Posts under ‘The Wall Street Journal’

FEBRUARY 9, 2012

By David Winning

Royal Dutch Shell is getting serious in its pursuit of a piece of Papua New Guinea’s oil and gas wealth.

Around six months after signing a strategic alliance with Papua New Guinea’s state oil company, the Anglo-Dutch oil major is setting up a representative office in the impoverished Southeast Asian nation.

Shell’s strategic alliance with Petromin, signed Aug. 18, includes a joint study of major basins in Papua New Guinea with the potential to contain big oil and gas deposits. The study is due to be completed this year, and could be a springboard for Petromin and Shell to participate in projects together.

“The opening of the office affirms Shell’s interest to invest in Papua New Guinea and offers opportunities for us to work more closely with our partner, Petromin,” Ton Ten Have, Shell’s Vice President Commercial Asia, said in a prepared statement.

According to a BP study, Papua New Guinea had 15.6 trillion cubic feet of proven reserves of natural gas at the end of 2010. That figure likely underestimates the true resource as Papua New Guinea has been lightly explored up to now.

“We welcome the increased presence of Shell and believe it will further facilitate our close cooperation for future opportunities in Papua New Guinea,” said Joshua Kalinoe, Petromin’s managing director. “Together with Petromin, Shell will help Papua New Guinea realise the full potential of its energy resources.”

Shell’s move comes as several companies look to bring in partners on projects in Papua New Guinea.

InterOil said Sept. 30 it had mandated Macquarie Capital, Morgan Stanley and UBS to find a strategic partner for its proposed multibillion dollar Gulf LNG project. Citing a person familiar with the situation, Deal Journal Australia reported Feb. 7 that Korea Gas is in talks to form a consortium with Mitsui and Japan Petroleum Exploration to join InterOil’s project.

Separately, Canada’s Talisman Energy last year appointed Sydney-based advisory RFC Corporate Finance to find an investor for four licenses in the forelands of western Papua New Guinea, which contain a mix of gas discoveries and exploration targets.

ASX-listed Oil Search also opened a data room on its offshore gas fields in the Gulf of Papua in the final quarter of 2011, and has already held preliminary talks with international companies with LNG expertise.

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Extract from “Today’s Top Equity Ratings Changes”

By Andrea Tryphonides

Another week begins and we are here to guide you through the top rating changes in Europe Monday:

• Firstly Credit Suisse has downgraded Royal Dutch Shell to neutral from outperform following the company’s fourth quarter results released on Feb. 2. The brokerage highlights lower 2012-15 free cash flow estimates, cut by 22% due to higher capital expenditure. Also, it sees little potential for Shell to re-rate on multiples given sector-average free cash and dividend growth in the medium term.

COMPLETE SOURCE ARTICLE

By LAURENCE ILIFF

MEXICO CITY—Mexican oil company Petroleos Mexicanos has filed a motion to add ConocoPhillips and subsidiaries of Royal Dutch Shell PLC to a 2010 suit in U.S. federal court that seeks damages against companies that had allegedly purchased natural-gas condensate that Pemex said was stolen from its operations in northern Mexico.

In a proposed amended suit that was attached to the motion, Pemex, as the state-owned company is known, said it doesn’t allege that either company “acted with intent or knowledge or that it was part of any conspiracy,” but it does allege that they are liable for “transactions involving the stolen property of Mexico.”

ConocoPhillips didn’t immediately comment Thursday. Shell said it had been notified about the suit, but declined to comment per company policy. Pemex didn’t immediately issue a statement on its latest filing.

The motion to amend the suit to add the additional companies was filed at the Southern District Court of Texas in Houston last week.

In the proposed amended suit, Pemex alleges ConocoPhillips purchased an estimated $35 million in stolen condensate from two other companies after the fuel had been “laundered” through resales to hide its origin.

The plaintiff in the original suit is the exploration and production division of Pemex, or PEP for its Spanish-language initials, which operates natural-gas operations in northern Mexico. Pemex added additional defendants to the original suit last year, bringing the total at that time to more than a dozen.

Last year’s suit followed a criminal investigation by U.S. authorities into a cross-border smuggling scheme that has resulted in the conviction of at least five people since late 2008.

Pemex said in its original suit it believes organized-crime groups have stolen more than $300 million in condensate since 2006 by robbing storage facilities and hijacking tanker trucks.

Petroleum condensates, like propane and butane, are byproducts of the production of natural gas. Pemex doesn’t typically sell the condensate, but instead uses it in its own oil refineries.

—Angel Gonzalez and Chad Bray contributed to this article.

Write to Laurence Iliff at laurence.iliff@dowjones.com

SOURCE ARTICLE

Comment: this also occurred in the 1980′s at Shell’s Dutch subsidiary, NAM, where large volumes of condensate produced from the Groningen “dry” gas field were sold and used as diesel fuel in road vehicles. It was only after an investigation by the authorities into the use of untaxed road fuel that NAM “discovered” their loss.

FEBRUARY 2, 2012

– Shell aiming to exploit difference in price between U.S. gas and LNG, GTL

– Investment in U.S. gas exploration to be at lower end of planned spending

– Company to make further moves into oil-rich shales

By Alexis Flynn

Of DOW JONES NEWSWIRES

LONDON (Dow Jones)–Royal Dutch Shell PLC (RDSA) is actively looking at ways to improve the profits it gets from U.S. natural gas, including seeking out land for a potential gas-to-diesel plant, the company said Thursday.

The Anglo-Dutch energy giant has invested heavily in U.S. shale gas assets, but new extraction techniques have led to abundant supply. Prices have fallen to a decade low and risk driving up the costs of Shell’s recent shale acquisitions. By contrast, the oil price has risen some 40% in the last two years.

“We have been looking for ways to leverage Shell’s strong resource position in North America,” said Chief Executive Peter Voser.

Chief Financial Officer Simon Henry said Shell was examining plans to develop the gas into products that are more closely linked to oil prices, such as liquefied natural gas for export and gas-to-liquids technology that turns gas into a transport fuel.

He said Shell was even seeking out land to build possible sites to build the types of facilities needed but cautioned that at a cost of “around $5 billion to $10 billion a project, we have to be selective.” Shell completed a giant gas-to-diesel project in Qatar last year, but its final cost was in the region of around $18 billion, rather than the $5 billion initially estimated in 2003.

Voser also said Thursday the company would broaden its focus to include oil-rich shale, with the company planning to spend $1 billion on liquid-rich shales alone in 2012, with production from the source expected to account for as much as 250,000 barrels of oil equivalent a day by 2017. By contrast, Voser said Shell’s expected outlay on U.S. gas exploration would be at the low end of its spending range given the weak pricing environment.

“Spending could be in the range of $5 billion and $6 billion per year on a worldwide basis over the next few years, including exploration, of which $3 billion to $5 billion could be North American gas plays,” said Voser.

The depressed U.S. natural gas price has compelled some U.S. firms to cut back on drilling. However, Exxon Mobil Corp. (XOM), the country’s largest natural-gas producer, said Wednesday it had no intention of curtailing its output.

-By Alexis Flynn, Dow Jones Newswires; +44 207842 9471, alexis.flynn@dowjones.com

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JANUARY 23, 2012

By LIAM DENNING

Even today, $1.67 trillion is a lot of money. That is the amount wiped off the combined market capitalization of the top 50 energy companies between the end of 2007 and the end of 2011. Breaking it down offers big clues on Big Oil’s prospects for 2012.

Every year, PFC Energy, a Washington, D.C.-based consultancy, ranks the top 50 listed energy companies in the world by market value. The latest, due Monday, has a surprise. The biggest gainers in 2011 were the dinosaurs of oil and gas: the supermajors. Their collective value increased by 8%, compared with a 7% decline for the PFC Energy 50 overall. It is only the second time they have led the field in the ranking’s 13-year history.

Conventional wisdom holds this shouldn’t be the case. Faith in the supermajors—Exxon Mobil, Chevron, Royal Dutch Shell, BP, ConocoPhillips and Total—has waned as state-backed rivals like PetroChina have emerged and smaller competitors have opened up new frontiers like U.S. shale. Seemingly too big to grow but too small to offset the power of petro-states, the supermajors have been priced for decline.

Why did investors fall in love with them again in 2011? First and foremost: security. The S&P 500 ended 2011 down slightly after wild swings. In choppy markets, scale and cash payouts provide comfort. And the supermajors, with a collective value of $1.2 trillion at year end, provide it in spades. The three U.S. ones alone paid out 9% of all S&P 500 dividends and buybacks in the year ended September 2011, according to data from Standard & Poor’s and Capital IQ.

So how about that missing $1.67 trillion? It is gone despite the average price of Brent crude being 53% higher in 2011 than in 2007 (and 13% higher than in 2008, year of the super-spike). About half of that market value was lost by listed state-controlled national oil companies, or NOCs, like PetroChina. State support has its advantages, but it also means NOCs serve two masters: markets and mandarins. That makes them riskier investments.

While the NOCs in the ranking lost 44% of their value between 2007 and 2011, the supermajors declined by just 22%.

But it isn’t just safety that helped the supermajors lead the charge in 2011. Chevron, Exxon and Shell likely all delivered cash flow per share growth of 30% in 2011, well ahead of the traditional growth stocks of the exploration and production sector, according to Credit Suisse.

Ed Westlake, analyst at Credit Suisse, says the oil majors are more sensitive to oil prices than many investors think. In part, that is because much of their global natural-gas production is sold at prices linked to oil, rather than at the depressed, de-linked levels that prevail in the U.S.

This year, the supermajors are forecast to make $67 billion in free cash flow, according to FactSet Research Systems. That is down slightly from 2011′s expectation but still equates to a healthy free cash flow yield of 5.6%.

Goldman Sachs points out, however, that unlike a year ago, supermajor stocks enter 2012 trading at a slight premium to their smaller integrated oil peers. That, coupled with the fact that 2011′s cash-flow surge is unlikely to be repeated, means some investors’ gains may be redeployed into other energy stocks.

It seems unlikely that the supermajors will register the biggest gains in the PFC Energy 50 2012. That doesn’t make them a bad investment. With markets still unsettled—Europe, in particular, remains unpredictable—Big Oil will likely remain a safe haven. Stocks don’t always have to be the biggest winners to be reliable repositories of value.

Write to Liam Denning at liam.denning@wsj.com

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JANUARY 16, 2012

SINGAPORE (Dow Jones)–Oil major Royal Dutch Shell PLC (RDSB.LN) said Monday it has signed two production-sharing contracts with Malaysia’s state-owned oil and gas company Petroliam Nasional Bhd. for enhanced oil recovery projects offshore Sarawak and Sabah.

The two companies had agreed in November to jointly develop the oil fields in Malaysia using enhanced oil recovery techniques, in a project that was valued at $12 billion, Petronas had said then.

The project is expected to help the Malaysian national explorer extract a greater portion of oil from its existing reserves and extend the life of its oil fields.

Associated work activities and new investments from the partners are expected to extend the life of the fields beyond 2040 and lead to increased oil production, Shell said in a statement.

-By Gurdeep Singh, Dow Jones Newswires; 65-6415 4064; gurdeep.singh@dowjones.com

SOURCE ARTICLE

JANUARY 12, 2012

By ALEXIS FLYNN

European energy companies are expected to return more money to shareholders in 2012 as stubbornly high oil prices swell their balance sheets.

With full-year results only weeks away, expectations are growing that heavyweights like Royal Dutch Shell will cap an extraordinary 12 months by raising dividends.

According to Deutsche Bank, the sector has “plenty of headroom” to support a forecast of 5% aggregate dividend growth in 2012. Already, it says, companies in the sector are expected to accumulate 50% more cash than they need to cover operating costs in 2012 and 2013.

Even BP PLC may raise its dividend.

The U.K. oil company, which for many years was known for bumper payouts, had to suspend its dividend in the wake of 2010′s Gulf of Mexico oil spill. Only last February did it resume payments, at a lower level.

As the company’s ultimate liabilities for the spill become clearer, management could be confident enough to increase the payouts, analysts from Credit Suisse say.

Investors in recent years have had to contend with major oil companies plowing their free cash into new sources of oil, and the technology to extract it, although the sector has remained a reliable source of dividends.

Still, Moody’s Investors Service points out, four energy companies—Shell, BP, Total SA and Statoil ASA—rank among the 20 European firms with the best cash positions. It also notes that the European energy sector as a whole ranks third, after utilities and automotive firms, in terms of its cash holdings.

Investors are still spooked by the memory of 2008. Crude prices were then rapidly dragged down by Lehman Brothers’ collapse and a sudden contraction in the global economy. Oil firms’ stock prices fell, but analysts say history is unlikely to repeat itself in 2012.

Oil and gas prices weathered last year’s uncertain macroeconomic environment because of supply issues, such as the civil war in Libya, while the earthquake and tsunami in Japan forced the government to temporarily shut down all nuclear power generation. Utilities had to scramble to buy liquefied natural gas, lending strength to LNG prices.

Growing tension between Iran and the West and threats to supply in Nigeria are likely to keep crude prices elevated for the foreseeable future.

Since higher energy prices are currently translating into superior cash generation, analysts say the sector’s top firms already feel confident enough to give money back to investors.

“Healthy cash flow should leave room to increase shareholder returns in the form of dividends or buybacks, for some select companies,” said Credit Suisse in a note.

It added that chief financial officers will also likely keep some cash on the books as insurance against economic risk and in case opportunities for mergers arise.

Continued high oil prices are the keystone upon which any largess rests, analysts argue. “The sector now requires an average $90 a barrel to achieve cash neutralityacross 2012/13,” said Deutsche Bank. If a company is cash-neutral, it is generating enough cash to cover its costs.

The firm most likely to deliver continued dividend increases in the medium term is Shell, according to analysts at Nomura. The bank says Shell will continue to see the benefit of its long-term investments in big-ticket projects in Canada and Qatar.

However, Goldman Sachs sounded a note of caution on Shell’s fortunes. It said that while the Anglo-Dutch giant could enjoy a bumper year, its fourth-quarter results could bring down its earnings per share.

SOURCE ARTICLE

JANUARY 12, 2012

HOUSTON (Dow Jones)–Royal Dutch Shell (RDSA, RDSA.LN) is confident it will be able to drill for oil and natural gas in Alaska’s arctic region this summer as it hopes to overcome its remaining legal challenges.

“We still have a few not insignificant hurdles to get past, but it looks that we will be drilling,” Marvin Odum, president of Shell Oil Co., the U.S. unit of the Anglo-Dutch giant, said in prepared remarks delivered at a conference in Houston.

Shell recently received various federal environmental permits to drill in Alaska’s Chukchi and Beaufort Seas, but environmental groups have filed lawsuits challenging those approvals.

-By Isabel Ordonez, Dow Jones Newswires; 713-547-9207; isabel.ordonez@dowjones.com

SOURCE ARTICLE

JANUARY 11, 2012

Associated Press

HARRISBURG, Pa. — U.S. Sen. Bob Casey on Wednesday wrote to a Shell executive in hopes of persuading the oil and gas giant to choose a Pennsylvania site to build a huge new chemical plant that could mean thousands of new jobs and millions of tax dollars for the state.

The company has said it will decide early this year where to build the plant from among sites in Pennsylvania, Ohio and West Virginia, and those states’ officials have lobbied Shell or offered incentives for what could be a massive investment that rivals the region’s largest industrial plants.

“Pennsylvania has everything needed to make it a top choice for Shell’s facilities,” Casey wrote in his letter to Shell executive Mark Quartermain. “We have a proven work force, access to water, communities with a long history of working cooperatively with industry, an extensive rail transportation network and appropriate real estate. Pennsylvania also has an exceptional higher education network which will mesh well with Shell’s commitment to innovation.”

A spokeswoman for Pennsylvania’s other U.S. senator, Pat Toomey, said Wednesday that Toomey has been in close contact with state economic development officials who are leading Pennsylvania’s effort to land the plant, and members of his staff have met with Shell officials.

“We stressed the unbelievable workforce in the region, particularly Pittsburgh’s great universities that produce world class engineers and highly skilled workers, the easy access to the inland waterway system in the region, and our strong commitment to the continued development of the shale,” spokeswoman Nachama Soloveichik said.

Ohio’s governor, John Kasich, reportedly flew to Houston in late November to pitch his state to Shell, which is a subsidiary of Netherlands-based Royal Dutch Shell PLC.

Shell’s plans are driven by the vast natural gas reserves in the Marcellus Shale, a formation that lies primarily beneath New York, Pennsylvania, Ohio and West Virginia. The Marcellus Shale is thought of as the nation’s largest-known natural gas reservoir, and has attracted the attention of some of the world’s largest energy companies and billions of dollars in investment already.

The main product at the proposed Shell plant would be ethylene, which is used to produce chemicals that go into everything from plastics to tires to antifreeze. Workers would break apart the molecules of the raw gas so it can be turned into various products.

The industrial complex would then likely attract many smaller, specialized chemical plants, the American Chemistry Council has said.

Royal Dutch Shell in 2010 bought a Pennsylvania-based drilling company, East Resources Inc., for $4.7 billion in an effort to expand and improve its land holdings in shale gas territories in North America.

—Copyright 2012 Associated Press

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JANUARY 10, 2012, 6:10 P.M. ET

NEW YORK -(Dow Jones)-Royal Dutch Shell PLC (RDSA, RDSA.LN) Tuesday reported an emissions event caused by a leak in overhead piping at the company’s joint-venture refinery in Deer Park, Texas.

In a filing to Texas state environmental regulators, the company said the emissions were routed to the appropriate safety flare system and that refinery personnel depressured and isolated the leak from the Debenzenizer 1 column in just over 10 minutes.

The Debenzenizer and Hydrotreater 2 were listed as sources of the emissions.

It is not clear whether the event had an impact on production at the 327,000-barrels-a-day refinery that Shell Oil, a subsidiary of Royal Dutch Shell PLC, operates in partnership with PMI Norteamerica S.A. de C.V., a subsidiary of Petroleos Mexicanos, or Pemex.

-By Rose Marton-Vitale; Dow Jones Newswires, 201-264-4185, rose.marton@dowjones.com

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RELATED ARTICLES

Shell Reports Release of Deadly Benzene Chemical at Deer Park Refinery

Extract: Bloomberg News has reported the release of an unknown amount of the deadly chemical benzene at its Deer Park refinery in Texas.

Shell to Pay $500,000 for Pollution in Texas

Extract: The settlement was reached after Harris County accused Shell Chemical, a unit of Royal Dutch Shell PLC, of failing to notify officials about the toxic releases

Shell reports release of sulfur dioxide at Convent Refinery

EXTRACT: LONDON -(Dow Jones)- Income performance at Motiva Enterprises LLC’s Convent refinery near Baton Rouge in Louisiana has been dismal since July 2008 and the company needs to cut costs to return to profitability, according to an internal email from part-owner Royal Dutch Shell PLC (RDSB) which was leaked to a blog critical of the company. “We are getting our costs in line at Convent in order to become competitive in a tough business environment,” the email sent to Motiva staff by manager David Brignac said. “We are considering reductions in operator positions, but no final decisions have been made on operator staffing levels,” he writes in the email posted Friday on royaldutchshellplc.com.

Forbes: Shell refineries settle with government: Associated Press, 03.31.2010, 02:40 PM EDT

Extract: ST. ROSE, La. — Two Shell chemical companies have agreed to install $6 million in pollution reduction equipment at two petroleum refineries in Louisiana and Alabama and upgrade a terminal in Puerto Rico as part of a Clean Air Act settlement with the federal government. Shell Chemical LP and Shell Chemical Yabucoa, units of Royal Dutch Shell PLC ( RDSA – news – people ), also will pay a combined $3.3 million civil penalty to the federal government, Alabama and Louisiana.

About $193 will go to Louisiana organizations for environmental education, teacher workshops and emergency operations. The new pollution control equipment will be installed at Shell Chemical refineries in St. Rose, La., and Saraland, Ala. The settlement was announced Wednesday by the Justice Department and the Environmental Protection Agency.

NASDAQ: Shell To Pay $9.5 Million In Settling Clean Air Act Allegations: Mar 31, 2010 | 3:00PM

Extract: DOW JONES NEWSWIRES: Royal Dutch Shell PLC (RDSA, RDSA.LN) has agreed to pay $3.5 million in penalties and spend an estimated $6 million to install pollution-reduction equipments at three U.S. refineries to reduce harmful air emissions. The equipment is intended to cut output of sulfur dioxide and nitrogen oxides by more than 1,450 tons a year at the facilities in Louisiana, Alabama and Puerto Rico. Assistant Attorney General Ignacia Moreno said the settlement is an example of businesses’ effort to comply with government environmental regulations. “We will continue to work with industry to achieve compliance under the Clean Air Act to remove harmful pollution from the air we breathe,” she added. -By Jodi Xu, Dow Jones Newswires; 212-416-3037; jodi.xu@dowjones.com (END) Dow Jones Newswires 03-31-101334ET Copyright (c) 2010 Dow Jones & Company, Inc.

Los Angeles Times: Shell refineries reach Clean Air Act settlements: By Associated Press March 31, 2010 | 12:02 p.m.

Extract: ST. ROSE, La. (AP) — Two Shell chemical companies have agreed to install $6 million in pollution reduction equipment at two petroleum refineries in Louisiana and Alabama and upgrade a terminal in Puerto Rico as part of a Clean Air Act settlement with the federal government. Shell Chemical LP and Shell Chemical Yabucoa, units of Royal Dutch Shell PLC, also will pay a combined $3.3 million civil penalty to the federal government, Alabama and Louisiana. About $193,000 will go to Louisiana organizations for environmental education, teacher workshops and emergency operations. The new pollution control equipment will be installed at Shell Chemical refineries in St. Rose, La., and Saraland, Ala. The settlement was announced Wednesday by the Justice Department and the Environmental Protection Agency.

Unauthorised venting and flaring of gas by Shell in USA

Extract: On 5 August 2003, the United States Department of Justice announced ^[19] that Shell Oil Company had agreed to pay $49 million USD “to settle claims under the False Claims Act and various administrative provisions relating to its unauthorized venting and flaring of gas…” at its Auger platform, located some 150 miles (240 km) off the coast of Louisiana and at other Shell facilities in the Gulf of Mexico. The settlement also resolved claims that Shell had failed to properly report, or pay royalties on the vented and flared gas. This was the third case settled by Shell Oil Company in the period 1999 to 2003 alleging that it had underpaid royalties owed to the United States. In 2000, Shell agreed to pay $56 million to settle claims that it undervalued gas produced from federal leases. Shell paid $110 million in 2001 to settle ^[20] US Department of Justice claims that it undervalued crude oil extracted from federal lands.

Shell Reports ‘Unplanned’ Flaring At Martinez Refinery: 26 February 2011