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OIL PRICES TO SOAR AS DEMAND KEEPS RISING, SAYS SHELL

Tuesday February 15,2011
By Andrew Johnson, Deputy City Editor

OIL prices are set to surge in coming years as supply fails to keep up with burgeoning demand from the booming growth in emerging market economies, Royal Dutch Shell said yesterday.

The oil giant’s warning came as the Brent Crude price hit a 28-month high of $104 on the back of turbulence in the Middle East and rising imports to China.

In a report published yesterday, Shell said demand for energy in 2050 would triple ­compared with levels seen in 2000 while supplies may only grow by 50 per cent.

It said improvements in energy efficiency could cut demand by a fifth. This will leave the world having to work out how to close a gap between ­supply and demand equal to the energy industry’s entire output in the year 2000.

“This gap, this zone of ­uncertainty, will have to be bridged by some combination of extraordinary demand moderation and extraordinary production acceleration,” the company said.

Shell predicted that oil ­production would hit a plateau by the end of this decade but prices would continue to rise before them.

The report said India, China and other developing nations were entering their most energy-intensive phase of growth, putting “pressure on prices and generating volatility”.

While coal was abundant and alternative energy, such as biofuels, would become more significant, it said there was no “silver bullet” that would solve the problem.

“Over the next four decades, the world’s energy system will see profound developments,” added chief executive Peter Voser (right). “Heightened collaboration between civil society and the public and private sectors is vital if we want to address economic, energy and environmental challenges.”

Shell said the financial crisis had accelerated the shift in power from west to east, increasing political uncertainty and the likelihood of price shocks. The company also warned of a growing risk to the environment through carbon emissions.

Among risks to growth, it said, were uncertainty over greenhouse gas emission regulations and the fall-out from BP’s Gulf of Mexico oil spill.

However, there could be growth from huge resources in Iraq and natural gas. The company said it was crucial businesses and governments took the right decisions now.

Royal Dutch Shell Reports Strong Earnings for Fourth Quarter

A version of this article will appear in print on February 4, 2011, in The International Herald Tribune.

By JULIA WERDIGIER

LONDON — Royal Dutch Shell said Thursday that its earnings had more than tripled in the fourth quarter because of higher oil and gas prices, and as investments in new projects started to pay off.

Profit at Europe’s biggest oil company rose to $6.79 billion in the last three months of 2010, compared with $1.96 billion in the same period a year earlier.

“We are making good progress against our targets, and there is more to come from Shell,” Peter Voser, Shell’s chief executive, said in a statement.

Excluding non-operating and one-off items the result was $4.1 billion, short of the $4.85 billion average estimate of analysts polled by Reuters. The shares were down 3 percent in early trading.

“Profits are somewhat shy of market estimates,” Richard Hunter, head of British equities at Hargreaves Lansdown in London, said. He added that the “setback is likely to be short-lived, however.”

Shell’s earnings follow a set of strong results from larger rivals such as Exxon Mobil, which reported its highest quarterly profit in more than two years. Earnings at BP, Shell’s closest rival, failed to meet analyst expectations, however, and the company announced the sale of assets that it said would make it a smaller and more agile company.

Unlike BP, which predicted its production would fall this year because of asset sales and the aftermath of the Gulf of Mexico rig explosion, Shell said it was confident of meeting its target of an 11 percent increase in oil and natural gas production from 2009 to 2012.

“These are ambitious targets, but we are on track,” said Mr. Voser, who managed to halt a drop in production last year with a large investment program. He also cut costs and sold less lucrative assets to improve profitability.

Shell started six key projects last year, including in Brazil and Qatar, where it started offshore gas production this year. Oil and natural gas production rose 5 percent to 3.3 million barrels of oil equivalent per day last year. The company invested $3 billion in exploration activities last year, about three times more than BP.

Mr. Voser said he expects total investments of as much as $27 billion this year, including $1.6 billion for a biofuels joint venture in Brazil with Cosan, a Brazilian company that harvests and processes sugar cane.

Shell said it would leave the dividend for the first quarter of this year unchanged at 42 cents a share.

SOURCE ARTICLE

Shell sees 2011 as “year of choices” on biofuels

By Scott Malone

CAMBRIDGE, Massachusetts Wed Oct 13, 2010 (Reuters) – Royal Dutch Shell, which is investigating about 10 second-generation biofuel technologies that would use nonfood raw materials, expects to narrow its research to about five options next year, its top scientist said.

“I am putting a lot of time and energy into sustainable biofuels, second-generation biofuels, in essence, the conversion of redundant material, straw, into ethanol,” Gerald Schotman, the Anglo-Dutch oil company’s chief technology officer said on Wednesday. “We’re also playing with ideas on algae, growing algae and then converting algae directly into gasoline and diesel.”

While ethanol has won praise for being a sustainable fuel, today it is largely made from corn and has also drawn criticism for diverting resources that could otherwise be used to feed people.

Shell’s second-generation efforts could work around that problem by converting either agricultural byproducts or algae to liquid fuel, either ethanol or a diesel-like fuel.

The company aims to focus its efforts on about five developing technologies next year, Schotman said in an interview: “2011 is going to be the year of choices.”

Schotman was in Cambridge, just outside Boston, to disclose that Shell had agreed to fund $25 million in Massachusetts Institute of Technology research projects focused on energy over the next five years.

He warned that it will be quite some time before biofuels and other renewable sources of energy, like wind and solar power, displace fossil fuels. By 2050, it’s possible that the world will generate 30 percent of its energy from renewable sources, but that leaves 70 percent in traditional fossil fuels, he said.

“This is a long-distance horse race,” he said of the development process. “The world estimated that it was going to take three laps, but it’s going to take six or seven laps.”

(Reporting by Scott Malone; Editing by Steve Orlofsky)

REUTERS ARTICLE

Cosan, Shell sign binding deal on ethanol venture

REUTERS

SAO PAULO | Wed Aug 25, 2010 8:59am EDT

SAO PAULO (Reuters) – Royal Dutch Shell and Brazilian sugar and ethanol giant Cosan signed on Wednesday a binding agreement to create a global ethanol business, looking to benefit from growing demand for biofuels.

The joint venture, with estimated annual sales of $21 billion, was modified since its initial announcement in February to include all of Cosan’s energy generation business and 500 million reais ($283.6 million) in debt owed to Brazilian development bank BNDES.

Cosan, the world’s largest sugar and ethanol producer, also said in a securities filing that the initial accord was changed to make the venture a global biofuels provider. As a result of that, Cosan and Shell are barred from competing with the new entity.

($1=1.763 reais)

(Reporting by Elzio Barreto; Editing by Derek Caney)

REUTERS ARTICLE

Has Shell’s advertising budget been wisely spent?

FIRST PUBLISHED IN JUNE 2010

Shell’s latest corporate advertisement followed by candid commentary/analysis by Paddy Briggs (right)…

LET’S DELIVER ENERGY
FOR A CHANGING WORLD.
LET’S GO

Today’s consumers are smarter than ever about energy. Naturally they want it to heat, cool and light their homes, get them to work, and power their mobile phones. But they are also keen to help build an energy system that sustains the lives of future generations. They want their energy to come from cleaner sources. They want to get the most out of every drop. And they want to see positive results now.

At Shell, we’re listening. Consumers’ raised expectations inspire us to come up with ever more innovative products and services.

Take the quest for cleaner air in our cities. We have created a fuel oil, which can cut soot emissions from factories by up to 75%. That should help people breathe a little easier.

Customers at our service stations want to play their part, too. They want fuels that are more efficient. We’ve responded with new blends that help drivers save fuel with every fill-up. And we’re working with transport companies, combining the latest fuels and lubricants with satellite technology to reduce fuel consumption.

Low-carbon biofuels are another way to meet rising expectations. They can help reduce emissions from road transport right now. We’re already the world’s largest distributor of biofuels and are pursuing plans for large-scale production.

We’re also working with technical partners to develop future biofuels from non-food sources, like crop residue and even algae.

Of course, our customers’ horizons stretch beyond transport to more responsible living, whether through cleaner electricity or more energy-efficient homes and offices.

That’s why we are boosting production of cleaner-burning natural gas, which emits less than half the carbon dioxide of coal when used to generate electricity. And why we are investing in vital technology to capture emissions from power plants and other industrial sites and store it safely underground.

Despite all this change, one thing remains the same. After more than a century, our customers still expect reliable and affordable energy every day. With global energy demand set to double by mid-century, that will be a challenge. But together with our partners we will continue unlocking energy from hard-to-reach places like frozen Siberia and delivering it to customers around the world.

At Shell, we’re grateful to have millions of customers asking for better energy. They demand as much of us as we ask of ourselves.

Commentary

In its latest corporate advertisement (above), expensively placed in some influential publications like “The Economist”, Shell claims to be “listening”. We have heard this claim before of course and we should treat it with some scepticism – Shell pulled its online feedback forum “Tell Shell” some years ago – presumably because of the virulence of the criticism on it. But no matter – let’s take this latest request for feedback at face value and offer some.

The dark arts of advertising are notoriously ” economical with the actualite” – but I would guess that nobody really minds a bit of hype and “accentuating the positive” – where would copywriting be without the need to put a brand’s products or services in the most favourable light? But there are limits – the need to be “Legal, decent, honest and truthful” is required of any advertiser and the rules say that your ads shouldn’t mislead, lie or even tell half-truths.

So in the context of the need to be at least credible in your ads, and at best transparently truthful, how should we judge Shell’s latest offering? Remember we are talking big bucks here – not principally to the ad agency for preparing the ad and writing the copy but definitely to the media for running it. A few hundred thousand dollars at least – and possibly much more. Has Shell’s budget been wisely spent?

The first paragraph claims that “Today’s consumers are smarter than ever about energy”. It goes on to say that these consumers are “also keen to help build an energy system that sustains the lives of future generations”. How many consumers (that’s you and me folks) speak in anything like these terms? I don’t know what an “energy system” is – and I worked in the industry for nearly forty years. I doubt that my neighbours would have a clue what it is either. Presumably somebody can define the term “energy system” – but there’s little point in using such opaque language in an ad – even in “The Economist”!

So that first paragraph is at best patronising and trite and at worst gobbledegook. But the second paragraph is far worse. The claim is that “Consumers’ raised expectations inspire us to come up with ever more innovative products and services”. The conceit of this statement is breathtaking. It purports to suggest (a) That Shell is innovative and (b) That innovation is consumer led. Now lets be charitable and agree that Shell can indeed be innovative. Virtually all of this innovation comes from the upstream – and impressive some of it is as well. But there is no way that this highly technological activity can be seen as consumer driven. Then in the following paragraph we get mention of a low soot fuel oil for factories. In Britain, which is where this ad appears, a tiny minority of factories burn fuel oil – most of them switched to cheaper and more environmentally friendly natural gas years ago. Not too many people will be breathing any easier as a result of this innovation!

So what about the “service stations” (paragraph 4) – a curious and old-fashioned term by the way. They mean petrol stations I think. Here we are told that customers want “fuels that are more efficient”. Well yes – but not if they have to pay through the nose for them. The “new blends” that are referred to (presumably like V-Power) cost a premium, which negates any efficiency savings. Most motorists want cheap petrol – and there’s not much of a promise about this in the ad. If V-Power and its like really saved money through efficiency don’t you think that Shell would give us the data to prove the case?

The statements about “Low carbon biofuels” (paragraph 5 and 6) are another utterly misleading bit of hype. It is no doubt true that Shell is a big player in these products – but there is nothing much new about them. The Brazilians have run some of their cars on biofuels for a generation or more but in the UK they are virtually non-existent – and will remain so unless governments create a tax regime which make them viable. Some chance!

The seventh paragraph about “customers’ horizons” is just poor copywriting and is virtually meaningless. It’s an unsubstantiated claim – hardly surprising as it is hollow and patronising. It leads on to the next paragraph where the implicit claim is that Shell’s driver for the expansion of its Gas sector is in some way environmental and that it is driven by these “customer horizons”. The real reason for Shell’s drive to boost its production of natural gas is because this sector is growing and is profitable – good business in other words. Yes it is cleaner than coal – but Shell has no influence at all on utilities’ decisions to build Power stations that run on Gas rather than coal. True Shell can supply the gas, at a price, if the utility makes that decision but the determiners of the decision are primarily governments and local authorities – they are the ones one should thank for the resultant cleaner air – not Shell!

The penultimate paragraph is platitudinous and one again trite. If you asked them my guess is that many consumers would be very disturbed about some of the side effects of Shell’s ambition to “…continue unlocking energy from hard-to-reach places”. The Tar Sands of Canada is just one example of where this ambition is, to say the least, controversial!

Shell is not a bad company – although it does some indefensible things at times. But it does itself no service by running advertisements which claim distinctiveness when little exists, claim to have a unique understanding of consumers without any evidence being provided and lapse into self-congratulatory and highly selective hype.

ENDS

Paddy Briggs worked for Shell for 37 years during the last fifteen of which he was responsible for Brand management in a number of appointments. He was the winner of the “Shell/Economist” writing prize (internal) in 2001. In October 2009 Paddy was elected by the 33,000 Shell Pensioners in the UK to be one of the two Pensioner elected Trustees of the Shell Contributory Pension Fund. Paddy runs the brand consultancy BrandAware ™ .and writes and speaks on brand and reputation matters. He is active as a director of training courses on brand and reputation management.

Paddy’s website: http://brandaware.co.uk/

ARTICLE FIRST PUBLISHED IN 2010.

Shell buys stake in US biotech startup Virent

BusinessWeek Logo

The Associated Press June 8, 2010, 11:51AM ET

AMSTERDAM

Royal Dutch Shell PLC said Tuesday it has purchased a stake in U.S. biotech startup Virent Energy Systems Inc., a company that turns plant sugars into fuel closely resembling gasoline.

Shell declined to disclose terms of the deal. It will receive a seat on the board of directors of Virent, based in Madison, Wisconsin.

Virent, with around 70 employees, has previously received $10 million (euro6.4 million) in U.S. government aid and $40 million ((euro25.5 million) in venture capital backing.

Shell and Virent announced a five-year test partnership in 2008 and said they hoped one day to move to large scale production.

Virent says its technology has advantages over better-known processes that turn plant matter into ethanol. The fuel that Virent makes is a substitute for normal gasoline, potentially eliminating the need for gasoline-biofuel blends, or the specialized infrastructure needed to use pure ethanol.

It also works on grasses, which would make it easier to employ in different parts of the world and not compete with food crops.

Shell, Europe’s largest oil company, said in 2009 it would focus future renewable investment efforts mostly on biofuels, rather than wind or solar energy.

In February it announced a $12 billion ethanol joint venture with Brazil’s Cosan SA.

SOURCE ARTICLE

Shell venture yields petrol from sugar

Financial Times

By Ed Crooks
Published: March 26 2010

Royal Dutch Shell is turning sugar and water into small quantities of synthetic petrol at a joint venture with a US technology company, it has announced.

Virent Energy Systems, based in Wisconsin, has been producing about two thirds of a barrel per day of its “biogasoline” from a demonstration plant.

Shell and Virent now plan to have a design for a commercial-scale plant by the end of the year, with hopes of possible production in 2015-16.

Shell has several joint ventures working on advanced biofuels, including cellulosic ethanol, and in February set up a $12bn joint venture with Cosan of Brazil to produce and distribute ethanol and sugar.

Luis Scoffone, Shell’s vice president for alternative energies, said it was too early to tell which technologies would be successful in the long term.

FULL FT ARTICLE

RELATED ARTICLE

Shell opens biopetrol pilot plant
25 March 2010

The Netherlands-based energy major Shell has started up its biopetrol demonstration facility in Madison, Wisconsin, US.

The plant is the outcome of a joint biopetrol research and development effort between Shell and Wisconsin’s Virent Energy Systems.

The plant is billed as the world’s first demonstration plant converting plant sugars into petrol and petrol blend components as an alternative to ethanol.

The plant has the capacity to produce up to 10,000 gallons of the fuel each year, which will be used for engine and fleet testing.

The new biofuel can be blended with petrol in high concentrations for use in standard petrol engines. The new product has the potential to eliminate the need for specialised infrastructure, engine modifications, and blending equipment necessary for the use of petrol containing more than 10% ethanol.

SOURCE ARTICLE

Start-up Turns Sugar Beets Into Alternative to Gasoline

THE WALL STREET JOURNAL

TUESDAY MARCH 23, 2010

By RUSSELL GOLD

A biofuels start-up, working with oil giant Royal Dutch Shell PLC, has begun turning sugar beets into a gasoline substitute compatible with existing engines and pipelines.

Virent Energy Systems Inc. is expected to say Tuesday that its process of converting plants into liquid fuels is working at a 10,000-gallon-a-year pilot site in Madison, Wisc. “At today’s crude-oil and biomass costs, our process is competitive,” says Lee Edwards, Virent’s chief executive.

Virent’s catalytic-conversion technology has attracted backers such asCargill Inc. and Honda Motor Co., which both have equity stakes in the privately held company. Shell has funded a significant portion of Virent’s research over the past couple years.

The U.S. government is heavily promoting the development of biofuels, through a combination of blending mandates, grants and subsidies, as a way to create jobs and an alternative to imported crude oil.

The fuel being made by Virent can be blended right into existing pipelines, gas stations and automobile fuel tanks without problems. The industry calls this a “drop-in” biofuel.

This is a large change from the current crop of biofuels. Corn-based ethanol, the dominant biofuel in the U.S., cannot be moved through petroleum pipelines because it is too corrosive. What’s more, no more than 10% of a gallon of gasoline can be ethanol by law, a limit set to prevent engine problems.

By comparison, Virent says it believes existing engines can operate on its fuel without any problems, while generating fewer carbon-dioxide emissions.

The successful start-up of the Madison facility shows both the promise and problems with biofuels. The Virent announcement underscores the technological progress being made to create low-carbon fuels from domestic crops. But at the same time, the facility is still quite small. The 10,000-gallon annual output is less than one barrel a day. By comparison, Shell’s part-owned refinery in Norco, La., churns out 75,000 barrels of gasoline daily and an equal amount of diesel.

Samhitha Udupa, a research associate at Lux Research, a Cambridge, Mass., firm that analyzes emerging technologies, sees great potential for drop-in fuels to elbow aside corn-based ethanol. “Ethanol only has a market because it is being forced upon us by the government, not because it’s a good fuel,” she says. “We will always need diesel and gasoline. The sooner people can come up with biobased drop-in replacements that are cost competitive with petroleum, there is no reason why consumers wouldn’t adopt that.”

Still, she worries that too many companies are hoping to use plant sugars—whether from sugar beets or inedible stalks and grasses—to make biofuels. “The cost of sugar is definitely going to increase in coming years and that will affect their bottom line,” she says.

Virent’s Mr. Edwards says the technology can convert a number of plant sugars into fuel and the company is working on making diesel and jet fuel, in addition to gasoline. He expects planning work on a 100-million-gallon-a-year facility to begin later this year.

Write to Russell Gold at russell.gold@wsj.com

WSJ SOURCE ARTICLE

Shell defends continued focus on fossil fuel-paper

Reuters UK

FRANKFURT, March 1 (Reuters) – Royal Dutch Shell Plc (RDSa.L) Chief Executive Peter Voser defended the oil giant’s retreat from some green technologies to concentrate on oil and gas production in an interview with the German daily Frankfurter Allgemeine Zeitung.

Shell withdrew from its solar business because it was not prepared to make the required investments, Voser told the newspaper adding that alternative fuel for cars remained problematic.

Voser said Shell was investing between 20 percent and 25 percent of its research budget into biofuels, an area where the company still sees potential.

But Voser cautioned that second generation biofuels will take years before they become viable arriving on markets, “late this decade…if at all.”

Biofuels, hybrid technology and electric cars still faced difficult technological hurdles, and may even cause other problems, the Swiss chief executive said.

“In the next 40 years, the number of vehicles in the world will double,” he said.

Demand, he said, will come mainly from Asia, where many polluting coal fired power stations generate electricity, there could be a step backward from an environmental standpoint.

Voser said he does not expect massive growth for oil demand in the short-term. “Because 2010 is a difficult year for the world economy, particularly the second half, when stimulus measures come to an end,” he said.

“We will probably also continue at a slow pace in to 2011. But in the medium term, global demand for oil and gas will rise.”

(Reporting by Edward Taylor, Editing by Leslie Gevirtz)

© Thomson Reuters 2010 All rights reserved.

REUTERS ARTICLE

BP and Shell Investors Want BP and Shell Out of Canadian Oil Sands

CleanTechnica.com

Written by Zachary Shahan

Published on February 10th, 2010

When environmentalists ask you to do something, you might not listen. When concerned citizens ask you to do something, you might not listen. When scientists ask you to do something, you might not listen. But when your investors ask you to do something, maybe then you’ll listen.

BP and Shell investors are demanding that they leave the Canadian oil sands alone. Why? For the bottom line (as well as all of the moral environmental reasons).

But does it look like BP and Shell will actually listen?

BP Investors Challenge Getting Oil from Canadian Oil Sands

“The Co-operative Asset Management, the Unison Staff Pension Scheme, a group of clients from Rathbone Greenbank and the COIF Charities Investment Fund are all signatories to the resolution which tells BP not to commit $10bn (£6.4bn) to its Sunrise oil sands development,” Tom Young of BusinessGreen reports.

Basically, these investors don’t support getting oil from the Canadian oil sands because processing that oil is more expensive and more environmentally damaging than traditional oil exploration.

“We believe that environmental costs may make an expensive business prohibitively so, without fundamentally addressing the issue of a large net rise in emissions,” said Niall O’Shea, head of responsible investing at the Co-operative Asset Management. “BP should reassure shareholders that what they’re embarking on is fully costed, prudent and can withstand a more carbon-constrained world.”

Shell Investors Challenge Getting Oil from Canadian Oil Sands

A similar thing came to the forefront last month with Shell. Shell investors announced they would file a resolution demanding more information on the risks associated with Canadian oil sands projects. A little softer perhaps, but along the same lines.

BP and Shell Likely to Change Course?

Unfortunately, words from the men on top show that BP and Shell are unlikely to agree to these investors’ demands or requests.

Apparently, previous BP chief executive Lord Browne of Madingley said he would not invest in oil sands. But the new BP chief executive Tony Hayward seems to have different plans. He told the Guardian that he saw no problem making such investments.

“Canadian heavy oil is going to be a very important part of America’s energy, ” he said.

Similarly, regarding the Shell case, Shell told the Guardian: “The resolution is basically a request for further information around the economics and other aspects of our oil sands operations. The resolution is submitted by shareholders representing some 0.15 per cent of our total outstanding shares.” It doesn’t sound like Shell is looking to change course here, just to explain why they have no problem extracting oil from the oil sands.

We will see what will come of these two cases. But it looks like even concerned investors can’t get the top guys calling the shots to change their plans on this.

Image Credit: vaXzine via flickr under a CC license

CleanTechnica.com Article