Mail on Sunday: Oil rules Footsie as Shell tie-up looms

Mail on Sunday: Oil rules Footsie as Shell tie-up looms

“Shell, which admitted last week that the cost of its giant project on the Russian island of Sakhalin had doubled to £11bn, has now run into problems with a much-delayed £650 million gas project in western Ireland, writes Tom McGhie. The largest infrastructure project in Irish history is being held up by the Mayo Five – a retired teacher, a singer and three farmers – who are refusing to allow Shell to build a pipeline across their land. They are in jail for breaching a High Court injunction preventing them from blocking Shell trucks.”

Sunday 17 July 2005

Simon Watkins,

17 July 2005

OIL is poised to become the dominant sector in the London stock market this week, challenging even the boom in technology shares in the late Nineties.

On Wednesday, Shell merges its British and Dutch arms and will list the combined group in London. This will massively boost Shell’s prominence in the FTSE 100, meaning oil and gas companies will account for more than a fifth of the value of the blue-chip index.

BP, the biggest oil group, will represent 10% of the Footsie, while Shell will account for a further 9.5%. When BG Group is added, the whole sector will make up 21% of the index.

The only other time the market has been so dominated by a single industry was during the technology and telecoms surge of the late Nineties. At its peak at the end of 1999, technology and phone companies accounted for 23 per cent of the market. By 2001, the technology boom was in reverse and the slump in computer and telecom-related shares dragged the Footsie into a long-running bear market.

Analysts say oil group domination poses less of a threat to Footsie stability because, unlike dotcoms, the high value of oil and gas groups is based on real profits fuelled by the soaring price of crude oil.

Shares in BP and Shell have been driven higher as the price of crude oil has climbed to its current level close to $60 a barrel. Hilary Cook, investment strategy director at Barclays Stockbrokers, said: ‘This makes the FTSE 100 more vulnerable to a fall in the price of oil, but as prices are likely to stay high for some time that is not a worry.’

Shell, which admitted last week that the cost of its giant project on the Russian island of Sakhalin had doubled to £11bn, has now run into problems with a much-delayed £650 million gas project in western Ireland, writes Tom McGhie.

The largest infrastructure project in Irish history is being held up by the Mayo Five – a retired teacher, a singer and three farmers – who are refusing to allow Shell to build a pipeline across their land.

They are in jail for breaching a High Court injunction preventing them from blocking Shell trucks.

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