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Project Delays Will Cost These Oil Majors Billions

Screen Shot 2014-04-06 at 21.01.34Extracts from a Motley Fool article by Rupert Hargreaves published 28 July 2014

In total, Kashagan is now expect to cost a total of $136 billion, more than 140% above initial estimates. Production has been consistently delayed; the most recent delay, which occurred at the end of last year, concerns the project’s pipelines. At present, the project is being overseen by Italy’s Eni, although ExxonMobil is shortly set to take over. Shell, Eni, and Total all have a 16.8% stake in the project, and Morgan Stanley’s analysts believe that as a result of the delays, these three companies will have their 2016 net income estimates reduced by $500 million each. That is a large figure, even for these oil giants.

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Oil prospectors shifting focus back to wealthy, more predictable countries

Screen Shot 2014-03-10 at 23.56.16Extracts from a Seeking Alpha article published 28 July 2014

Companies including Shell, Chevron and Exxon are diverting more and more funds to the world’s richest economies, as they grow tired of the risks of working in violent and corrupt places for the reward of finding oil and gas reserves that can be profitably exploited… The companies are pulling out of more conflict-torn and difficult regions: Shell since 2010 has sold $1.8B of its Nigerian assets and last year began talks to sell four oil production blocks and a pipeline there.

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ROYAL DUTCH SHELL PLC AND RUSSIA: BUSINESS AS USUAL

By John Donovan

Shell CEO Ben van Beurden was straightforward in what he publicly stated at the 2014 AGM of Royal Dutch Shell Plc. He said that Shell puts the interests of its shareholders first, above any geopolitical considerations. That is his excuse for Shell’s dealings with evil regimes in Iran and Russia, irrespective of sanctions. You can tell all you need to know about Ben’s priorities from his failure to sign the document “SHELL BUSINESS PRINCIPLES” – it is still signed by his predecessor Peter Voser, who abandoned ship long ago. 

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Russian oil may be facing a bear market: The Guardian Sunday 27 July 2014

EXTRACT

“Meanwhile, Shell has huge Russian investments and is the largest firm based in the Netherlands, the home of many victims of flight MH17.”

Putin Stays on Offense in Ukraine: Associated Press Sunday 27 July 2014

Putin facing multi-million pound legal action over alleged role: The Telegraph 26 July 2014

Oil majors BP and Shell may be ready for more mergers

Some of Shell’s big shareholders are said to be frustrated by the company’s continued spending on expensive far-flung projects that fail to yield healthy returns. Alongside its profit warning at the start of this year, Shell announced that it was halting a controversial exploration programme off the coast of Alaska because the costs had far outweighed the results. Some $4.5bn had been ploughed into exploring in the region since 2005. Rumours continue to swirl that an activist investor is circling Shell with a view to taking a stake and forcing it adopt a more radical strategy.

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Article by Ben Marlow published by The Telegraph 26 July 2014

Ten years ago, Lord Browne, the then chief executive of BP, flew to Williamsburg, Virginia, for a board meeting, where he planned to outline detailed proposals for a mega-merger with Royal Dutch Shell.

The radical tie-up had been discussed in secret weeks earlier with Jeroen van Der Veer, his counterpart at Shell, during a stroll around Lake Como in Italy.

With an estimated $9bn (£5.3bn) of synergies from the deal and Browne’s conviction that he had the backing of his own executive team, including his eventual successor Tony Hayward, the BP chief was ready to deliver the grand plan. But on the flight out of the UK, he suddenly got cold feet.

“I knew the answer even before the meeting started. The sentiment was ‘why rock the boat?’ The Shell merger was not discussed. It was not going to be done and that was that… In the end we did not rock the boat; we missed it,” he recounted in his memoirs four years ago.

Browne, who stepped down in 2007, was among a generation of buccaneering oil major executives who had overseen a wave of mega-mergers at the end of the nineties that totally reshaped the industry.

BP moved first, merging with Amoco and kicking off a flurry of tie-ups including Exxon and Mobil, Texaco and Chevron, and TotalFina and Elf, that created the so-called supermajors.

More than a decade and a half on from those unions, could we be on the cusp of another round of mega-mergers? Not immediately, but some senior City sources think falling fortunes could force the giants into each other’s arms in the next year or two.

Their central argument for a fresh flurry of deal-making is a problem affecting the whole industry: a slump in profits. In January, Shell issued a shock quarterly profit warning and weeks later posted a 23pc fall in annual earnings from $25.3bn the year before to £19.5bn in 2013. In April, BP followed suit, reporting a similar drop in profits for 2013 and the first quarter of 2014.

Their US rivals are similarly struggling. In May, Exxon Mobil, the titan of the world’s oil majors, reported falling profits for the fourth quarter in a row. ConocoPhilips also posted a dip.

The industry is being hit by a perfect storm of headwinds: lower oil and gas prices which mean falling margins in their downstream businesses, which make petrol, diesel, and other finished products; as well as higher exploration expenses and dwindling reserves.

Oil executives say their profits are pinched because, as many fields around the world age and produce less oil, they are forced to drill in deeper oceans and more remote places such as the Arctic to keep up with production. The days of easy discoveries seem to be over and widening the search costs more money.

There is certainly plenty of rationale for a further round of mega deals such as that led by Browne in the late Nineties. And there may be appetite from investors too. Some of Shell’s big shareholders are said to be frustrated by the company’s continued spending on expensive far-flung projects that fail to yield healthy returns.

Screen Shot 2013-11-01 at 09.31.18Alongside its profit warning at the start of this year, Shell announced that it was halting a controversial exploration programme off the coast of Alaska because the costs had far outweighed the results. Some $4.5bn had been ploughed into exploring in the region since 2005. Rumours continue to swirl that an activist investor is circling Shell with a view to taking a stake and forcing it adopt a more radical strategy.

One senior banker joked that if you got the six oil majors into a room at the same time you could quickly get each one to find $50bn of costs to take out of their respective businesses.

Nor should size be an impediment. Dealmakers claim that if ExxonMobil merged with one of its biggest rivals the enlarged company would still only account for around 6pc of global oil production, hardly the sort of level to trigger serious competition concerns. The Texas-based behemoth currently has a stockmarket value of £440bn. Doubling its size is far from unthinkable, they say.

That said, there are several barriers to further activity.

In 12 years at the helm of BP, Browne oversaw a £48bn bid for Amoco and the creation of its Russian joint venture TNK-BP, which opened up the gates to Russia’s vast reserves. He also seriously flirted with approaches for Yukos and Shell, his memoirs revealed.

However, his tenure came during a golden era of expansion. Today, there is an industry trend to shrink by selling off assets that are no longer commercially viable.

Screen Shot 2014-05-22 at 13.24.30Political opposition may also be a problem. According to high level City sources, the primary reason that Exxon never went ahead with a rumoured bid for BP in the months after the Deepwater Horizon disaster was opposition from Washington to Exxon getting any bigger and exerting more influence over the oil industry.

But perhaps the biggest hurdle of all is that the current crop of executives lack the daring to spearhead a game-changing acquisition, despite a general shift across boardrooms and in investor sentiment towards taking greater risks.

The stars may be slowly moving into place but it could take a number of years before they are aligned. In his book, Browne said that the search for a partner began in 1995. Eventually he found one — in 1998.

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RELATED: Shell BP Mega-Merger?: 29 May 2014

Shell vs. Bodo Community: British Court To Hear Evidence In Nigeria

Screen Shot 2014-02-10 at 16.29.29Extracts from an article by Tunde Oyedoyin published by The Guardian Nigeria on Friday 25 July 2014

A BRITISH court will temporarily sit in Nigeria next year in a bid to determine how much compensation Shell Nigeria should pay to the fishermen of the Bodo community, who were affected by the two massive oil spills that occurred in their area in 2008 and 2009.

Although the decision to hear evidence from the fishermen was taken during a previous sitting on June 20, when the case was heard again Friday in Courtroom 20 of the Technology and Construction Court (TCC), Chancery Lane, Mr. Justice Akenhead confirmed that he will be sitting in Port Harcourt for two weeks, beginning May 5, 2015.

Speaking with The Guardian after yesterday’s hearing, the European Coordinator of the Movement for the Survival of Ogoni People (MOSOP), Lazarus Tamana said the court’s decision was a vindication for the people of Bodo community, who had suffered a lot as a result of the activities of Shell. He accused the oil giant of not wanting to do the right thing.

Explaining how the oil major came to put N3 billion on the table, he said: “Before dragging Shell to London, the highest they offered in compensation was N250 million. It was when they knew the case was already here that they raised their offer to N3 billion.”

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Offshore oil plan could be ‘game over’ for climate

Screen Shot 2014-04-04 at 09.49.25Extract from an article by Professor Richard Steiner published 25 July 2014 by The Arctic Sounder

Already suffering extreme effects of climate change, drilling in the Arctic Ocean would make matters worse by adding significant industrial disturbance, including platforms, pipelines, tankers, ports, ship and air traffic, underwater noise, suspended sediment, and of course oil spills with no hope of cleanup. The area’s remoteness, severe weather and icy seas make drilling here a high-risk, unacceptable gamble.

Just ask Shell Oil. In perhaps the most intensely scrutinized offshore drilling project in history, Shell’s calamitous 2012 Arctic drilling effort off Alaska displayed arrogance, incompetence, and a reckless disregard for the risks involved.

One of Shell’s Arctic drilling rigs, the Kulluk, being towed across the stormy Gulf of Alaska in late December (to avoid paying first-of-the-year taxes), broke its tow and grounded off of Kodiak Island. Its other drill ship, the Noble Discoverer, had to emergency-disconnect from drilling to avoid the approach of a large ice floe, had a stack fire, broke down and had to be towed into port, was detained by the Coast Guard, and was issued several notices of violation and serious deficiencies.

Shell’s oil spill containment dome “crushed like a beer can” when it was first tested. Both of Shell’s Arctic drill rigs were seriously damaged, and the company had to cancel its 2013 and 2014 Arctic drilling plans. Industry observers opined that Shell may have “bitten off more than it could chew.”

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Shell Leaves Business Strategy for Russia Unchanged Despite Sanctions

Screen Shot 2014-02-10 at 16.29.29British oil giant is determined to continue its work in Russia and will not change its business strategy in the country, despite the sanctions imposed against Moscow by the United States and European Union, representative of Shell’s press service told RIA Novosti on Friday.

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MOSCOW, July 25 (RIA Novosti) – British oil giant is determined to continue its work in Russia and will not change its business strategy in the country, despite the sanctions imposed against Moscow by the United States and European Union, representative of Shell’s press service told RIA Novosti on Friday.

“Shell continues to run business in Russia both in the upstream and downstream without any changes. We monitor the situation regarding the sanctions. But so far there have been no changes in either the business itself or in the business strategy,” the source said.

Last week the United States expanded the list of sanctions against Russia, adding the country’s major entities, including Gazprombank, Vnesheconombank, Rosneft and Novatek. The companies have been denied access to US financial markets, while the US-based companies and individuals are prohibited from granting loans to them for more than 90 days. Earlier on Friday, the European Union also extended its sanctions against Russia over the Ukrainian crisis, adding 15 individuals and 18 companies to the blacklist.

Gazprom is Shell’s largest Russian partner, which owns 50 percent of Sakhalin Energy, a joint international operator of Sakhalin II project run by Russia, UK and Japan. Shell and Gazprom Neft also own Salym Petroleum Development (SPD) on a parity basis. The output of crude by SPD amounted to 7 million tons of oil in 2013.

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Shell Oil Co. Removes Toluene Bladder Cancer Lawsuit to Florida Federal Court

Screen Shot 2014-02-10 at 16.29.29Extracts from an article posted by Harris Martin Publishing on 25 July 2014

July 25, 2014

ORLANDO, Fla. –– Shell Oil Co. has removed a toluene exposure lawsuit to a Florida federal court, noting that while it is a Delaware corporation with a principal place of business in Texas, the plaintiff resides in Florida.

Shell Oil Company removed the complaint to the U.S. District Court for the Middle District of Florida on July 18, citing diversity jurisdiction and, further, noting that the amount in controversy exceeds $75,000.

In her lawsuit, plaintiff Celeste Keys contended that her exposure to the chemical compound toluene caused her to develop bladder cancer.

“Defendants concealed and continue to conceal their knowledge …

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Shell vs BP – who wins?

Screen Shot 2014-02-10 at 16.29.29Extracts from an Interactive Investor article by Harriet Mann published Friday 25 July 2014

Although Barclays expects Shell to report the weakest quarterly momentum in the sector, driven by weak European natural gas prices, the City is largely bullish, with Deutsche Bank rating the stock ‘buy’ and JPMorgan and Barclays rating it ‘overweight’.

“With Shell’s financial rehabilitation seemingly underway our sense is that the portfolio and prospects means that the name is, once again, set to be (rightly) viewed as the premium Euro super-major. As the cash cycle moves back towards balance and investors gain confidence in income funding we expect the yield premium at which Shell trades to come,” Deutsche says.

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‘Solar’ jet fuel made out of thin air

Screen Shot 2014-02-10 at 16.29.29Extract from a Chemistry World article by Jon Cartwright published 2 May 2014

The dream of producing hydrocarbon fuels from carbon dioxide and sunlight is one step closer thanks to chemists in Europe who have made jet fuel from scratch in a solar reactor for the first time. Although the chemists only produced enough kerosene to fill a glass jar, they believe a full-scale solar concentrator could produce 20,000 litres of jet fuel a day.

Various methods have been tried to effectively remove oxygen from syngas, but the one settled on by the Solar-Jet team was the use of cerium oxide, or ceria.

The benefit of using ceria is that the oxygen and syngas are produced at different steps and can, therefore, be collected separately, enabling the syngas to be fed straight into the Fischer–Tropsch process. This was performed onsite by Shell, a collaborator on the Solar-Jet project and one of several oil and gas companies developing Fischer–Tropsch for the production of kerosene from syngas.

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Shell holds crisis talks with Niger Delta community over threat to operations

Screen Shot 2014-02-10 at 16.29.29Extract from an article published by Platts on 24 July 2014

Shell has opened talks with leaders of the Nembe community in the Niger Delta to stave off potential unrest that could disrupt the company’s operations, a Shell spokesman said Thursday. The talks come after the Nembe community in Brass Local Government Area of southern Bayelsa State Wednesday issued a 30-day ultimatum to Shell to shut down its operations for failing to abide by the terms of a General Memorandum of Understanding reached between the two parties last year.

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