been promoted to new roles

He also announced plans to scrap a heavily criticised bonus scheme that last year allowed top directors to collect multimillion-pound payouts, even though they failed to meet performance targets.

“I believe it is appropriate in the current economic environment to state up front that no upward discretion will be applied to the Long Term Incentive Plan or Deferred Bonus Plan vesting in 2010. In future, there will be no use of upward discretion in the vesting of these plans without prior shareholder engagement,” Mr Wijers said.

Meanwhile, in an unprecedented move for a global oil group, Mr Wijers unveiled plans to link bonus payouts to Shell’s performance on the Dow Jones Sustainability Index, which ranks corporate performance using a variety of social and environmental indicators, including cuts to carbon emissions.

From 2010, 10 per cent of the targets used to calculate payouts will be linked to the index, with the remaining 90 per cent related to operational and financial performance as well as the delivery of big projects on time and on budget. The key measure in Shell’s bonus plan remains the group’s performance against its peers — BP, Total, ExxonMobil and Chevron.

In another concession to investors, Mr Wijers said that in future Shell’s chief executive would be obliged to have shares in the company equivalent to three times his basic salary, in order “to provide greater alignment with shareholder interests”. The existing guidelines for executive directors are for a holding of two times salary.

Shell’s 2010 annual meeting will be held on May 18.

TIMES ARTICLE

TONY HAYWARD, BP’s chief executive, has set the FTSE 100 oil group on a collision course with investors and environmentalists over a blockbuster oil sands deal.