Posts Tagged ‘Gulf of Mexico’

Jan. 11 (Bloomberg) — BP Plc is poised to unseat Royal Dutch Shell Plc as Europe’s largest oil company by market value for the first time in more than three years after reviving output growth and cutting costs at a faster pace.

BP rose as much as 2.7 percent to 638.30 pence, the highest price in almost 20 months, and traded at 634.20 pence as of 3:15 p.m. in London. That valued the company at 118.979 billion pounds ($192 billion). Shell added as much as 1.6 percent to 1,941 pence, and was last at 1,928 pence, giving it a market value of 118.346 billion pounds.

More than two years into a turnaround program at London- based BP, Chief Executive Officer Tony Hayward has reversed a decline in output by ramping up operations in the Gulf of Mexico and doubled a cost-savings target. Peter Voser, who heads Shell, is now taking similar steps to reduce spending and cut jobs. A close at current levels would be the first time BP has been worth more than Shell since October 2006, Bloomberg data show.

“BP seems the most likely of our coverage group to pursue more material opportunities given the funding headroom, greater scope to deploy stock and potential areas of strategic interest,” Mark Bloomfield, a London-based analyst at Citigroup Inc., wrote today in an e-mailed report. He raised his recommendation on BP shares to “buy” from “hold.”

Hayward pledged in October 2007 to catch up with competitors and regain investor confidence after a fatal explosion at a U.S. refinery in 2005 and delays in starting projects dragged the share price down.

Production, Costs

BP raised production to 3.9 million barrels of oil equivalent a day in the third quarter. The London-based producer expects cash costs to have been around $4 billion lower in 2009, compared with an initial forecast of $2 billion.

Shell, whose production has dropped below 3 million barrels of oil equivalent a day, has already cut 5,000 jobs. It’s also reorganized management by erasing 20 percent of senior posts.

Shell and BP both reported lower third-quarter earnings as the economic slowdown eroded demand for energy and dragged down the price of crude and fuels.

The recession has forced oil producers and refiners to delay projects and sell units, protecting dividends in anticipation of higher prices in the years ahead. U.S. oil futures, which touched a record $147.27 a barrel in July 2008, averaged $62.03 a barrel last year.

‘Difficult’ Year

Voser said the world economy hasn’t fully recovered and that 2010 will be a “difficult” year, according to an interview in the company’s internal magazine Shell Venster. The company is holding talks with Essar Oil Ltd. to sell its Stanlow refinery in northwest England and the Hamburg and Heide refineries in Germany, David Williams, a spokesman at The Hague- based company, said today.

BP, which doesn’t plan to sell refineries or shut down capacity, has said global refining margins fell about 71 percent in the fourth quarter from a year earlier.

Shell is developing projects in Qatar and Malaysia to revive production growth. Record investment in 2009 let Voser expand an oil-sands venture in Canada and deep-water projects in the Gulf of Mexico and Brazil. Shell aims to increase production from existing reserves through 2020 by starting new projects that can pump more than 1 million barrels a day.

Citigroup Recommendation

Shell’s “operational story emerging over the next 12-24 months should be a powerful mix of growth, potentially sustainable beyond 2012,” Citigroup’s Bloomfield said. “The valuation gap will narrow over the forthcoming 12 months. We continue to prefer Shell to BP.” Citigroup recommends investors buy Shell shares.

BP said Sept. 2 its giant Tiber prospect in the U.S.’s deep waters of the Gulf of Mexico may hold 3 billion barrels of crude and gas. The find will help it boost pumping in the region by 50 percent to 600,000 barrels of oil equivalent a day after 2020.

BP became the largest oil and gas producer in the region after boosting output from the Thunder Horse platform and bringing the Dorado and King South fields on stream.

Investor confidence in BP shrank after a 2005 explosion at the company’s Texas City refinery that killed 15 people and injured hundreds. BP admitted responsibility for the blast and settled most of more than 4,000 claims out of a $2.1 billion fund. The U.S. Occupational Safety and Health Administration in October said it imposed a record $87 million fine on BP for its failure to correct safety lapses at the plant.

To contact the reporters on this story: Fred Pals in Amsterdam at fpals@bloomberg.netEduard Gismatullin in London at egismatullin@bloomberg.net

Last Updated: January 11, 2010 10:25 EST

By “Jo Blow”, a Shell/Motiva Insider.

I was asked to provide commentary on the email below which is a Shell/Motiva leaked email provided to this site by another insider.  This email is believed to be authentic and authored by the sender Tom Purves, Regional Vice President of Downstream Manufacturing for The Americas Gulf Coast Region.  The email was sent to the General Manager of the Motiva Norco Refinery, some site and corporate business planning people, and several finance people.

The purpose of the email appears to outline key cost reduction and margin improvement opportunities along with associated dollar values as it relates to integrating the Shell Norco Chemical Facility with the Motiva Norco Refinery. These two sites are situated side by side along the Mississippi river just outside of New Orleans Louisiana.  This will not be the first time in the history of these sites that they have operated as an integrated facility.

In the email Mr. Purves outlines his expectations for what is to be included in the business plan as it relates to integration of the sites.  It is not surprising that staff reductions in the salaried ranks is recognized as a key cost reduction driver in integrating the sites.  With the sites operating as an integrated facility, the other improvements mentioned in the email should be fairly easy to realize.  This email seems to confirm the following quote from a recent blog posting by “Norco Scum”.

“Now Purves has demanded an additional $2 million in personnel cuts from each of SCC and Motiva at the site by the end of the year, beyond the SPI target. So, hang on, more to come.”

However painful of an exercise this is, the benefits for integrating the sites will actually deliver a strengthened position for the Norco Site within the downstream asset portfolio.  Shell/Motiva must position itself in the short term to weather the current business environment, which is forecast to continue for the next few years.  The cost reduction initiatives already initiated, and the yet to be implemented cost reduction initiatives will likely mean the difference between posting a profit or posting a loss for manufacturing.

In closing, I would like to offer a couple of my observations and opinions as it pertains to this email.  At face value the email and its directed actions is exactly the sort of communication I would expect from Mr. Purves or any other Senior Executive with similar responsibilities.  Tough as it will be from a personnel standpoint for those affected, it will benefit the many that will not be affected.  To realize the savings in maintenance synergies, tankage utilization, and hydrocarbon margin improvement mentioned in the email, it will take the dedicated employee’s at Norco to identify and implement the nuts and bolts of these opportunities both during and after integration.  When you put that in perspective, it becomes paramount to the integration plan’s success for Mr. Purves and his Team to properly manage employee engagement.

LEAKED EMAIL FROM TOM PURVES, SHELL/MOTIVA VP, Manufacturing Gulf Coast

—–Original Message—–

From: Purves, Tom SOPUS-DMG-DMM

Sent: Saturday, August 29, 2009 1:04 PM

To: Ainsworth, Anne-Marie N MOTIVA-DMM/6; Bundick, Hermie L SCC-DMG/8; Howell, Art SDIUS-DFM/675; Co, Quennie L SDIUS-DFM/67; Marczak, Kristin M MOTIVA-DMM/647; Henning, Laurel F MOTIVA-DFC/13

Cc: Bolter, Anthony J SDIUS-DFM/7; Luijten, Marcel P MOTIVA-DVM/3; Pease, Robert W MOTIVA-DVM

Subject: Business Plan Premises for Norco Site Integration

I have now read through and digested all of the notes that have gone around among many of you while I was on vacation. Here is what I would like to build into the business plans for both Motiva Norco and Shell Norco regarding site consolidation.

Salaried Staffing Synergies – reduction of salaried staff and management between the two sides over and above what is already premised with the SPI 100 efforts that have been pursued independently thus far. I recognize that there have already been some limited departmental level consolidations. The premise number to be used in the plans will be $4mln per year split equally between Shell and Motiva. I expect the sites to translate this into specific reductions in people once the site is consolidated. I will need a preliminary estimate of how this is going to happen for discussion in the biz plan. You can bring that to the challenge sessions.

Maintenance Synergy – includes better contractor utiliztion through integrated planning and scheduling, single point control of contract resources, consistent prioritization and supervision and a significant improvement in the use of maintenance material. This is over and above what has already been achieved by the two sites independently. The premise number will be $8mln per year split equally between Shell and Motiva.

Tankage Utilization Improvements – includes reduced tankage rationalization and optimization of working capital including short term opportunities for segregations, additional storage or other movement opportunites to take advantage of the immediate marketplace. This is largely a margin capture item. The premise number will be $1mln per year split equally between Shell and Motiva.

Hydrocarbon Margin Capture Through Unit Operating Options – includes stream routings and unit operational options that create short term opportunities to capture value in the immediate marketplace. This is entirely a margin capture item. The premise number will be $10mln per year split equally between Shell and Motiva.

Thus the benefits we will build into the plan will reflect a $12mln savings for each site in 2010 over what we would have built for each site independently.

I have seen some notes that escalate the margin capture year on year. I am open to that possiblity but I don’t see how that is going to happen beyond the general growth in margins. To that end, if we want to escalate the $10mln in margin savings at 2010 premise margins to “margin of the year”, I could support that. I’d like Tony and Marcel to weigh in on the appropriateness of that approach.

Kristin, Quennie/Art – we will need a specific slide to descirbe this in both the Motiva presentation and the Global M material. Not sure how to translate this into the templates so I leave that to you.

If anybody has a concern or question, please raise it quickly. Thanks…

Tom Purves

Vice President Manufacturing Gulf Coast

Houston One Shell Plaza Room  1236B

Office Telephone              713-241-6363

US & International Cell     713-301-5042

Chevron has a 60% interest in Big Foot. Norway’s StatoilHydro ASA and Royal Dutch Shell PLC have stakes of 27.5% and 12.5%, respectively. A stake sale of 12.5% would reduce Chevron’s holding to 47.5%.

Still, some prospects received large bids in this year’s sale: a subsidiary of Royal Dutch Shell put up $65.6 million, the highest single bid on a tract.

Floating in waters about 8,000 feet (2,400 meters) deep, Perdido, run by Shell for partners BP Plc (BP.L) and Chevron (CVX.N), is the deepest such project in the world, Shell said in a news release.

In an unusual move prompted by concerns about the safety of a widely used model of Sikorsky helicopter, Royal Dutch Shell PLC’s U.S. unit has temporarily grounded a fleet of the choppers, and instead is relying on boats to take most workers to and from oil platforms in the Gulf of Mexico.

Oil industry officials and air safety experts said Shell’s decision is one of the rare instances when a major user or operator has temporarily halted flights of such a large number of the popular, 12-person choppers. The Sikorsky spokesman said Shell continues to use the models in other parts of the world.

The Financial Times reported last month that Royal Dutch Shell had the highest mortality rate of any large western oil company, with two employees and 28 contractors dying in the line of duty in 2007.

NEW YORK, Dec 9 (Reuters) – Shell Oil said it continued to ramp up Gulf of Mexico oil and gas production shut for hurricanes Gustav and Ike this past October.

HOUSTON: Current Shell operated production from the Gulf of Mexico is now over 400,000 BOE/d, while Shell’s net production, including both operated and non-operated production, from the region is around 310,000 BOE/d.