Shell warned the government not to tax it out of the UK, as it sketched out ambitious growth plans alongside an underwhelming set of results.

Chief executive Peter Voser said the Anglo-Dutch oil company was aiming to pump 4bn barrels of oil per day (bpd) by 2017, compared to 3.2bn today.

Net spending will rise from £15bn to £19bn this year as it chases its goal, although most of the difference will come from fewer asset sales, with actual investment set to rise by a more modest £1bn to £21bn.

Fourth-quarter profits fell 4pc to £4.1bn, taking the gloss off a 54pc rise in annual income to £20bn, thanks to high oil prices. The markets were less than impressed, either by Shell’s growth plans or its recent performance, sending the stock down 3.5p to 2265p.

Voser issued a coded warning to George Osborne not to tax Shell out of investing in Britain, after the Chancellor unveiled a £10bn, five year North Sea tax grab last year. ‘We hope we’ll get enough investment incentives in terms of tax structures so that we can actually keep the oil and gas industry alive here,’ he said.

He also predicted more closures of European refining operations after Swiss firm Petroplus collapsed, threatening UK supplies from the Coryton refinery in Essex. ‘I think we’ll see just a few big refineries surviving in the long term.’

But Europe currently has 6m bpd of surplus capacity, he added. Shell’s own downstream operation – effectively refining and marketing – slumped to quarterly losses of £176m, compared to a £305m profit last year.

Shell has been retrenching from both the UK and downstream of late, selling its Stanlow refinery to India’s Essar.

Chief financial officer Simon Henry said 80pc of future investment would focus on upstream – exploration and production – with 60pc of that sum to be spent in Australia and North America.

Much of that will come from environmentally controversial ‘shale gas’, with £3.8bn earmarked for exploration.

The company will also spend 35pc more on exploring for oil and gas, as well as investing in new sources of liquefied natural gas and chemicals.

Dividends are expected to rise marginally from the first quarter of 2012, up 1 cent to $0.43.

SOURCE ARTICLE

Oil prices could fall to $70 a barrel during 2012, from current levels above $110, as high volatility in the economy and energy markets becomes “a fact of life”, Royal Dutch Shell executives said.

By Emily Gosden: 3 February 2012

SOURCE ARTICLE (WITH COMMENTS)

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John

An incomplete but nonetheless informative summary of historic catastrophic offshore events…might be of interest to your readers…

LINK TO FILE: NeverSayNeverAgain

February 02, 2012, 11:40 AM EST

By Bloomberg News

Feb. 3 (Bloomberg) — PetroChina Co., the country’s biggest energy producer, boosted ties with Royal Dutch Shell Plc after agreeing to buy a 20 percent stake in its Groundbirch shale-gas project in Canada.

Shell will remain the operator of the project, Mao Zefeng, the Beijing-based senior assistant secretary to PetroChina’s board, said by telephone yesterday. He declined to give the value of the transaction.

PetroChina plans to pay more than $1 billion for a stake in the Groundbirch property, Hong Kong-based FinanceAsia reported on its website, without saying where it got the information. Shell and PetroChina’s parent agreed in June 2011 to increase cooperation in energy exploration in China, estimated to hold the world’s largest reserves of shale gas.

“Although PetroChina will gain just a minority stake, the firm can re-deploy any advanced technologies acquired overseas back home to better exploit China’s vast shale-gas reserves,” Gordon Kwan, head of energy research at Mirae Asset Securities Ltd. in Hong Kong, said by e-mail.

The deal with Europe’s biggest oil company is an extension of the companies’ cooperation in China, Mao said. Shell and China National Petroleum Corp., PetroChina’s parent, completed the country’s first horizontal shale-gas well in March.

LNG Exports

“The shale-gas project will continue to supply Shell’s customers in North America,” Mao said. “In the long term, we will explore the possibility of exporting it to Asia in the form of liquefied natural gas.”

PetroChina won’t release detailed “numbers” on the deal with Shell as the size of the transaction isn’t big, he said.

“I can confirm that CNPC will join us in Canada,” Shell’s Chief Executive Officer Peter Voser said in London yesterday. “It’s part of our global partnership to optimize our business working environment inside and outside China.” He declined to give the value of the deal.

The unit of CNPC has gained 4.1 percent in Hong Kong trading in the past year, compared with the 13 percent slump in the benchmark Hang Seng Index. The stock rose 1.9 percent to close at HK$11.62.

PetroChina expects to surpass its target of producing 1 billion cubic meters of shale gas in 2015, Mao said in an interview in Beijing. Commercial output of “a few hundred million” cubic meters is possible by 2013, according to Mao.

“We’re making good progress in drilling,” he said. “The question is now not whether China has shale gas, but how we can streamline the production process and deliver the scale.”

Chinese Shale Gas

PetroChina and domestic rivals are seeking technology to tap China’s shale gas resources through partnerships and acquisitions. Cnooc Ltd. acquired stakes in U.S. shale-gas acreage from Chesapeake Energy Corp. for a total of $1.65 billion in February 2011 and November 2010.

China, which has yet to produce shale gas commercially, may hold 1,275 trillion cubic feet (36 trillion cubic meters) of the fuel, almost 50 percent more than the U.S., according to the Energy Information Administration. The Chinese government held its first auction of shale-gas exploration rights last year.

“The overall environment is good for commercialization of unconventional gases, as tough carbon emissions guidelines have made natural gas the cleaner energy resource compared with oil and coal,” Mao said.

China plans to ease price controls and allow domestic fuel suppliers to earn a profit. Gas importers are losing money as they typically buy at overseas rates that are higher than the fixed domestic prices they are allowed to charge customers.

“The reform on the natural-gas price mechanism makes the commercial production of shale gas more likely, as a higher price will certainly provide more incentive for energy companies to speed up production,” Mao said.

–Guo Aibing and Chua Baizhen. Editors: Stephen Cunningham, Randall Hackley.

To contact the Bloomberg staff on this story: Aibing Guo in Hong Kong at aguo10@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net.

SOURCE ARTICLE

February 02, 2012, 1:20 PM EST

By Eduard Gismatullin

Feb. 2 (Bloomberg) — Royal Dutch Shell Plc, Europe’s largest oil company, is losing about $1 billion a year from drilling delays in the Gulf of Mexico since the 2010 Macondo disaster.

Shell’s production in the region will be curbed by about 50,000 barrels of oil equivalent this year, similar to 2011, Chief Financial Officer Simon Henry said. The company expects to return to planned operations off the Gulf coast by 2014.

“The cash flow implications are a billion dollars or more per year relative to where we want to be,” Henry said in London today. “We are catching up.”

The company, which in March said it planned to raise output to 3.5 million barrels of oil equivalent a day in 2012, is now warning that production could be lower due to Gulf drilling delays, asset sales and oil and gas prices in the U.S.

The U.S. Interior Department issued new safety regulations after lifting the drilling moratorium in October 2010 put in place after BP Plc’s Macondo well exploded in April the same year. The blowout, which killed 11 and sank the drilling rig, led to hundreds of lawsuits against BP and its partners and contractors.

–Editors: Stephen Cunningham, Randall Hackley.

To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

SOURCE ARTICLE

FEBRUARY 2, 2012

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

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

– Company to make further moves into oil-rich shales

By Alexis Flynn

Of DOW JONES NEWSWIRES

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

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

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

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

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

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

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

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

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

SOURCE ARTICLE

* Shell says global refining surplus of 6 million barrels

* Predicts more refinery closures in Europe

* Shell made Q4 loss from oil refining and marketing

By Alex Lawler

LONDON, Feb 2 (Reuters) – Royal Dutch Shell said on Thursday the global oil refining industry is facing about 6 million barrels per day (bpd) of surplus capacity, and predicted more plants would close in Europe.

Refining crude oil into fuels such as gasoline and diesel, traditionally the second-largest business for global oil firms such as Shell and rivals like BP Plc, has come under pressure from weak profit margins.

Shell, Europe’s largest oil company by market value, made a loss of $278 million from oil refining and marketing in the fourth quarter. The collapse of Swiss-based refiner Petroplus has raised the prospect of more plant closures in Europe.

“Globally, the world has about 7 million barrels a day too much capacity. Recent events whether Petroplus or otherwise have seen about a million barrels affected globally, so that’s only 6 million barrels,” Shell’s chief financial officer, Simon Henry, said at a news conference.

“Two million barrels of new capacity came on stream last year and probably another one and a half this year. So actually, the world is still building more capacity than is going out.”

Seven million barrels a day is more than the entire demand of Japan, the world’s third-largest consumer, and amounts to almost 8 percent of the 90 million bpd the International Energy expects the world will need in 2012.

The challenges of the refining industry in Europe, a mature oil market where demand is no longer growing, were illustrated by the difficulties of Petroplus, which has closed three of its refineries after lenders froze credit lines.

Shell Chief Executive Peter Voser said in Europe there were too many small refineries that are not very profitable, a legacy of an era when every country wanted its own plants.

“Shell has reduced its European portfolio significantly over the last few years. We have done it from our side but some others have not done the same steps like close refineries and that shake out is still to happen,” he said.

“I think we will just see a few big refineries surviving in the long term and hopefully that the current slowdown will actually help to make this shakeout finally now, so that we can have the right refining industry in Europe.”

Despite the loss from refining, Shell reported net income of $6.46 billion in the fourth quarter earlier on Thursday. Most of the company’s profit comes from producing oil and gas.

SOURCE ARTICLE

* Fourth quarter results disappoint

* Anaemic dividend rise

* Higher investments seen but returns weaken

* Shares drop

By Tom Bergin

LONDON, Feb 2 (Reuters) – Royal Dutch Shell said it was targeting aggressive growth in the coming years, with the start-up of big new projects and higher investments set to drive a 50 percent rise in cashflow and a 25 percent rise in oil and gas production.

However, weaker-than-expected results for the fourth quarter, partly due to dismal industry-wide refining margins, and an anaemic dividend hike, raised the question of whether Shell was simply running faster to stand still, with investments offering ever-dwindling returns.

Shell’s London-listed A shares traded down 2.2 percent at 0826 GMT, lagging a 0.8 percent drop in the STOXX Europe 600 Oil and Gas index.

Hague-based Shell said it was eyeing a return to strong production growth in the coming years, after nearly a decade. Apart from a 5 percent rise in 2010, the group’s production has fallen every year since 2002.

“Oil & gas production should average some 4 million boe/d (barrels of oil equivalent per day) in 2017-18,” the company said in a statement.

Production averaged 3.215 million boe/d in 2011, a 3 percent drop on 2010.

This growth will be generated by higher capital investment expenditure, which will rise to $32-$33 billion this year from $31.5 billion last year, Shell said.

Analysts had previously predicted that capex would fall, as Shell completed the big new projects such as the pearl gas-to-liquids plant in Qatar, which will push output higher.

The high capital being invested is one reason that Shell’s return on capital employed failed to sparkle, at 15.9 percent, compared to levels above 20 percent a few years back when oil prices were considerably lower.

Similarly, in spite of a record average Brent crude price of $111/barrel in 2011, the full year current cost of supply (CCS) net income of $28.6 billion still lagged the earnings high Shell reported in 2008, of $31.4 billion.

FOURTH QUARTER DISAPPOINTS

Shell said its fourth quarter CCS net income was $6.46 billion, helped by one-off gains from the sale of assets.

Excluding one-offs, the result rose 18 percent to $4.85 billion, shy of an average forecast of $5.17 billion from a Reuters poll of nine analysts.

The miss is despite the fact analysts had recently cut back their forecasts in the light of weak trading statements from Shell’s rivals.

CCS earnings strip out unrealised gains or losses related to changes in the value of inventories, and as such are comparable with net income under U.S. accounting rules.

The company also announced a weaker rise in its dividend than some analysts expected, adding just 1 cent to its first quarter dividend for 2012, to $0.43 per share.

SOURCE ARTICLE

By Eduard Gismatullin – Feb 2, 2012 8:02 AM GMT

Royal Dutch Shell Plc (RDSA), Europe’s biggest oil company, expects to raise its dividend this year for the first time since 2009 as new projects generate more cash.

Shell plans net capital investment of $30 billion, with cashflow from operations in 2012-2015 expected to be as much as 50 percent higher than in the 2008 to 2011 period.

Chief Executive Officer Peter Voser said growth will be driven by more than 60 new projects, unlocking potential resources of more than 20 billion barrels of oil equivalent. That’s on top of 14 projects started in 2009-11, including Qatar’s Pearl gas-to-liquids venture.

“Our improving financial position creates an opportunity to increase both our dividends and investment levels,” Voser said today in a statement.

Net income fell to $6.5 billion in the fourth quarter from $6.79 billion a year earlier, The Hague-based Shell said. Excluding one-time items and inventory changes, profit missed analyst estimates.

Shell is the first of Europe’s biggest oil companies to report earnings. It will be followed by BP Plc on Feb. 7 and Total SA on Feb. 10. Exxon Mobil Corp., the world’s largest energy company by market value, reported fourth-quarter sales that fell short of analysts’ estimates earlier this week.

Shell posted adjusted earnings of $4.8 billion, compared with the $5.2 billion median estimate of 15 analysts surveyed by Bloomberg.

‘Substantial Undershoot’

“The overall result represents a substantial undershoot against a consensus which just three weeks ago was above $7 billion,” said Stuart Joyner, an analyst at Investec Bank Plc.

U.K. front-month natural gas prices are down about 20 percent since reaching a 2011 high of 67.80 pence per therm on Nov. 7. Milder weather in Europe and maintenance curbed Shell’s production by about 100,000 barrels of oil equivalent in the quarter, according to Sanford C. Bernstein & Co.

Shell will increase production to about 4 million barrels of oil equivalent a day in 2017-2018. Last March, it said daily output would rise to 3.5 million barrels this year and 3.7 million barrels by 2014.

Output fell 5.5 percent to 3.305 million barrels a day in the fourth quarter from the year-earlier period.

Profit was also curbed by maintenance at rigs in the Gulf of Mexico and the North Sea. Shell shut the Bonga field in Nigeria after an offshore oil spill, the nation’s worst in more than a decade. A fire disrupted shipments from Shell’s Pulau Bukom plant in Singapore, the company’s biggest.

Shell made a loss of $278 million from its refining and marketing operations, compared with a profit of $482 million a year earlier. Crude-processing fell 17 percent as sales dropped.

Refining margins from processing oil into fuels such as gasoline and diesel on the U.S. Gulf coast fell 22 percent to $7.16 a barrel in the fourth quarter from a year earlier, according to BP Plc data.

Of the 31 analysts that cover Shell, 21 recommend buying the shares, nine have ‘hold’ ratings, and one advises investors to sell the stock.

Shell plans to increase the dividend by 2.4 percent to 43 cents in the first quarter from 42 cents announced in the fourth quarter.

To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

SOURCE ARTICLE

Photo shows Sakhalin II, Russia’s first liquified natural gas project. Courtesy of Gazprom.

Hi John,

I case you haven’t seen it, looks like there has been a corruption conviction involving Sakhalin II.  Although the story below does not mention Sakhalin II by its exact name, the story says the project “is one of the largest integrated oil and gas projects in the world and involves the exploration and development of several different oil and gas fields in the Sea of Okhotsk off Sakhalin Island (part of the Russian Federation).”

http://www.egovmonitor.com/node/45943

That is how Sakhalin Energy describes the project, so I am sure its Sakhalin II!

Prison terms for corruption in oil and gas contracts

31 January 2012