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Oil Spill: Syndicates Defraud Communities As Shell Remains Adamant On Payout

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Screen Shot 2015-03-01 at 08.16.28BY SAHARA REPORTERS, NEW YORK, FEB 28, 2015

An investigation by SaharaReporters reveals that several rogue syndicates have been selling oil spill compensation forms to members of oil-producing communities in Bayelsa State ostensibly to enable the residents to benefit from a fund established to compensate victims of the December 2011 Bonga oil spill. However, some concerned activists told Sahara Reporters that the sale of forms was exploitative, especially since it was not clear that those who file for compensation would ever receive any payment.

The House of Representatives and National Oil Spills Detection and Response Agency (NOSDRA) had in November 2014 recommended a compensation of $3.98 billion for victims of the incident.

NOSDRA estimated that 40,000 barrels of crude were discharged into the Atlantic during an operational mishap in an oil field operated by Shell Nigeria Production and Exploration Company (SNEPCO).

However, a Shell spokesman, Joseph Obari, maintained at the weekend that the Bonga spill did not hit affect the shoreline, arguing that the company should not pay any compensation.

Even so, our correspondent found out that a variety of groups were selling tens of thousands of compensation forms to residents of the oil producing communities in the state.

Ebrasin Leghemo, a member of the Koluama 2 community in Bayelsa, said that a firm of valuers, Dutch Nigeria Limited, had allocated 10,000 forms to the communities.

“There are three groups involved and we negotiated with them to give us 10,000 forms at the rate of N1,000 for indigenes and N2,000 for non indigenes,” he said, adding, “We are told that each claimant would get N400,000.”

Mr. Leghemo continued: “We heard that the House of Representatives has mandated Shell to pay $3.98 billion to the affected communities and we have secured the 10,000 slots for our community for impacted people amongst us.”

Meanwhile, various agents of the firm of valuers were in the area selling the forms in bulk. Some members of the various communities told our correspondent that they had paid between N1,000 and N1,500 to get one.

One resident, James Wilson, said he had filled out and returned a form he bought for N1,000. He said he filed claims for both the Bonga oil spill of December 2011 and Chevron’s rig explosion of January 2012. According to him, he had filed individual claims for N350,000 in damages from the two incidents.

However, Alagoa Morris, an environmental and human rights activist, has voiced concern over syndicates selling the forms to members of the oil communities. He disclosed that the activities of the ‘faceless syndicates’ were suspicious.

Mr. Morris urged the Bayelsa State government to investigate the firms behind the form-selling scheme to save unsuspecting members of the public from exploitation.

SOURCE

Extract from a comment received by Sahara Reporters

Welcome to Nigeria – The scamming “capital” of the world. From top to toe, from head to tail – all is rotten. In a country where the law enforcement and judiciary are corrupt and refuse to work with integrity, then the citizens and criminals will do as they like, knowing that next to nothing will ever happen to them, that there are no consequences to their bad behaviour. Even on the rare occasion that a cheat is caught, all they will do is bribe the police, bribe the lawyers, bribe the judges. Hardly a day passes that I myself am not cheated one way or another.

ENDS

PHOTO: London Rising Tide protestors outside the Royal Courts of Justice to highlight Shell’s devastating pollution in Nigeria

Lynn Hughes and Shell

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Screen Shot 2015-01-06 at 21.26.38U.S. District Judge Lynn N. Hughes

In an extremely rare move, the U.S. Court of Appeals for the Fifth Circuit has removed a case from U.S. District Lynn Hughes’ docket after the Houston federal court judge declined to rule the way the appellate court wanted in a case involving Shell Exploration.

The recent decision in United States v. Shell Exploration involves a qui tam False Claims Act (FCA) action brought by two individuals against Shell alleging that the company had failed to pay the U.S. government at least $19 million in oil royalties.

The government declined to intervene in the case.

In 2012, the Fifth Circuit reversed Hughes after he issued a summary judgment for Shell dismissing the plaintiffs’ case. The appellate court concluded in a case of first impression that the FCA did not prohibit government employees from filing qui tam actions. The appellate court also concluded in that decision that Hughes erred in dismissing the case by using an overly broad standard of “public disclosure.” The FCA bars prosecution of cases based on publicly disclosed allegations.

After the case was remanded, Shell refiled a motion for summary judgment, which Hughes granted in 2014, dismissing the plaintiffs’ claims with prejudice because of the public disclosure bar. The plaintiffs appealed Hughes’ decision to the Fifth Circuit.

In a Feb. 23 opinion, the Firth Circuit again reversed Hughes.

“Shell has not pointed to a single public disclosure of the fraudulent scheme alleged in this case, and there is no basis for applying the public disclosure bar. We therefore reverse the judgment of the district court,” Judge Eugene Davis wrote in the unpublished decision.

But this time they used an “extraordinary” and “rarely invoked” appellate court power by directing the Shell case to be assigned to another judge.

“In the prior appeal, we declined to have this case reassigned to a different judge on remand. The circumstances are now different because the district court judge disregarded our clear mandate and failed to apply the legal standards we established in our opinion for public disclosure and to address the specific questions we set out in that opinion,” Davis wrote.

“Facing a lengthy and detailed summary judgment record, the district judge issued a five-page opinion with few citations to either record evidence or relevant legal authority—not surprising given that neither the summary judgment evidence nor the law to support the conclusions he reached,” Davis wrote. “The opinion consists almost entirely of conclusory statements. The district judge reached the same conclusion he reached in his previous opinion by employing the same overly broad reasoning that we rejected before.”

The decision vacates and remands Hughes’ judgment and directs the chief judge of the Southern District of Texas to reassign the case to a different district judge.

Hughes declined to comment about the decision.

SOURCE ARTICLE – ACCESS SUBJECT TO SUBSCRIPTION

High Court dismisses Shell Centre challenge

From an article by Allister Hayman published 25 Feb 2015 by PropertyWeek.com

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High Court dismisses Shell Centre challenge

A judge has rejected a legal challenge to Eric Pickles’ decision to approve the controversial £1.2bn redevelopment of the Shell Centre.

The ruling today means joint venture developers Canary Wharf Group and Qatari Diar can now proceed with their redevelopment of the 27-storey Shell Centre tower, which includes eight new buildings and comprises 800,000 sq ft of office space, 80,000 sq ft of retail, restaurants and cafés, and up to 790 new homes.

The ruling looks set to bring to an end a long battle over the scheme on the River Thames.

FULL ARTICLE

Houston We Have A Problem: Oil Workers Strike For Safety & Fair Labor

Article by Alvaro Rodriguez and Jane Nguyen published 25 Feb 2015 by MINTPRESS NEWS under the headline:

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Oil workers holding picket signs in front of the Shell oil refinery in the Houston Ship Channel

In the largest strike since 1980, oil workers who are members of United Steelworkers District 13 locals (Locals 13-1 and Local 13-227) are no longer on the job in the Houston Ship Channel, the largest petrochemical complex in the world. The strike kicked off on February 1, 2015.

The three plants impacted by the strike in Houston include Shell Oil Refinery and Chemical Plant, LyondellBasell Refinery and Marathon (refinery and cogeneration facility).

The union is under attack in Texas, with USW members locked out at the Sherwin Alumina plant in Corpus Christi and the ASARCO facility in Amarillo. The attack on the union is occurring while the industry made record profits. Royal Dutch Shell announced earnings of $19 billion in 2014. LyondellBasell had record profits of $7.1 billion (EBITD) in 2014, cash generation of $6.0 billion. These profits in large part went to reward stock holders rather than repairs — with stock repurchases prioritized over worker safety —  to the tune of $7.2 billion in dividends. This largesse extended to a jump in compensation for their corporate officers.

The USW oil workers rallied at Shell headquarters in Downtown Houston (1 Shell Plaza at 901 Louisiana) on Friday, February 6 to “show management that union workers are united in their drive for a fair contract that improves safety throughout the industry.”

The safety record of Texas industry is abysmal. Texas continues to experience a large number of fatalities, chemical releases, fires and explosions. EHS Today reports that nearly 5,000 workers die each year as a result of fatal occupational injuries in Texas. These preventable deaths devastate families and workplaces.

According to a recent Dallas Morning News investigative report, “Houston has the worst record in Texas and Texas has the worst record in the nation when it comes to workplace fatalities or catastrophes.”

FULL ARTICLE

RELATED

U.S. refinery strike continues with no steps toward settlement: REUTERS 25 Feb 2015

Extracts

Reuters) – The largest U.S. refinery strike since 1980 continued through its 25th day on Wednesday with no movement toward renewed talks to end a walkout by 6,550 union workers at 15 plants, including 12 refineries accounting for one-fifth of domestic capacity.

A spokesman for lead refinery owner representative Shell Oil Co, the U.S. arm of Royal Dutch Shell Plc, said no face-to-face meetings have been scheduled with the United Steelworkers union (USW) as of Wednesday.

“No date has been set (for talks to resume,)” said Shell spokesman Ray Fisher. “Not sure if there has been any contact (between the two sides).”

FULL REUTERS ARTICLE

That sinking Feeling

Financial Times article by Christopher Adams, Michael Kavanagh and Chris Tighe: 25 Feb 2015

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That sinking feeling

North Sea oil was a challenge before prices halved. Now the UK industry fears a fatal blow

The plunge in prices, a tax system that deters investment and a failure by producers to co-operate could lead to a wave of early field closures and accelerated moves to decommissioning.

FULL ARTICLE

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.

In some respects Alberta’s gigantic deposits of bitumen, a dense mixture of sand and heavy crude oil, third in size only to the reserves of Saudi Arabia and Venezuela, were stranded from the start by location. Situated in the heart of a vast boreal forest at the center of a very large continent, they are hundreds of miles from the nearest refinery and thousands more from navigable tidewater.

Of course, some of Alberta’s crude has made its way to market, but so much slower than it could have, or was projected to, that producers, refiners, shippers, banks and other investors in tar sands development are beginning to wonder whether they have backed a good play by investing over $160 billion to turn tar into oil.

So the economic stranding process has already begun. Five global energy giants—Shell, Total, Suncor, Statoil and Occidental—have cut bait on major bitumen deposits in Alberta, in which they had already invested billions. Suncor has just slashed another billion dollars from its capital spending program and $800 million more from operating expenses. And as oil prices slide lower, commercial and investment banks are reconsidering future underwritings. An industry that recently envisioned doubling production over the next 20 years is now looking at something closer to the opposite: a halving of production or worse in far fewer than 20 years.

American media coverage of the tar sands has focused primarily on the approval of the Keystone XL Pipeline, which, if completed, would carry 830,000 barrels of Athabasca crude, every day, to the world’s largest refining center near Houston next to a booming export hub.

Because American and Canadian politicians and oil executives have lobbied so hard for its approval, Americans tend to believe that construction of Keystone will secure the future of the tar sands. Not true. To even approach a break-even point, at least four other pipeline routes will be needed to carry bituminous crude to the world’s market: two to the Canadian west, one to the East and one to the North.

If two or three of those lines are somehow stopped, and that’s quite likely to occur, the stranding of the tar sands will escalate, Canada will cease being a petro-state, and its business leaders will begin their search for yet another staple to drive its national economy.

A Staples Economy

Canada has always been what economists call “a staples economy,” reliant almost completely on one staple resource after another. Fur was followed by cod, then wheat, potash, minerals, timber and hydropower. Today, Canada’s staple resource is carbon, some of which is derived from coal but most of it from oil. Oil, in fact, represents 46 percent of Canada’s commodity production.

Unfortunately, over 90 percent of its reserves are bitumen, the costly production of which nets only 4 percent to Canada’s gross domestic product. But oil represents 40 percent of the country’s exports. So the urgency to develop and export the tar sands oil has become a national priority.

Canada’s tar sands booster-in-chief is Prime Minister Stephen Harper, an Alberta-based petrolero who rose to prominence in politics as chief policy officer of the Reform Party, Canada’s version of the American Tea Party. Founded in 1987, Reform merged in 2000 with the floundering Progressive Conservative Party to form a new and almost unbeatable national coalition calling itself the Canadian Conservative Reform Alliance. (After adding Party to its name, it became CCRAP and was nicknamed “see-crap.”) Harper became party leader of CCRAP, which has since won two national elections. It’s as if Ted Cruz became the Republican front-runner and won the White House twice.

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Once a member of Canada’s Young Liberals and a supporter of Pierre Trudeau, Harper went west as a young man, worked in Alberta’s oil fields and followed his father into employment with Imperial Oil, Canada’s second-largest petroleum company (69 percent owned by Exxon Mobil). There, like so many other western Canadians, he grew to despise Eastern Canada, rather like the scion of a prominent American family moving from Connecticut to Texas.

In Calgary, he became an outspoken and eloquent opponent of Justin Trudeau’s National Energy Plan, which seemed set upon nationalizing Canada’s last staple resource. While there is still talk of nationalizing oil and tar sands oil in Canada, and in some polls a majority of Canadians support the idea, that couldn’t possibly happen with Harper in power.

At the 2012 World Economic Forum in Davos, Switzerland, Harper announced that the expanded production and export of tar sands bitumen was a national priority. Canada, he predicted, was set to become an energy superpower. In Ottawa, he took immediate and aggressive steps to weaken environmental protections like the Navigable Waters Protection Act, which was hindering pipeline construction, and to fast-track tar sands production.

But Harper’s focus remained on Europe, where in 2012 the European Parliament and member European Union governments were debating terms of a revised Fuel Quality Directive and considering an official ban on the import of “dirty fuels”—oil shale, liquid coal and tar sands, all of which have high extraction impacts, releasing more greenhouse gas than conventional oil through their “well-to-wheel” life cycle. A Stanford University study that many members of the EU Parliament relied on projected a 23 percent increase of life-cycle carbon emissions from tar sands production.

Harper and his advisers immediately saw the danger of that study and the disaster a European ban on dirty fuel represented for Canada’s largest new staple. One vote in Brussels could leave the tar sands stranded immediately and forever, even if oil producers found a route to the Chinese market.

During the two years leading up to the EU parliamentary vote on the issue, Harper mobilized Canadian oil executives and his Cabinet behind a $30 million nation-to-nation lobbying effort. Their first target was the Stanford study, which they drove into the ground with their own industry-funded studies.

Week after week, planeloads of oil execs and PR flacks crossed the Atlantic, Harper aboard whenever he could be, laterally threatening a trade war with Europe if the vote went the wrong way. Side trips were made to Washington. And members of the European Parliament were flown to Ottawa and Alberta for gold-plated junkets.

Without Harper’s effort, the Parliament in Brussels would almost certainly have voted to ban dirty fuels. After two years of intense lobbying, the measure lost by a 12-vote margin, 337-to-325, with 48 abstentions. A few months later, in the fall of 2014, the first shipment of tar sands crude arrived in Europe, with many more to follow, as a vote on the Fuel Quality Directive will not come up again for at least four years.

In the meantime, if a few EU member nations condemn tar sands oil, and ban its import, more small nails will be driven into the tar sands coffin. And if two of the proposed source-to-port pipelines on the drawing boards are blocked (see map and sidebar here), more producers and investors will abandon the sands.

If Canada’s tar sands do one day become stranded, the equivalent annual emissions of over 65 coal-fired plants and 50 million passenger vehicles will remain underground. And a lot of the credit (or blame) will go to environmental activists, aboriginal communities, litigious farmers and groups like Greenpeace, NRDC and 350.org, which have added to their anti-pipeline advocacy a campaign to pressure institutional investors to divest their “Big Fossil” holdings. Even before divestment began, nine out of 10 tar sands producers’ stocks had underperformed the market. So they are vulnerable.

Strand Their Capital

According to the Institute for Energy Economics and Financial Analysis, a think tank in Cleveland, the campaigns of environmentalists and native communities have already cost tar sands producers $17 billion. But that has not stemmed the determination of the North American fossil-fuel industry to move Athabasca crude to refineries around the world.

Despite the insistence of American Republicans and petroleros that everything rests on completion of Keystone XL, the pipeline means little to the U.S. economy. In Canada, however, economists estimate that U.S. rejection of the pipeline could cost the country as much as $1.7 billion a year, far more significant than the loss of 200 or 300 permanent jobs the pipeline would create in the U.S. And by simply raising the break-even point higher than it already is for bitumen producers, stopping Keystone could place the tar sands in far greater danger of being stranded.

While assets like the tar sands should be stranded, because mining and burning them will raise the temperature of an already overheated planet a degree or more, they are more likely to become stranded because they are either unable to reach market or have lost market value.

The sad irony is that before Canada selected tar sands crude to be its staple export, the country was poised to become a major global contributor to clean energy. It had signed climate treaties, promoted solar energy, developed hydroelectric power and had a prosperous renewable-energy industry under sail, for which the country possessed all the necessary natural and financial resources.

Then one powerful neoliberal free-market zealot decided to double down on high-carbon fuels and announce to the world that tar sands would become the next nation-building staple for his country.

It appears he was wrong about that, which would not be a bad outcome for the planet.

Journalist Mark Dowie is the author of Conservation Refugees: The Hundred-Year Conflict Between Global Conservation and Native People. This article appears in the March 2015 issue of The Washington Spectator.

SOURCE

Offshore oil drilling opponents scold Port of Seattle for Shell deal

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Screen Shot 2015-02-25 at 22.42.39Article by Ted Land, KING 5 News: 24 Feb 2015

SEATTLE — The Port of Seattle got quite the earful, Tuesday from a group opposed to offshore oil drilling.

They’re irate that the port is doing business with Shell, which plans to use Terminal 5, near West Seattle, as a launching point as it prepares to drill in the Arctic.

“It appears the port has forgotten that it’s a public agency entrusted with making decisions in the general public interest,” said Peter Goldman, an environmental attorney who was among more than a dozen people to testify at the port commission meeting.

They scolded the Port of Seattle for rushing the deal with Shell last month and not allowing enough public input. The agreement came as a shock to many opponents, who felt like their voices were never heard.

They say the lease deal with Shell is essentially an endorsement of offshore oil drilling. Ironic, they say, Seattle’s goal is to have one of the greenest ports in the country, as highlighted in a video on the port website, which states it’s the port’s responsibility to “preserve our environment for future generations.”

The commission listened and then moved on to other items. Opponents say they’re now planning legal action.

SOURCE

Canada’s energy slump to wipe out $23-billion over two years

Screen Shot 2015-01-12 at 08.45.23From an article by Jeff Lewis published 24 Feb 2015 by The Globe and Mail under the headline:

Canada’s energy slump to wipe out $23-billion over two years

Extracts

The slump in Alberta’s energy sector is set to wipe out billions more in corporate earnings, complicating growth plans and putting investor dividends at greater risk.

An analysis of more than 30 major oil sands projects by consultancy Wood Mackenzie Group says as much as $23-billion (U.S.) of cash flow will disappear over the next two years – even if U.S. crude oil prices rise to $55 a barrel this year and $65 in 2016 from today’s lows.

Even as the energy sector reels from the sharp drop in oil prices, the Edinburgh-based consultancy said a series of expansions and new projects where investments were made long before oil prices hit the skids will add as much as 458,000 barrels per day of oil sands production over the next two years.

Companies across the energy sector are deferring spending, cancelling new projects and ratcheting up pressure on suppliers to cut rates in a bid to lower overall costs and offset dwindling profits.

This week, Royal Dutch Shell PLC shelved plans for a 200,000 barrel-a-day mining venture north of Fort McMurray, Alta. called Pierre River, saying the project is no longer a priority as it seeks to wring better performance from its existing assets. The global oil giant last month cut some 300 jobs from a separate Alberta oil sands project.

FULL ARTICLE

Salym Shell development in Siberia

Screen Shot 2015-01-06 at 21.26.38By Olga Ivshina, BBC News, Western Siberia, published 27 Nov 2014 under the headline:

Russian oil industry facing deep freeze

Without visiting a well in Western Siberia, you would never realise just how hard it is to extract oil in Russia.

Two hours’ drive from the nearest village of Salym, the snow banks are huge and the closest airport is over 300km (185 miles) away.

The temperature is down to -26C, but locals say winter temperatures normally drop to -40C, and Russia’s oil industry has more serious challenges than the cold.

Oil prices are falling and the cost of extraction is rising as resources are becoming exhausted. And then there are the Western sanctions imposed on oil companies as a result of Russia’s actions in Ukraine.

As Opec oil producers meet in Vienna to consider how to respond to falling prices, Moscow is particularly keen for concerted action.

The pressure on Russia’s oil industry is increasing. Oilfields that were within relatively easy reach have already been explored.

“It is becoming harder and harder to extract oil,” says Petr Fedorov, the supervisor on the Salym Petroleum drilling platform.

“We will have to develop new projects in more complex conditions, in particular on the sea shelf and in the Arctic.”

And the sanctions are adding to the problem.

Russia used to import most of the technical equipment needed to mine less accessible reserves.

But the imports have dried up and one after another ambitious, hi-tech projects are being frozen:

  • Exxon Mobil has halted work in developing Arctic fields, which it had begun in collaboration with Russia’s Rosneft
  • Shell suspended participation in a joint venture with Gazprom Neft to develop shale oil in the Khanty-Mansiysk region
  • Salym Petroleum development – a Shell project with Gazprom Neft on a shale field in Western Siberia – has slowed down, although the company says work will continue

The sanctions cover not only technological equipment, but also oil services, such as construction, repairs, and drilling preparation and exploration in new oilfields.

“This is way more crucial for industry than the development of the shelf in the Arctic,” says oil expert Vitaly Bushuev.

The Arctic may represent the future of the industry but servicing and developing wells should be tackled now, he believes.

More than half of Russia’s budget is paid for with oil and gas revenue and the country is heavily dependent on exports.

But it needs to develop oilfields to maintain its current rate of production.

Prior to the sanctions, an 11.5% decline in oil production was already predicted for Western Siberia by 2020.

Now it may drop much faster. And it may be difficult to find a way to substitute these losses.

“The situation is really alarming,” says Alexander Khavkin, professor at the oil and gas institute at Russia’s academy of science.

“In theory we can replace Western technologies by domestic ones in a couple of years.

“But someone should start doing it. Many companies are now preferring to wait and observe the situation, and meanwhile time is playing against us.”

Russia needs to embrace innovation such as nanotechnology, Mr Khavkin argues, to increase oil production and extraction.

But that requires investment, and that is looking unlikely when spending is being squeezed by Western sanctions.

SOURCE

Matthias Bichsel Joining Petrofac


PETROFAX BOARD: Retirement destination of Shell has-beens?

Petrofac Board is recommending that shareholders approve the appointment of Matthias Bichsel at its 2015 Annual General Meeting. If approved by shareholders, Matthias, who has over 30 years’ relevant experience, most recently as Director of Projects & Technology at Royal Dutch Shell plc, will join the Board as an independent Non-executive Director on 14 May 2015. Matthias brings an extensive understanding of the oil and gas industry and the Board looks forward to working with him. In addition, Roxanne Decyk has notified the Board of her intention to step down as a Non-executive Director at the conclusion of the Annual General Meeting. The consequential changes to Board Committee memberships following these changes will be reviewed in due course.

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Another nail in the coffin of tar sands

BBC NEWS: Obama vetoes Keystone oil pipeline bill: 24 Feb 2015

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US President Barack Obama has vetoed a bill that would have approved construction of the Keystone XL oil pipeline.

The Republican-led Congress sent the bill to the president on Tuesday.

White House spokesman Josh Earnest said Obama vetoed the bill “without any drama or fanfare or delay”.

The 875-mile (1,400km) pipeline would carry tar sands oil from Alberta, Canada, to the US state of Nebraska where it joins pipes running to Texas.

The project has pitted Republicans and other supporters, who say it will create much needed jobs, against many Democrats and environmentalists, who warn the pipeline will add to carbon emissions and contribute to global warming.

The Keystone bill is Mr Obama’s third veto as president and his first since Republicans won full control of Congress in November.

SOURCE ARTICLE

Oil Industry Blasts Latest Rules For Arctic Drilling

Screen Shot 2013-11-01 at 09.31.18This article was written by Oilprice.com , the leading provider of energy news in the world.

Oil Industry Blasts Latest Rules For Arctic Drilling

The energy industry has been quick to criticize the Obama Administration’s proposed regulations for exploratory drilling in the US Arctic Ocean, calling them “unnecessarily burdensome.”

The Interior Department proposed Feb. 20 its first regulations ever for the US regions of the Arctic Ocean that would require energy companies to have contingency plans and spare equipment to contain any spills in the region. They would apply to the Beaufort Sea off the northern coast of Alaska and the Chukchi Sea over the Bearing Strait between Alaska and Russia.

An Interior Department report said in 2011 that an estimated 22 billion barrels of oil and 93 trillion cubic feet of gas – both technically recoverable – lie beneath these two seas owned by the federal government.

Under the new proposals, companies exploring for oil and gas in the region would have to prepare plans for responding to spills and have “prompt access” to equipment capable of controlling and containing the leak. They also must have a separate drilling rig on hand in case they lose control of the spill altogether.

The plan was criticized immediately by Eric Milito, director of upstream operations at the American Petroleum Institute, the leading trade association for the US oil industry.

“Other equipment and methods, such as a capping stack, can be used to achieve the same season relief with equal or higher levels of safety and environmental protection,” Milito told Platt’s . “For this reason, it is unnecessarily burdensome to effectively require two rigs to drill a single well.”

Nevertheless, one specific company, Royal Dutch Shell , has already committed to proposed regulations  and will adhere to them in large part during its exploratory drilling this summer in both the Beaufort and Chukchi seas even before they go into effect. That includes having a backup drilling rig available in the event of a spill.

The reason for Shell’s early compliance are an agreement between the Anglo-Dutch energy company and the US Department of Energy (DOE) because of Shell’s shaky performance in Arctic drilling during the summer of 2012, in which its exploratory drilling was undone by mechanical failures exacerbated by harsh weather.

Because Arctic drilling generally is conducted only from July to October, the regulations would require operators to submit plans for quick response to any accident. “If there were to be an uncontrolled well event, we want to make sure that the well can be secured within the drilling season,” said Brian Salerno , director of Interior’s Bureau of Safety and Environmental Enforcement.

These regulations already apply to drilling in the Gulf of Mexico, “where generally mild weather conditions and an established industry presence have created extensive infrastructure and logistical support that allow for nearly year-round operations,” said Abigail Ross Hopper , the director of the Bureau of Ocean Energy Management.

The proposed regulations for exploratory wells still must await a 60-day public comment period, and there was no word when they would become final. Meanwhile, Salerno said  the Interior Department will propose in the next few years new regulations for production as well as exploration.

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Read more: http://www.fool.com/investing/general/2015/02/24/oil-industry-blasts-latest-rules-for-arctic-drill.aspx#ixzz3SgtdjTLT

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COMMENT FROM A REGULAR CONTRIBUTOR

The role of the API (American Petroleum Institute) as a lobby group is often overlooked.

After the Macondo blowout, the conflicted roles of the API were described in very unflattering terms in the report of the investigating commission.

This is outlined in:

Spill Commission: American Petroleum Institute Is ‘Compromised’ (API)

Given the prominence of the API’s views on the site today, a link to this article and others describing the various subsidiary lobby groups spawned by the API might be appropriate.

American Petroleum Institute Kept Tabs on Enviros: 11 Feb 2014

World’s biggest PR firm calls it quits with American oil lobby – reports

How the American Petroleum Institute Spies on Environmentalists

The New York Times, Mouthpiece for The American Petroleum Institute

FROM WIKIPEDIA ARTICLE ON API Organised Deception. 

API spent more than $3 million annually each year during the period 2005 to 2009 on lobbying; $3.6 million in 2009. As of 2009, according to API’s quarterly “Lobbying Report” submitted to the US Senate, the organization had 16 lobbyists lobbying various Congressional activities.

API conducts lobbying and organizes its member employees’ attendance at public events to communicate the industry’s position on various issues. A leaked summer 2009 memo from API President Jack Gerard asked its member companies to urge their employees to participate in planned protests (designed to appear independently organized) against the cap-and-trade legislation the House passed that same summer.

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Groningen Gas Field Shock: Risk of earthquakes at 4.6 on the Richter scale

From an article published 24 February 2015 by DutchNews.nl under the headline:

Groningen facing stronger earthquakes as gas field empties: report

The province of Groningen will be hit hard with additional seismic activity hitting the gas fields by more and heavier earthquakes, according to a scientific report of Shell employees and NAM. Last week, the safety research council OVV said in a report that maximising profit was the main driver for the extraction of natural gas from underneath Groningen province and public safety took a back seat.

The province of Groningen will face more frequent and stronger earthquakes as the gas fields under the province empty, the AD reports on Tuesday.

The findings come in a scientific report from Shell and gas extraction company NAM and published in the the Journal of Geophysical Research: Solid Earth.

Parts of Groningen have for years been hit by earthquakes and there is mounting opposition to gas extraction in the province because of the damage to property. The quakes occur as the ground settles in areas where the gas has been removed.

Earlier this month, economic affairs minister Henk Kamp agreed to again reduce the volume of natural gas extracted, this time to 16.5 billion cubic metres in the first six months of this year.

Estimate

For the report, researchers made an estimate of the risks of stronger earthquakes as the gas fields empty. Between now and 2023, there is a 50% risk of a much more powerful earthquake than the strongest so far, the researchers found.  That centred on Huizinge in 2012 and reached 3.6 on the Richter scale.

There is also a 10% risk of earthquakes of 4.6 on the Richter scale.

According to NAM, the research confirms earlier findings. ‘We must take stronger earthquakes in the future into account,’ the NAM told the AD.

Last week, the safety research council OVV said in a report that maximising profit was the main driver for the extraction of natural gas from underneath Groningen province and public safety took a back seat.

SOURCE

EXTRACT FROM AN ARTICLE PUBLISHED BY DE TELEGRAAF (DUTCH) 

GRONINGEN -

The province of Groningen will be hit hard with additional seismic activity hitting the gas fields with more and heavier earthquakes, according to a scientific report of Shell employees and NAM.

The report was published recently in the Journal of Geophysical Research: Solid Earth. Researchers made a calculation of the probability of heavy tremors through the depletion of the gas fields. Until 2023, there is a 50 percent chance of an earthquake that is quite stronger than the worst earthquake in Huizinge in 2012 (3.6 on the Richter scale). There is a 10 percent probability of earthquakes of 4.6 on the Richter scale.

SOURCE

Link to invaluable information setting out historical overview of gas exploitation in Groningen and the current controversy. 

COMMENT RECEIVED FROM A REGULAR CONTRIBUTOR

Shell and NAM!!! NAM is spending big money on further research. And all this was predicted by a retired geologist from NAM (I believe) about a year ago. He simply extrapolated the frequency and magnitude of the quakes over time on a logarithmic scale. It was crystal clear the magnitude would increase. But he was poo-pood by Shell et all as being to alarmist. This is going to be extremely costly and drag on for years for Shell and Exxon.

Link to the article by a former NAM engineer Adriaan Houtenbos, published in the NRC in Oct 2013. It is in Dutch, but apparently he was completely right!

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Related Stories

Oil and gas industry in ‘bleak’ 2014, finds survey

Screen Shot 2015-01-31 at 08.53.48FROM A BBC ARTICLE PUBLISHED 24 FEB 2015

Oil and gas industry in ‘bleak’ 2014, finds survey

The UK offshore oil and gas industry has reported its worst annual performance for four decades.

Industry body Oil & Gas UK said falling oil prices and rising costs meant the sector spent and invested £5.3bn more than it earned from sales during 2014.

That outflow of cash was the biggest since massive investment in platforms in the 1970s preceded the flow of oil.

The body’s annual survey also indicated that investment in the industry is set to fall this year, as well as drilling.

Oil & Gas UK said the “bleak” findings emphasised the urgency of government action to secure the industry’s long-term future.

Although drilling of 25 wells was expected last year, only 14 took place, continuing a downward trend. Only 50 million barrels of viable reserves of oil or its gas equivalent were discovered.

This year, Oil & Gas UK members expect between eight and 14 exploratory wells to be drilled, and only five wells to appraise initial discoveries.

This points to a steep drop in investment in developing new reserves and extending current offshore fields.

The survey also showed that:

  • Investment last year reached £14.8bn, which was higher than expected due to cost and project over-runs.
  • It is forecast to fall to between £9.5bn and £11.3bn during this year. Feedback from offshore operators suggests very little new investment is expected to be given the go-ahead during 2015.
  • Annual investment could fall as low as £2.5bn within three years, once the current wave of large projects enters production.
  • Production of oil and gas fell by only 1% during 2014, following sharp falls over the previous three years. Due to recent high investment levels, it is expected to rise by 1% during this year.
  • Operating costs continued to rise during last year, up by 8% to £9.6bn.

The cost per barrel extracted has risen to a record high of £18.50. That is expected to fall as the industry cuts back on its costs, including a controversial move to change rota patterns for offshore workers.

It is claimed that cost and efficiency measures need to improve by up to 40% per barrel of oil if there is to be a sustainable future for the UK’s offshore sector.

Oil & Gas UK chief executive Malcolm Webb said: “Even at $110 per barrel, the ability of the industry to realise the full potential of the UK’s oil and gas resource was hamstrung by escalating costs, an unsustainably heavy tax burden and inappropriate regulation.

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“At current oil prices, we now see the consequences only too clearly.

“Without sustained investment in new and existing fields, critical infrastructure will disappear, taking with it important North Sea hubs, effectively sterilising areas of the basin and leaving oil and gas in the ground.”

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From 2010 until mid-2014, world oil prices had been fairly stable, at about $110 a barrel. But since June, prices fell below $50 and have recently been trading at around $60.

This has been driven by weak demand in many countries due to insipid economic growth, coupled with surging US production, and a break from past behaviour by oil exporting nations, by keeping production up rather than cutting it to maintain the price.

Responding to the report, a UK government spokesman said: “The Oil & Gas UK report underlines the need for a concerted and joined-up approach between the government, the Oil and Gas Authority and industry to ensure investment and exploration in the UK North Sea continues and is able to get through this difficult period.

“The UK government recognises how important the North Sea is, both in terms of the thousands of jobs it supports and the benefit it brings to the UK economy.

“The package of fiscal changes and initiatives announced by Treasury in early December shows the government understands the challenges and is on the front foot in dealing with them.”

Scotland’s Energy Minister Fergus Ewing said: “This report highlights the long overdue and urgent action on taxation and regulation, which the UK government must deliver to give the industry the certainty it needs to protect jobs and investment.

“It is encouraging that Oil and Gas UK expect the first annual production increase in 15 years to happen this year.

“However, to sustain North Sea activity over the longer term, exploration levels must improve and long-term investment must be sustained to ensure that sufficient new production comes on stream.

“This should help to protect future tax receipts and ensure a fair return to the nation.”

SOURCE

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Special report: Energy

The Big Oil Drop

Shell Replaced Only 26% Of Its Produced Reserves In 2014

Screen Shot 2015-02-24 at 11.00.06From an article by Zoltan Ban published 23 Feb 2015 by Seeking Alpha under the headline:

Shell Replaced Only 26% Of Its Produced Reserves In 2014

Summary

  • Shell replaced only 26% of its produced reserves in 2014.

  • The three year average rate of reserve replacement is 67%.

  • Even with potential for growth in the downstream, Shell is likely to undergo a continued process of shrinkage as a company in the longer term.

Royal Dutch Shell (RDS.A, RDS.B) produced 1.2 billion barrels of oil equivalent in 2014. Only 26% of that was replaced with new reserves, which means that just over 300 million barrels of oil equivalent were added. Over the past three years, 67% reserve replacement was achieved, which looks much better, but still suggests that Shell is a shrinking upstream producer (link).

Shrinking oil production has already been a well-established trend with this company since 2010, but the current low reserve replacement ratio suggests that there is much worse to come.

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Data source: RDS.

Aside from the fact that reserves are declining, the quality of those reserves is very different compared to reserves already on the books. Increasingly, we are looking at unconventional reserves such as shale oil & gas, as well as deep water fields that are very expensive to develop. Enhanced recovery from old fields also features prominently in the company’s reserve replacement strategy.

We should keep in mind that these reserve additions were achieved during a year when the second half saw a constant slide in prices, therefore we should be mindful of the fact that the rate of reserve replacement should improve if the price of oil will recover to the $100/barrel range we experienced in the past half a decade or so. The 2014 reserve replacement rate is in part a reflection of lower oil prices in the second half of the year. Shell data shows us that even in the preceding years, it failed to replace 100% of the reserves produced. If prices will stay well bellow $100 for the foreseeable future, it is very likely that reserve addition will suffer a similar fate to 2014, this year and most likely next year as well.

This trend of shrinking reserves should have been foreseen as Shell struggled to make a number of frontier projects happen. It sold its Catarina play in the Eagle Ford to Sanchez Energy (NYSE:SN) last year, admitting that it was unprofitable. It gave up on trying to produce oil out of Kerogen and it also put its arctic drilling program in Alaska on hold. Given the relative difficulty faced by many multinational oil & gas companies in trying to tap new conventional reserves, it would have been very good news for Shell if some of the unconventional or frontier plays would have worked out.

Production decline rate to mirror decline in reserves.

As we can see from the above graph, there is already a well-established production decline trend in place for some years now. The rate of decline will in fact start to accelerate as the reserve base Shell is basing its production on declines as well. Given that in the next few years and for the foreseeable future oil & gas prices will likely be volatile and on average significantly lower than the $100 oil price plateau we saw in the past four years, reserve additions will also be significantly lower than in past years.

It is hard to predict what the exact extent of this decline in reserves and therefore production will look like, but given that Shell only managed to replace about two thirds of the reserves it produced in the past three years, I think it is also reasonable to expect that production will be about a third lower a decade from now. The current reserves of 13.1 billion barrels of oil equivalent are only enough to last for about a decade, therefore a decade from now, production will in theory more or less reflect the current and future reserve addition volumes. The picture will worsen significantly if future rate of reserve replacement will become more like what we saw in 2014.

Future revenue potentially hit by lower production and possibly lower prices. Downstream may be bright spot.

With lower oil & gas production, revenues have also been taking a hit in the past few years. After hitting a record of $484 billion in 2011, it has been sliding steadily for three years in a row and we already know that 2015 will be a terrible year given oil prices.

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Data source: RDS.

As we can see, even in the 2012-14 period, revenues were down, year after year, even though the price of oil remained on the $100 plateau for most of that time. Now with production in decline and the price of oil likely to be more volatile and generally lower on average than the $100 level which companies started to take for granted, it is probable that Shell will never manage to surpass the revenue level it achieved in 2011.

There is increasing evidence that Shell is in a permanent state of shrinkage and what is worse, it seems that its debt level, while very manageable at the moment, given the size of the company, is on an increasing path in the past few years and given the current oil price environment, this year and possibly next year as well will not only show a continuation of the trend but also an acceleration.

Screen Shot 2015-02-24 at 10.54.21

Source: RDS.

The downstream segment.

If there is a potential bright spot out there for Shell in the long-term, it has to be the downstream segment. 2014 cash flow from downstream operations increased by 40% compared to previous year, while upstream cash flow increased 6%. The upstream segment is still by far the most important part of the company’s operations, with earnings from upstream being almost three times larger than downstream, but there is definitely more potential in value-added operations.

Shell’s massive cracker plant near Pittsburgh, which is in its early planning stages, with land recently having been purchased to build the plant on, is an example of the kinds of opportunities for value added investments. Shale gas in the region sells for very cheap compared to the US spot price due to supply outgrowing regional demand. Making use of production from the Marcellus & Utica shale gas fields makes far more sense than trying to simply sell the gas into an over-saturated regional market.

I expect that Shell will continue to pursue such projects around the world and I do believe that it will serve to partly offset the decline in oil & gas production the company is likely to continue to experience in the foreseeable future.

Even with such downstream investments, Shell will not be able to prevent its continued shrinkage as a company. This is likely to be the fate of many other similar oil & gas giants as challenges such as declining discoveries, increased resource nationalism and failures to tap new frontiers will take their toll. While Shell does provide for a good investment opportunity for those looking to get a good dividend, and take advantage of oil prices rebounding this year or next, its long-term potential is not looking very bright.

SOURCE

Groups derail Shell refinery plan

Screen Shot 2015-02-24 at 10.38.34

Screen Shot 2015-01-06 at 21.26.38Article by Gary Chittim published 23 February 23, 2015 by King5.com under the headline:

Groups derail Shell refinery plan

Seattle – Six environmental groups successfully challenged approval for a rail expansion that would bring oil trains directly to the Shell Oil Refinery in Anacortes.

The project was initially moved along by Skagit County through a Mitigated Determination of Non-Significance.

The groups Earth Justice, Sustainable Communities, Friends of the San Juans, ForestEthics, Washington Environmental Council, Friends of the Earth, and Evergreen Islands appealed that decision to the Skagit County Examiner.

The Examiner agreed a complete environmental review is needed before the project can proceed.

The groups used recent explosions and leaks in Ontario and West Virginia as examples of how common and dangerous accidents can be.

Shell General Manager Tom Rizzo released the following statement:

We are disappointed by the decision not to uphold the County’s Determination of Non-Significance for our proposed East Gate Rail Project. This project is critical for the refinery, and we strongly believe that the County’s environmental analysis was thorough and based on sound science and evidence.

Shell is committed to safe and modern rail operations and to the communities of Skagit County with whom we have enjoyed a long and close relationship. This project will reflect the high standards of these communities by utilizing only rail cars with enhanced safety features, along with the facility’s state-of-the-art environmental protections.

For over two years, we have been going through an exhaustive planning and regulatory process in an effort to procure each of the various permits required for this facility. We respect the Hearing Examiner’s decision and are determined to stay the course in this process in order to achieve a win/win for Shell and the community. We are still going through the details of the ruling, and it is too early at this point to comment on specific next steps.

Earth Justice’s complete statement can be found at http://earthjustice.org/

SOURCE

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Shell’s Washington rail project faces lengthy delay: Reuters 23 Feb 2015

Extracts

(Reuters) – Royal Dutch Shell’s proposed crude-by-rail project in Washington state has been put on hold pending environmental review, just days after a pair of oil train derailments caused huge fires in Canada and West Virginia.

A Skagit County Office of Land Use Hearings examiner ruled Shell’s proposal must undergo a full environmental review, which can take a year or more.

Hearing examiner says Shell oil project needs full review: Associated Press 23 Feb 2015

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