Eric Wesoff 03 04 10

“It’s fun to be an oil and gas CEO.”

Santa Barbara, CA — Peter Voser, CEO of Royal Dutch Shell, traveled a long way to speak at the Wall Street Journal ECO:nomics show this morning.  To give you an idea of the mindset of this particular audience, when polled on their expectations of future fuels, the winning response was nuclear, followed by natural gas.  Which is probably accurate but not the response you’d get from a bunch of enviros.

Shell expects global demand for energy to double by 2050.

Take note: Shell has transformed into a natural gas company.  Since 2004, the oil giant has invested more than $15 billion in natural gas in the United States.  By 2012, they will have more gas production than other fuels, in what he referred to as a twenty- to thirty-year journey.  This is a telling trend.  Wind and solar are nice, but natural gas is what is going to keep the world powered.

Voser reminded the crowd that natural gas produces 50 percent to 70 percent less CO2 than coal and that Shell has been somewhat surprised by the volume of natural gas deposits in the U.S.

In Voser’s words, “We need gas, conventional oil, and all other sources.”  He added that we need coal with carbon capture and sequestration and electromobility.

Shell knows about automobiles and the CEO quoted a few facts, the scariest of which was that his firm expects the number of automobiles to double to two billion by 2050.  He shocked the crowd with his forecast on electric vehicles — Voser said that 40 percent of automobiles will be electric by 2050.   But if EV electromobility is powered by coal, “then we are shooting ourselves in the foot.”

When it comes to renewables, Shell is focused on biofuels and trying to get second-generation biofuels to be economical as well as working on wind power.

Not solar, though.  They have gotten out of solar, both in silicon and CIGS thin film.  Shell can’t see solar as something that they can scale up.  They are “leaving it to smaller and medium size players.”

They are also doing work in tar sands — although he likes the term “oil sands” — which accounts for 2.5 percent of their production.  He thinks of it as a technology of last resort.  They’ve waited 40 years to go after this resource and expect that oil sands can have the footprint of traditional oil.

Voser said, “We need a CO2 price, not a tax,” although he is “skeptical” about energy legislation passing in the U.S. this year.  He added, “What we want is energy legislation which drives supply security and which generates new jobs but also preserves old jobs.”

Voser was in full agreement with T. Boone Pickens on focusing on the U.S.’ own reserves of natural gas “instead of buying oil from our enemies.”

SOURCE ARTICLE

The database featured a letter that set out criticism of Shell’s activities in Nigeria

The Times
February 12, 2010
Robin Pagnamenta, Energy Editor

Oil firm will sell 15% of refinery operations and slow down tar sands projects as fourth-quarter profits fall by 75%

• Oil company hit by cheaper energy prices and lower refining margins in 2009
• BP chief executive sees ’slow and gradual’ economic recovery in US and Europe

Katie Allen
Tuesday 2 February 2010 08.10 GMT

BP’s Thunder Horse platform before it was towed to the US Gulf of Mexico. The platform came online this year Photograph: Michelle Christenson/AP

BP has reported a sharp drop in profits in 2009 as it grappled with cheaper energy prices and squeezed margins on refining.

The oil company said underlying profits in the fourth quarter rose 70% on a year earlier to $4.4bn (£2.75bn), but that missed the City’s forecasts. The year as a whole suffered a 45% fall in profits to $14bn.

Still, BP sought to flag up a stronger-than-expected 4% rise in oil and gas production in 2009 thanks to the start-up of new projects, including the first full year of production from the Thunder Horse field in the US Gulf of Mexico.

In a statement, Tony Hayward, the chief executive, said that BP had still exceeded many of the aims he had set out at the start of 2009 and described it as a “very good” year overall.

He said BP expects recovery in the major economies of the US and Europe to be “slow and gradual”. While oil markets look well supported by Opec, BP expects gas markets to remain volatile and refining margins to remain depressed for the foreseeable future.

“2009 has been one of the best years for BP and its shareholders since the merger with Amoco [in 1998]. But we are not resting on our laurels. There’s a lot more to be done,” said Hayward.

BP’s results echo news on Monday from ExxonMobil, the world’s largest publicly traded oil company, that profits slumped to $19bn in 2009 from $45bn as it too battled against declining margins at its refineries and weaker demand for fuel in recession-battered economies.

SOURCE ARTICLE

The Movement for the Emancipation of the Niger Delta (Mend) called off its ceasefire just hours before an attack on three fuel pumping stations operated by Royal Dutch Shell. The company confirmed on Monday it was forced to partially shut down production following the sabotage assault on the facilities, in the south-eastern Bayelsa state.

IBADAN, Nigeria (Dow Jones)–Shell Petroleum Development Co., or SPDC, has closed some production following the sabotage on its Trans-Ramos Pipeline in its western operations in Nigeria, a spokesman said Monday.

LAGOS, Nigeria—Vandals over the weekend punctured an oil pipeline operated by Royal Dutch Shell PLC, say Nigerian military and security officials, highlighting how an illicit oil-theft industry in the creeks of the Niger Delta continues unchecked.

Feb. 1, 2010, 10:49 a.m. EST: NEW YORK (MarketWatch) — Crude futures rose on Monday after declining last week, as a round of upbeat global economic reports lifted demand expectations, while an oil pipeline in Nigeria was damaged by an attack and rekindled concerns over supply.

Sunday Telegraph

BP expected to exend gap with Shell in the battle of oil giants

The British oil major, now the biggest in Europe, is currently winning the race against its Anglo-Dutch rival

By Rowena Mason
Published: 8:12PM GMT 30 Jan 2010

Royal Dutch Shell is likely to endure more humiliation at the hands of BP this week, when it posts profits an estimated $1.7bn lower than its rival.

BP, which recently stole Shell’s crown as Europe’s largest oil company by market value, is likely to report profits of $4.6bn (£2.9bn). This 80pc up from $2.6bn in the last quarter of 2008 on a “replacement cost basis – a measure used by oil companies to strip out the effect of changing inventories.

BP is reaping the harvest of an aggressive $4bn cost-cutting drive that began before the recession and doubled in pace last year.

Meanwhile, analysts have been downgrading the forecasts for Shell’s profits over concern that its refining business has been performing below expectations.

According to consensus estimates, it is likely to report that profits have fallen to $2.9bn from $4.8bn in same quarter of the 2008, when it reports on Thursday.

Shell started cutting costs much later than its rival, resulting in 5,000 job losses during the downturn.

Its chief executive Peter Voser warned last week at the Davos economic summit that there were likely to be more redundancies this year.

“It’s normal in any business that you have to go further and you have to operate your operating expenditure in a very tough way,” he said, sounding a cautious note on global recovery. “As part of that, it may also mean that some more people have to go.”

Both the companies’ profits are expected be down sharply for the year – in the case of BP, 40pc lower at $15bn, and more than 60pc down at $11.4bn for Shell.

The first US oil company to report, Chevron, showed on Friday the difficulty of maintaining healthy profits when refining margins remain low, with hefty losses in that division.

The corporation posted a 37pc fall in quarterly profits, as the cost of producing petrol and diesel prices failed to keep up with a big rise in the cost of crude oil.

The second-largest oil company in the US made a net profit of $3bn between October and December, down 37pc from in 2008.

Data from BP shows that companies are now making just $1.49 per barrel of petrol product, compared with $5.19 a year ago.

Downstream divisions – responsible for refining, marketing and selling petrol-based products – are expected to suffer at all the majors, owing to lower demand in the recession. Many oil companies are frantically trying to offload their refineries, concerned about overcapacity in the industry.

Shell is in the process of selling its UK-based Stanlow refinery in Cheshire to Indian company Essar and three others in Europe.

A higher oil price of $76.13 in the fourth quarter – almost a third above last year – will have supported profits in the exploration and production arms.

But BG Group, the oil and gas producer, is still likely to report pre-tax profit of £1.05bn on Friday – down 10pc from £1.16bn a year earlier, with annual profits 23pc below last year’s £4.1bn.

Analysts often see discrepancies between BP and Shell’s performance as merely part of the cycle of rivalry between the two companies.

BP rose by 19pc on the stock market this year and boosted production to 3.9m barrels, while Shell fell by 3pc and saw its output drop below 3m barrels.

“Shell began restructuring last year, so is lagging BP, and furthermore its massive capex expenditure in recent years does not see new volumes start to kick in until 2011-2012,” said Richard Griffith, an analyst for Evolution Securities. “On balance, earnings won’t look great when they’re announced but we see more scope for positive surprises at BP and less dividend risk.”

Most industry experts are more concerned with the expected dash for new production assets in the aftermath of the recession than any temporary drop in profitability.

Citi analyst Mark Bloomfield said: “We expect the focus to shift from a defensive cost-saving mode towards pursuit of opportunities for expansion.”

This shift in emphasis towards new projects has led some City investors to favour Shell over BP.

Mr Voser has promised that Shell would commit to record capital expenditure. It is forecast to see a boost in output from European gas and Nigeria this year and, looking to 2013 and beyond, it will see new prospects at its Qatar gas-to-liquids project, and the Canadian oil sands come on stream. The company has staked its future on a number of technically difficult fields, including unconventional reserves in Canada and deepwater projects in the Gulf of Mexico and Brazil.

BP will also increase production over the next couple of years and is exploring deep drill sites in the Gulf of Mexico and under the Arctic ice.

However, it lacks its competitor’s big flagship projects to lift future output.

Sunday Telegraph Article

Created: 27 January 2010

Written by: Daniel O’Sullivan

Royal Dutch Shell chief executive Peter Voser cannily chose the safe ground of an exclusive interview with the Financial Times to finally admit the all-too-obvious – the Canadian oil sands development Shell has touted as a major growth driver is instead a costly distraction, on which time is now being called. Mr Voser said the massive expansion the company had previously planned for its Athabasca Oil Sands Project (AOSP) – envisioning growth from the current 155,000 barrels per day (bpd) capacity to an eventual 770,000bpd – was now ‘”clearly scaled down” and would be “very much slower”.

Over the past few years Shell has emphasised heavy investment in so-called ‘unconventional’ hydrocarbon sources, both Canadian oil sands and gas-to-liquids projects elsewhere, as a substitute for the new conventional oil and gas resources the company has been notably lacking since its reserves-booking scandal of 2004. But the relatively high costs of new oil sands developments in particular mean scant profits with oil prices anchored stubbornly in a $70-$80 a barrel trading range. As recently as November, Shell oil sands head John Abbott indicated the in-construction $14bn (£8.69bn) AOSP Expansion 1 project, coming onstream later this year to boost total AOSP output to 255,000bpd, needs oil prices around $60 per barrel just to break even. And new investments would require higher prices.

Two previously-slated medium-term expansions of 100,000bpd each are on ice indefinitely, and any serious AOSP growth beyond de-bottlenecking, which could add perhaps some 100,000bpd in small increments by 2020, seems moot. Mr Voser was not questioned on what this strategic U-turn means for Shell’s resource base, defined as its portfolio of hydrocarbon exploitation opportunities not yet migrated into developed reserves. But the effective scrapping of further large-scale AOSP growth will presumably have a material impact – while oil sands currently account for 8.4 per cent of proved Shell reserves, totalling 11.9bn barrels-of-oil-equivalent (boe), they were previously thought to account for perhaps a third of Shell’s total resource base, estimated at 66bn boe.

IC VIEW

We have been saying for years that the unconventionals strategy would come a cropper. Mr Voser said Shell would now concentrate again on conventional hydrocarbon development. But he played down the need for acquisitions to bolster the new direction, saying they were hard to justify ‘if you don’t have a strategic hole somewhere you want to fill’. But we think this is exactly Shell’s problem. High enough at 1714p.

INVESTORS CHRONICLE ARTICLE