Posts Tagged ‘BP’

By Emily Pickrell, HOUSTON CHRONICLE

Published Thursday, January 12, 2012

Shell Oil Co. expects to clear remaining regulatory hurdles and begin drilling later this year in the Chukchi Sea near Alaska, company President Marvin Odum said at a scientific conference on Thursday.

Shell received conditional federal approval last month to drill six exploratory wells in the Arctic offshore region but still must secure permits for individual wells.

Among the requirements for Shell to obtain those permits will be selling regulators on its plan for responding to spills or other accidents at the sites.

Odum said Shell is mindful of the 2010 Deepwater Horizon disaster in the Gulf of Mexico, and the wide criticism BP and others involved received for the conditions leading to the accident and their response.

“We will have every piece of response in Alaska available on a one-hour notice,” Odum said in a keynote address at the ninth conference of the Academy of Medicine, Engineering and Science of Texas.

“The access to the equipment will provide for a much different response than what the world watched in the Gulf of Mexico.”

Environmentalists who oppose the drilling contend that no proven technology exists for cleaning up a spill in the slushy Arctic environment.

The area about 70 miles off the Alaska coast is more remote than the Gulf, and winter ice causes additional challenges.

Odum noted, however, that the drilling will be in about 150 feet of water – far shallower than the well under a mile of water that blew out in the Deepwater Horizon disaster.

He said that Shell is also working with Norwegian experts on how best to clean up any potential spills in colder climates.

On another subject, Odum predicted that Shell will soon get into the gas-to-liquids business in the U.S., with plants similar to its $20 billion Pearl plant in Qatar, which converts natural gas to liquid transportation fuel.

“With very low natural gas prices, we have a market that still has to import much of its liquid fuels,” Odum said. “It is high time to do something like that in the U.S.”

A view of the wind

In another panel Thursday, Shell Wind Energy President Richard Williams presented an optimistic view of the opportunities in wind.

“Everyone asks us if a wind farm makes money,” Williams said. “The answer is yes.”

The cost of turbine construction has decreased about 30 percent, and installation costs have gone down about 10 percent, Williams said, while improvements in safety and additional technical education programs have made it easier to find and train employees to run wind farms.

Odum emphasized, however, that while Shell is continuing to explore opportunities in renewable energy, growing demand will mean continued reliance on oil and natural gas.

“Thirty percent of global energy could come from alternatives to oil and gas, but at the same time, the world will need twice as much energy as today,” Odum said.

emily.pickrell@chron.com

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JANUARY 12, 2012

By ALEXIS FLYNN

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

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

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

Even BP PLC may raise its dividend.

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

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

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

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

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

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

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

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

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

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

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

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

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

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January 03, 2012

After what happened last year when BP’s oil well blew out and dumped millions of gallons of crude into the Gulf of Mexico, the idea of drilling for oil in the frigid Arctic Ocean off northern Alaska sounds risky.

Even in the relatively placid and temperate Gulf, it took 86 days to cap BP’s damaged well, and by then raw crude had spread for hundreds of miles. Further, the frigid arctic waters aren’t as rich in the oil-eating bugs that limited damage in the Gulf. The Beaufort and Chukchi seas, where Royal Dutch Shell wants to drill next summer, are covered with ice two-thirds of the year.

But despite those risks — and the fact that the Shell bid is shaping up as an election-year controversy — other factors say Shell should be allowed to drill. And, in fact, the Obama administration has granted the company a conditional go-ahead.

There are at least three reasons for moving ahead:

• The Arctic Ocean is much shallower than the Gulf of Mexico. Shell would drill in 160 feet of water or less, compared with the mile-deep water where BP was drilling in the Gulf. And well pressures off Alaska are just a third to a half what they are where BP drilled. If something did go horribly wrong, Shell would benefit from BP’s experience.

• Shell and other companies have drilled more than 100 wells in the Arctic waters off Alaska and Canada without serious incident, which suggests that drilling there, safely, is possible. Shell also has a better safety record than BP, and with $4 billion already invested in Arctic operations would face significant losses if it caused a serious spill.

• The U.S. Geological Survey estimates that the area holds more than 20 billion barrels of oil, which would rival some of the mega-fields in the Middle East— a serious consideration for a nation that still imports almost half its oil.

In an ideal world, there’d be no need to drill in Arctic waters, just as there’d be no need to build the controversial Keystone pipeline to bring tar sands oil through the United States from Canada, or even to resume drilling in the ultra-deep Gulf of Mexico. But until most of America’s 250 million motor vehicles run on something other than gasoline, pretending that the nation doesn’t need more domestic oil is foolish.

Americans shouldn’t stand for another disaster like the one that a careless, clueless BP caused last year, but neither can their energy needs be ignored.

Give Shell the go-ahead, but keep it on a short leash.

OPPOSING VIEW: Say no to Arctic drilling

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MPs are to question UK oil and gas companies on the safety of drilling in the Arctic, after fears that retreating ice will see a damaging rush to exploit billions of barrels of untapped reserves in the region.

The committee’s remit will include the entire area of the Arctic Circle and both onshore and offshore drilling Photo: Bloomberg News

By STEVE HAWKES, Business Editor: 6 January 2012

SHELL is to scrap final salary pensions from 2013 — despite making billions in profits.

The oil giant will close its scheme to new recruits in two years.

All existing staff will be kept on final salary benefits — for now.

The move means that every UK company in the FTSE 100 has now scrapped the generous retirement packages.

It came as the UNITE union revealed thousands of health workers had “unanimously rejected” government calls to cough up more money for their own saving pots.

Matthew Sinclair at the TAXPAYERS ALLIANCE said Shell’s action showed a huge divide between the public and private sector. While the Government is £990 billion in debt, Shell is expected to post annual profits of almost £17billion for 2011.

Mr Sinclair told Sun City: “As the population ages, everyone is having to be realistic about the costs of providing for so many pensioners.

“Taxpayers shouldn’t be asked to pick up the bill for pensions far more generous than they enjoy themselves.

“And unions need to give up on futile strikes against modest steps to improve the situation.”

Shell — famed for its slogan “You Can Be Sure of Shell” — told staff the pension change reflected UK “market trends”, such as rising life expectancy and poor stock market returns.

It said in a statement: “The plan will be designed to ensure that the reward package in the UK for new hires remains strongly competitive.”

Other major British companies such as TESCO, DIAGEO and BP have all recently closed their final salary pension schemes — which base retirement pay on a worker’s last wage — to new recruits. They now offer schemes based on average pay throughout a career.

The NATIONAL ASSOCIATION OF PENSION FUNDS estimates that just 19 per cent of private sector final salary pension schemes are open to new joiners, compared to 88 per cent a decade ago.

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COMPASS: Other points of view

By PETE SLAIBY Published: January 4th, 2012

Pete Slaiby is vice president for Shell Alaska.

In her recent opinion piece (Jan. 2), Wilderness Society Arctic Program Director Lois Epstein assumes that neither Alaskans, the nation nor Shell are “ready to drill safely in the Arctic.” Ms. Epstein then dismisses decades of data that indicate otherwise and claims drilling in the Arctic would lead to a “reasonable likelihood of disaster.” The fact is, Shell and others have successfully drilled more than 35 wells in the Alaska offshore without incident — not counting the Cook Inlet wells that have helped heat Anchorage homes for over 50 years.

By Richard Moniak

On Dec. 16, 2011 the federal Bureau of Ocean Energy Management (BOEM) gave Shell Oil conditional approval of their Chukchi Sea exploratory drilling plan. The agency directed Shell to shorten the proposed drilling season by 38 days to ensure that, if an accident occurs, they can cap a well blowout and clean up a spill before the sea ice returns. Alaska’s congressional delegation immediately blasted BOEM for being short-sighted. But are they really defending the merits of Shell’s plan or are putting their trust in the oil lobbyist talking points?

Sen. Mark Begich called BOEM’s decision a “last-minute monkey wrench into Arctic development,” and added, “Alaska has done off-shore exploration before, we’ve done it safely, and the technology is better now than it has ever been.” His statement implies BOEM should have rubber stamped Shell’s plan as if it had been rigorously analyzed and tested.

But Shell’s undersea well capping and containment system is still under design and their oil spill response plan requires approval by the Bureau of Safety and Environmental Enforcement. Even more to the point, Shell can’t possibly ensure that a spill won’t occur. And if one does, they can’t guarantee they’ll be able to contain it and prevent widespread environmental damage to the Arctic sea and coastal environments.

It’s the lack of such guarantees on environmental issues where our delegation’s position is inconsistent. Begich put that on display just one day earlier at a Senate hearing where he opposed the commercial production of genetically engineered (GE) salmon. “Looking at the available scientific information” he said, “it is clear that there is no guarantee that these GE fish won’t ever escape into the wild” and cause harm to our wild salmon and aquatic ecosystems.

Sen. Lisa Murkowski and Rep. Don Young also oppose commercial farming of these fish. So shouldn’t they, and Begich, be insisting on similar assurances against damage to our Arctic waters, especially considering that last August a Shell oil spill off the coast of Scotland turned into the worst in Great Britain in a decade. And, just last week, the industry added two new blemishes to their record. A Russian oil rig sank in Arctic waters and a Shell subsidiary spilled 1.6 million gallons of oil off the Nigerian coast.

So why are Begich, Murkowski and Young so willing to trust that Shell can safely operate in the Arctic Ocean? It could have a lot to do with lobbying pressure. According to the nonpartisan Center for Responsive Politics, between 2000 and 2006 Shell spent less than $100,000 per year for paid lobbyists on Capitol Hill. But that increased dramatically after the Bush administration opened up 70 million acres under Arctic waters to offshore oil and gas development. For each of the past three years Shell has spent more than $10 million to influence government decisions. That puts them among the top 20 corporations lobbying in Congress.

If you believe Shell Alaska Vice President Pete Slaiby, there is solid science behind this effort. In a Senate hearing last July he told Begich and others that, “Shell would not be working in the Arctic had we believed there was something, an event we could not control.”

That hubristic pronouncement echoes the words of Tony Hayward shortly after BP’s Deepwater Horizon drill rig exploded in the Gulf of Mexico. Speaking as the corporation’s chief executive officer he old reporters that BP was mounting “the biggest response by anyone in the industry ever, and we’re able to do it because we planned for it.” We all know how that story turned out.

The Deepwater Horizon investigators believe there was a systemic failure at BP to place safety ahead of profit. Is Shell any different? In their published “General Business Principles” they list protecting shareholder interests first among its five corporate responsibilities. Down at the bottom is being “responsible corporate members of society, to comply with applicable laws and regulations” and, last of all, “to give proper regard to health, safety, security and the environment.”

When it comes to our environment we need a delegation that holds these values in reverse. It’s their job to lead us in building a healthy society and that can’t happen if they place their trust in paid lobbyists.

• Moniak is a Juneau resident.

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By ALEXIS FLYNN

LONDON—BP PLC said it will end its 13-year alliance with Russian state-owned oil company OAO Rosneft to explore for oil and gas in Sakhalin, due in part to the economics of the Far East project.

The U.K.-based energy producer said that in recent meetings with the shareholders and board of ZAO Elvary Neftegaz it confirmed its intention to exit the joint venture. “There are many reasons for this decision, including the challenging economics of the discovered resource in the KV [Kaigansky-Vasuykansky] block,” BP said Friday.

The company first formed an exploration alliance with Rosneft in 1998, with an initial license to search for hydrocarbons in Kaigansky-Vasuykansky area granted in 2002. The following year, BP and Rosneft created the Elvary Neftegaz joint venture before commencing drilling operations in 2004.

Earlier this week, Rosneft Chief Executive Eduard Khudainatov was quoted by Interfax as saying BP had lost interest in Sakhalin.

The end of the joint venture marks a further Russian retreat for BP. In January, Rosneft agreed with BP to a $16-billion share swap and development of three Arctic offshore licenses, but that deal was blocked by BP’s partners in the TNK-BP Ltd. joint venture. Rosneft later announced a global partnership with Exxon Mobil Corp.

BP said Friday it will work with Rosneft to find the best way to accomplish its exit from Sakhalin. In his remarks to Interfax, Mr. Khudainatov said Rosneft remained “very interested” in the project but wouldn’t offer participation to anyone else following BP’s departure.

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By JONATHAN FAHEY, AP Energy Writer: 30 December 2011

ALAMINOS CANYON BLOCK 857, GULF OF MEXICO (AP) — Two hundred miles off the coast of Texas, ribbons of pipe are reaching for oil and natural gas deeper below the ocean’s surface than ever before.

These pipes, which run nearly two miles deep, are connected to a floating Shell platform that is so remote they named it Perdido, which means “lost” in Spanish. What attracted Shell to this location is a geologic formation found throughout the Gulf of Mexico that may contain enough oil to satisfy U.S. demand for two years.

While Perdido is isolated, it isn’t alone. Across the Gulf, energy companies are probing dozens of new deepwater fields thanks to high oil prices and technological advances that finally make it possible to tap them.

The newfound oil will not do much to lower global oil prices. But together with increased production from onshore U.S. fields and slowing domestic demand for gasoline, it could help reduce U.S. oil imports by more than half over the next decade.

Eighteen months ago, such a flurry of activity in the Gulf seemed unlikely. The Obama administration halted drilling and stopped issuing new permits after the explosion of a BP well killed 11 workers and caused the largest oil spill in U.S. history.

But the drilling moratorium was eventually lifted and the Obama administration issued the first new drilling permit in March. Now the Gulf is humming again and oil executives describe it as the world’s best place to drill.

“In the short term and the medium term, it’s clearly the Gulf of Mexico,” says Matthais Bichsel, a Royal Dutch Shell PLC board member who is in charge of all of the company’s new projects and technology.

By early 2012 there will be more rigs in the Gulf designed to drill in its “deep water” — defined as 2,000 feet or deeper — than before the spill.

In November, Perdido began pumping oil from a field called Tobago; the well begins 9,627 feet below the surface of the Gulf. No other well on the globe produces oil in deeper water and that’s about as deep as the Gulf gets. For drillers, that means the entire Gulf is now within reach.

“We are at the point where … depth is not the primary issue anymore,” says Marvin Odum, the head of Royal Dutch Shell’s drilling unit in the Americas. “I do not worry that there is something in the Gulf that we cannot develop … if we can find it.”

From a distance, Perdido looks like an erector set perched on an aluminum can. This can, or “spar,” is a 500-foot-tall steel cylinder that sits mostly underwater, serving as a base for the equipment and living quarters above. It is stuffed with iron ore to lower its center of gravity, keeping the whole operation from bobbing in the water like a cork. The spar is tethered to the sea floor 8,000 feet below with ropes and chains.

Oil and natural gas are pumped to Perdido from nearby wells drilled by an onboard rig and from faraway wells drilled by satellite rigs. Water and other impurities are then removed from the oil and gas, which gets sent hundreds of miles through an undersea pipeline to terminals and refineries along the Gulf coast.

Perdido, which pumps the equivalent of 60,000 barrels of oil and natural gas a day, will eventually yield 100,000 barrels per day from 35 wells in a 30-mile radius, according to Shell. It will likely produce oil for decades — in all, as much as 360 million barrels of oil and 750 billion cubic feet of natural gas, according to Wood Mackenzie.

As global oil demand climbs past 89 million barrels a day and traditional onshore and shallow water fields are depleted, the deep waters of the Gulf and off the coasts of South America, West Africa and Australia are playing an increasingly important role.

In 2000, 1.5 million barrels of oil per day were produced from deepwater fields around the globe, or 2 percent of global production. In 2011, that number grew to 5.5 million barrels, or 6 percent of global production. By 2020, deepwater oil will account for 9 percent, according to IHS CERA.

The Gulf is attractive for many reasons. Its oil fields are enormous; it straddles the world’s biggest consumer of oil; it’s in a politically stable part of the world; and drillers can easily tap into a vast network of pipelines and refineries. Also, despite industry complaints, the cost of royalties, taxes and regulation in the U.S. are among the lowest in the world.

“Everybody wants to be there,” says Mohammad Rahman, the lead Gulf analyst for Wood Mackenzie.

By early 2012, there will be 40 deepwater rigs in the Gulf, up from 37 before the BP spill, according to Cinnamon Odell of ODS-Petrodata. BP received its first permit to drill in late October.

The Gulf produces an average of 1.5 million barrels of oil per day, according to Wood Mackenzie. That’s 27 percent of U.S. output and 8 percent of U.S. demand.

Thanks to more accurate imaging technologies, drillers are able to see under geologic formations that used to confound geologists. In June, ExxonMobil Corp. said it found 700 million barrels of oil — one of the biggest discoveries in the Gulf in last decade. In September, Chevron and BP also announced major finds, thought to be in the hundreds of millions of barrels of oil.

Many of the Gulf’s recent discoveries are in a geologic formation known as the Lower Tertiary, formed between 23 million and 65 million years ago. Perdido, which is operated by Shell and owned jointly by Shell, Chevron and BP, is the first to produce oil from this formation. Analysts say it could hold 15 billion barrels of oil.

As the BP disaster made clear, drilling in deep water presents difficulties and dangers. Last month a Chevron well in the deep waters off of Brazil ruptured and spilled 2,400 barrels of oil into the Atlantic after Chevron underestimated the pressure of the oil field it was tapping.

Perdido only recently reached its monthly production target after a year of operation because of difficulties getting oil and gas from the seabed to the platform. New devices designed to separate oil and gas on the sea floor have not performed as well as Shell hoped. It has taken months of adjustments made by underwater robots and other equipment on the platform to fix the problems.

Challenges like this have helped push the average cost of producing oil in the deepwater Gulf to $60 a barrel, according to IHS CERA, near the highest level ever. But with oil close to $100 a barrel, the expense is well worth it.

After all 35 wells are drilled for Perdido, its owners will likely have spent $6.2 billion on the project, according to Wood Mackenzie. But along with the risks, the Gulf offers great rewards: Perdido could ultimately generate $39 billion in revenue and $16 billion in profits.

Jonathan Fahey can be reached at http://www.facebook.com/Fahey.Jonathan .

Copyright © 2011 The Associated Press. All rights reserved.

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