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January, 2006:

The Times: Look ahead

Royal Dutch Shell is expected to report the biggest profits performance in UK corporate history when it announces its fourth-quarter results on Thursday.
Analysts expect the oil and gas group to reveal that it made $23.03 billion (£12.9 billion) last year, up from $17.59 billion over the previous 12 months.
Shell is expected to report earnings of $5.48 billion in the fourth quarter, compared with $5.22 billion over the same period in 2004.
Damage caused by hurricanes in the Gulf of Mexico has meant that production in 2005 will be about 3.5 million barrels of oil a day — at the bottom end of the target range. The group said recently that the cost of repairing damage to rigs and refineries would be about $350 million, although most of this would be covered by insurance. read more

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Daily Telegraph: The week ahead

A guide to company results and meetings, and economic statistics
Royal Dutch Shell is expected to unveil record profits for a British company fuelled by a steep increase in oil prices over the past year.
The oil giant's fourth quarter results on Thursday are expected to push the company's annual earnings up to a record $23billion (£13billion).
Also this week, US oil giant Exxon Mobil is expected to post the world's biggest-ever profit of about $32billion and BP is expected to continue the trend with profits of around $22billion reported on February 7.
At Shell, analysts' consensus forecast for current cost of supplies earnings, the standard measure used in the oil industry, is $5.5billion for the three months to December.
For the nine months to September Shell earned $17.5billion compared to $12.4billion earned in the same period a year earlier.
The earnings would be the highest ever reported by a UK-listed company, beating the record $17.6billion posted by Shell a year ago. read more

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Daily Telegraph: Refiners urge Brown to rethink

By Roland Gribben (Filed: 30/01/2006)
Pressure is growing on the Government to end opposition to the creation of a new agency to control Britain's strategic oil stocks, amid worries about the future of the refinery business.
The Chancellor Gordon Brown has been reluctant to support the move because he is concerned the Government may end up being exposed to a huge financial obligation by effectively underwriting the oil stocks.
BP, Shell, Esso and independent oil companies along with importers and petrol retailers, including Tesco and Sainsbury, are attempting to persuade him to change his mind, and pointing out that by adopting the Stockholding Agency framework used in other EU states the Government will not be exposed to financial risk.
At present, oil reserves are held by oil companies without any cost to the Government, although Alan Johnson, Trade and Industry Secretary, is responsible for administering them.
Under existing rules BP, Shell and other oil majors with refineries in Britain are required to hold the equivalent of 67.5 days' sales while supermarkets and other non-refiners have a smaller 48.5 days' obligation.
Oil companies and supermarkets believe an agency would be better placed to administer stocks and ensure they were meeting obligations. They feel their arguments have been reinforced by confusion surrounding specific stocking requirements covering particular products.
One industry executive said: “It's very frustrating. We've been talking to the Government about setting up the agency for three years now and there's been little progress.”
The unity in the industry on the agency issue masks wide differences between the oil majors and supermarkets on other stocking and strategic issues. BP and Shell are pressing the DTI to end the stocking differential with supermarkets and refiners, arguing that Britain is the only EU country with a two-tier system.
They maintain the current set-up is anti-competitive, penalises domestic refineries, and will not survive changes in the industry or the longer-term need to fall in line with the EU's 90-day stock obligation. Britain has been given a dispensation because North Sea oil provides a “reserve cushion”, but as offshore production runs down stocks will need to rise.
Supermarkets, faced with a massive bill to bring them into line and anxious to protect their 33pc share of the petrol market, have mounted strong opposition to the move. They have told ministers that “big oil” is trying to shackle them and undermine their competitive position read more

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AFX Europe (Focus): Hostage oil workers released in Nigeria – official UPDATE

LAGOS (AFX) – Four foreign oil workers who had been held hostage by Nigerian separatist militants for 19 days have been released by their captors, a state government spokesman told Agence France-Presse.
“They've been released. They're with the governor right now. They're very OK,” said Bayelsa State spokesman Ekiyor Welson, speaking by telephone from the state capital Yenagoa.
A British diplomat and an official of the energy giant Royal Dutch Shell said that they are checking the report.
On January 11 a heavily armed ethnic Ijaw militia riding speed boats boarded the oil industry supply vessel Liberty Service off the coast of Bayelsa and captured four crew members.
The boat's American skipper Patrick Landry, British security expert Nigel Watson Clark and engineers Milko Nichev of Bulgaria and Harry Ebanks of Honduras have since been held in Ijaw areas of the Niger Delta.
Statements from the hostage-takers demanded that the Nigerian government release two prominent Ijaw leaders from jail and that Shell pay 1.5 bln usd in compensation to villages polluted by oil spills.
There was no initial information on what kind of a deal, if any, had been struck with the kidnappers to secure the shipmates' release.
[email protected]
afp/jlw/jlw read more

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The New York Times: Nigerian Militants Free Foreign Oil Workers

By REUTERS
Published: January 30, 2006
Filed at 2:39 a.m. ET
YENAGOA, Nigeria (Reuters) – Nigerian militants released four foreign oil workers on Monday, ending a 19-day hostage crisis that also saw Nigerian oil output cut by a tenth.
The hostages — an American, Briton, Bulgarian and Honduran — were abducted from an offshore oilfield in the southern Niger Delta on January 11, one of a series of attacks on the oil industry in the world's eighth largest exporter.
“They have all been released. They are all alive and well,'' said the spokesman for the southern state of Bayelsa.
The militants had demanded more local control over the delta's oil wealth, compensation for oil pollution to villages in the vast wetlands region and the release of two Ijaw leaders. The Ijaw are the biggest ethnic group in the delta.
Diplomats and militants said it was unlikely that the release of the hostages would mark the end of attacks on oil platforms and pipelines, which have forced Royal Dutch Shell to close 221,000 barrels per day of production.
“I think there will be more attacks,'' said a security consultant for a multinational oil company in Nigeria.
A militant Ijaw group with apparent links to the kidnappers sent an email on Sunday agreeing to the hostages' release as a goodwill gesture to the international community.
“The Movement for the Emancipation of the Niger Delta has agreed to release the four hostages on humanitarian grounds as an offer of goodwill to the people of the world,'' said the statement, signed by imprisoned Ijaw militia leader Mujahid Dokubo-Asari.
The kidnappers had demanded freedom for Asari, who is standing trial for treason, as one condition for releasing the hostages.
A militant source involved in the negotiations said the government paid 100 million naira ($770,000) as a ransom to the kidnappers.
On Sunday, police said about 20 armed men stormed the headquarters of a South Korean oil services company in the delta and stole more than $300,000 in the latest attack on foreign firms. There were no casualties.
The attack occurred only five days after nine men were killed during an attack on the offices of Italian oil company Agip, a unit of ENI. The attackers robbed a bank on the premises.
The militants' violent campaign has forced Shell to remove more than 500 employees from the delta.
Oil unions have threatened to withdraw from the delta, which produces almost all of Nigeria's 2.4 million barrels a day of oil, if security deteriorates further.
With oil markets already nervous about tension between the West and Iran, the unrest in Nigeria's oil heartland has contributed to a rise in prices to four-month highs of more than $67 a barrel. read more

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The New York Times: Oil Pushes Over $68 as Iran Talks Overshadow OPEC

By REUTERS
Published: January 30, 2006
Filed at 1:19 a.m. ET
SINGAPORE (Reuters) – Oil prices climbed half a dollar to above $68 a barrel on Monday, shrugging off a likely rollover in OPEC production to focus on key talks over Iran's nuclear program and more militant attacks in Nigeria.
U.S. light crude climbed 46 cents to $68.22 a barrel after soaring $1.50 a barrel on Friday. Prices are up more than $7 this year and touched $69.20 a barrel a week ago, the highest since Hurricane Katrina hit the U.S. Gulf Coast last summer.
London Brent crude climbed 55 cents to $66.79.
OPEC's meeting in Vienna on Tuesday is being overshadowed this week by talks on Iran, with the United States and European Union powers gathering later on Monday to try to convince Russia and China to back tough diplomatic action to prevent Tehran from continuing with its nuclear activity.
On Thursday, the U.N.'s International Atomic Energy Agency will hold an emergency session at which the board could decide to send Iran to the U.N. Security Council, a move traders fear could prompt Tehran to consider using its oil as a political weapon.
“The market has the same buy factors — Iran and Nigeria — and now increasing tension ahead of the IAEA meeting could drive the market higher,'' said Naohiro Niimura, vice president of the derivatives unit at Mizuho Corporate Bank in Tokyo.
Concerns over supplies from the world's fourth-largest exporter, as well as lost output from Nigeria, have added fuel to a market ignited by a new flood of fund money into the commodities complex, which has performed strongly for two years.
Last week's robust U.S. inventory levels, a pledge from Saudi Arabia to fill supply gaps and the promise of an emergency release from Western government stockpiles if Iran or Nigeria halted exports failed to reverse the rally.
Although OPEC producers remain concerned over the seasonal dip in second quarter demand, most agree the Organization of the Petroleum Exporting Countries has little choice but to keep output steady at near a 25-year high when it meets on Tuesday.
“I think we should leave things as they are,'' Algerian Energy and Mining Minister Chakib Khelil told reporters in Vienna on Sunday. “We will look again in March.''
Saudi Oil Minister Ali al-Naimi went a step further, saying he saw no reason to cut production at any time this year.
OPEC is scheduled to meet again on March 8, also in Vienna.
In Nigeria, where major producer Royal Dutch Shell has already shut in over 200,000 barrels per day (bpd), around 20 armed men stormed and robbed a South Korean oil services firm on Saturday, the latest attack on a foreign oil company.
In a positive step, the Nigerian government said on Monday that four foreign oil workers who had been abducted from a Shell platform nearly three weeks ago had been released and were well.

Disruptions to Russia's natural gas supplies to Europe and some of its former Soviet neighbors have also unsettled traders and lifted oil demand. Exports to Georgia began flowing again on Sunday, a week after pipeline explosions cut supplies, while supplies to Italy improved over the weekend.
Norway, the world's third-biggest oil exporter, joined the list of supply concerns after a small oil workers' union said on Friday it would consider a strike to halt production at the Oseberg field if talks on a wage deal failed.
More Articles in Business > read more

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Financial Times: Filtronic aims for predictability

Published: January 30 2006
MONDAY
*Filtronic, which is due to report its interim results, has “a long record of not meeting expectations”, according to one analyst. Today's announcement will provide clues as to whether the company, which makes microwave electronics for the wireless telecommunications and defence industries, is moving into more profitable and predictable times following the sale last year of its LK handsets business. That allowed Filtronic to pay down debt and reinvest in areas with greater growth potential, such as its wireless infrastructure operation. Last month, the company said trading in wireless infrastructure and in its integrated products division was in line with expectations. But the first-half results will contain a £1m charge linked to the closure of its Australian wireless infrastructure operation and a US semiconductor sales office. With that and the loss of the handsets business, Filtronic may post an interim operating loss.
TUESDAY
*ARM Holdings, the chip designer, will be under pressure to show it has managed to turn round flagging licence sales when it reports full-year results. The company, whose chip designs are used for devices, such as mobile phones and iPods, was forced to lower annual forecasts twice in the past six months owing to weak licensing. Consensus forecasts are for pre-tax profit of £78.7m on revenues of £230.9m for the 2005.
WEDNESDAY
*British Sky Broadcasting, the satellite television group that will be releasing its second-quarter results, announced at the end of last year that it had reached the 8m target subscriber figure. Analysts expect the net additional subscribers during the quarter to December to total about 180,000, with churn at about 10.8 per cent. Investors will also be looking for further guidance on how Easynet, the broadband group BSkyB bought for £211m, will add value.
THURSDAY
*AstraZeneca's results, which are predicted to be in line with expectations, should have a settling effect on investors, due to strong sales of heartburn treatment Nexium, as well as cost cutting and a share buy-back programme. Earnings per share are expected to be about $2.90, up by more than 30 per cent, hitting the group's earlier guidance of between $2.85 to $2.95. Sales are predicted to be just under $24bn (£13.5bn). But in his first set of results as chief executive, David Brennan, is likely to face questions about where future growth will come from in the face of a dwindling pipeline and theprospect of generic competition to some of its starperformers.
FRIDAY
*Royal Dutch Shell will unveil its fourth-quarter and full-year results, which promises to be as high-profile an event as ever. At the end of last year, the group pledged to spend an extra $4bn (£2.2bn) a year on finding new reserves of oil and gas, in part, to replace those Shell had previously overstated. The market will be eager to hear the latest news on where Shell's reserves stand and where it thinks the best prospects are for new oil discoveries. Shell is likely to be asked about the progress of its mammoth Sakhalin project in the far east of Russia, which the company last year admitted was running late and over-budget. The group is also expected to update the market on the status of the Mars platform in the Gulf of Mexico, which was shut down by hurricanes last year. read more

This website and sisters royaldutchshellgroup.com, shellnazihistory.com, royaldutchshell.website, johndonovan.website, and shellnews.net, are owned by John Donovan. There is also a Wikipedia segment.

Financial Times: Streamlined websites net top graduates

By Jon Boone, Education Correspondent
Published: January 30 2006
Top companies are pouring resources into their recruitment websites as the battleground for scooping up top graduates has moved from university career fairs to the internet.
According to the second annual study of 102 corporate career websites, published today, leading companies were busy in 2005 relaunching their online recruitment efforts in order attract top talent.
Ernst & Young, the professional services firm, was rewarded for its relaunch by rising 22 positions to sixth favourite website among the 4,339 students from across Europe surveyed by Potentialpark Communications, a Swedish recruitment consultancy.
Stevan Rolls, head of recruitment at Ernst & Young, said the firm's global site had needed an overhaul as the recruitment market has got “a bit tighter”.
“We realised the old site had an awful lot of information on it and we decided to design something that better reflected what students tell us they want. That meant simplifying things and cutting out a lot of excess information.”
Potentialpark said companies were learning to make sparing use of such fashionable web tools as blogging and podcasts because simplicity and ease of use are more important to many jobseekers.
Goldman Sachs also rose 43 positions to 13th place after the investment bank overhauled its website.
Torgil Lenning, a consultant at Potentialpark, said: “It is great to see that so many companies are relaunching their career websites. If all companies did work this way, the employment market would be much smoother.”
HSBC, another company that enjoyed a 49-place rise to 14th position, said it had involved students in the design of their new website.
John Morewood, from the bank's graduate recruitment department, said the streamlined website, which is designed to be used by potential applicants worldwide, had already led to an increase in the number and quality of applicants.
“We have been able to fill up particular programmes much faster than in previous years because we have seen an improvement in the quality of candidates applying this year.”
Carl Gilleard, chief executive of the Association of Graduate Recruiters, said the large amounts of resources that companies are prepared to dedicate to their career websites was an indication that the battle for top graduates has become fiercer.
“When recruiters first started using the web they were taken with the novelty of it and the content was not so good. Now that the net has become such a vital tool they are all working hard to attract as many people as possible by improving the user-friendliness of their sites.”
The website that European students chose as their favourite was Shell, which has moved up from number 11 last year. The oil giant was followed by ABB in second place and then Siemens and Procter & Gamble.
Navjot Singh, head of recruitment at Shell, said the secret of a good career website was to keep things simple and not burden the user with onerous requests for information about themselves.
“Too many of these online application forms ask for huge amounts of data – you don't, for example, need someone's date of birth just so they can receive an e-letter about jobs going at Shell. Candidates will want to know how that information is going to be used.” read more

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The Observer: Treasury cashes in on the UK's financial jiggery-pokery

Frank Kane
Sunday January 29, 2006
The front-page headline in the Financial Times last week was good news indeed. 'UK tops inward investment league,' it declared, going on to explain that Britain had attracted more cash than any other country in 2005. Hawk-eyed foreign investors had spotted the opportunities of the keenly competitive and efficient UK economy, and poured their money in – some $219bn of it. America, at $106bn, and China, with a meagre $60bn inward investment, were also-rans.
A great triumph for Gordon Brown's economic master-plan then, and so it was trumpeted. Des Browne, the Treasury Chief Secretary, said: 'Once again, we have shown that – even in the most difficult of years – the British economy remains resilient and competitive.' It was the highest figure recorded for a European country, and all the more impressive because the figures came from the United Nations Conference on Trade and Development – about as impartial and global as you could get.
But just read Unctad's small print: 'However, the increase was largely accounted for by the merger of Shell Transport and Trading with Royal Dutch Petroleum for some $100bn.' The rest of the increase was due to the high level of mergers and acquisitions business in Britain and the rest of the developed world, which totalled $2.9 trillion.
So rather than demonstrating Britain's resilience and competitiveness, the Unctad figures actually show how good we've all got at financial engineering, in particular a huge accounting item from a bit of Anglo-Dutch jiggery-pokery.
In fact, as the FT reported later in the piece, the level of total investment in the economy last year as a share of national income was the lowest on record.
What we are actually getting very good at is selling off the family silver in ever-increasing quantities, and smoke-and-mirrors financial accounting. I wonder if Browne is proud of that.
Parker shows how it should be done at P&O
If Browne, or Brown for that matter, wants to know about real inward investment, and value creation, he should study what has happened at P&O over recent weeks. This is most decidedly not a case of the family silver going abroad – most of the assets and employees are overseas anyway, and the company has long been a global player, beneath an ever-thinning veneer of British imperial tradition. It seems entirely appropriate in the 21st century that P&O's worldwide assets should be in the ownership of one of the great trading international centres, like Dubai or Singapore.
And if you are going to sell premium assets, you must demand a premium price, and there is no better man for the job than Sir John Parker. He has orchestrated the auction currently under way between DP World of Dubai and PSA of Singapore (owned by trading conglomerate Temasek) with all the finesse of a maestro. Last Thursday, when Dubai came back to top a recommended £3.5bn bid by Singapore, with a quickly recommended £3.9bn cash offer of its own, it was as good an example of value-creation as you could find.
Parker has successfully exploited the rarity value in P&O – there are no other international ports groups available. He admits that the current price, at 38 times earnings, is 'out of normal valuation territory'. It is a persuasive offer, but not just for shareholders – it becomes compelling when P&O pensioners are taken into account. Dubai has undertaken to put £125m into the estimated £200m pensions deficit now and make up the rest over five years. (Compare this with the meagre, but government-sponsored pensions element of the scandalous Qinetiq flotation.) The question Parker must now ponder is: can he do even better? Can he persuade the Singaporeans to come back with a higher offer, lifting the value of P&O well over the £4bn mark.
The PSA executives who flew home for the Chinese New Year – apparently without even knowing of the new Dubai bid – must decide exactly what price they are willing to put on P&O. They face bigger regulatory hurdles than DP World, but have said they will do whatever is required to get P&O. Backed by Hong Kong's Hutchison group, they have pockets just as deep as Dubai's. On the other hand, they may not want to be tied up in red tape for six months by Brussels.
I think in the end the unique nature of P&O's business will tempt them back. There is another twist to come in this tale, I believe, but it will only be for the good of P&O shareholders, employees and pensioners.
Is Sir Victor the black horse's white knight?
Sir Victor Blank has never been a man to decline a challenge. He had plenty of those in his time at Trinity Mirror, and for the most part rose to meet them. He will be less in the media spotlight at Lloyds TSB, but as chairman of one of Britain's most venerable financial institutions, he will be under even closer scrutiny from his real peers – the small but powerful circle of bankers who run the financial services industry and much of UK plc.
He will want to get his feet under the desk, of course, but he must already know intuitively that Lloyds cannot go on as it is. From being at the top in the 1990s, when it avoided the expensive mistakes on non-core banking suffered by its rivals, it has languished for years.
Its focus on UK banking – which looked so sensible back then – now makes it look like a laggard, too timorous to be entrepreneurial in a rapidly globalising business world.
The options are limited: Lloyds must either persuade the government to abandon its veto on British domestic banking consolidation, and then lead the next round of that process; or it must negotiate a successful exit for shareholders via a takeover by one of the big international groups that want to expand in Europe. Put bluntly, it must either merge with Barclays, or be bought by the likes of Bank of America or Standard Chartered.
Your move, Sir Victor. read more

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The Observer: Who's to blame for the big bang?

As families suffering from the multiple effects of the Buncefield oil depot blast wait for compensation, no one is accepting responsibility, reports Jon Robins
Sunday January 29, 2006

Sixty families who were injured or suffered damage to their homes in the Buncefield fuel depot explosion have begun legal action in the High Court against one of the oil companies operating from the site.
It's now seven weeks since the huge blast at the depot in Hemel Hempstead, Hertfordshire, registered 2.9 on the Richter scale but there has yet to be any acknowledgement of responsibility by the oil companies to their devastated neighbours.
Hertfordshire Oil Storage Limited (HOSL), a joint venture between Texaco and Total that operates on the site, told Cash last week: 'HOSL continues to work closely with the Health and Safety Executive [HSE] and the Environment Agency in their investigation to ascertain the cause of the incident and in the clean-up at the site. It is not possible to speculate about the cause of the incident or liability at this stage, and it is recommended that all people affected notify their own insurers, who will advise them on the most appropriate way to proceed.'
The British Pipeline Agency (BPA), a joint venture between BP and Shell, which also operates from Buncefield, issued a statement via City law firm Freshfields. It said its client 'has no reason to believe that it was responsible for the incident and refuses to accept any liability in this regard'.
Local homeowners, frustrated by the lack of positive response from the industry, lodged a litigation order again HOSL on Friday. Bill Burgar, managing director of a computer telephony company who has lived next to the site for 10 years, is one of those joining the legal action. 'We were woken up by what sounded like a jet engine, then a massive explosion,' he said. 'My immediate reaction was that there had been a terrorist strike.' About 2,000 people were evacuated after Britain's fifth-largest fuel distribution depot went up in flames. More than 100 families were rehoused. While, miraculously, only 50 people were injured, some residents claim to have been traumatised and many want to move on, but fear no one will want to live next door to the depot that became 'Britain's biggest blaze in peacetime'.
The explosion blew the plasterboard ceiling down on Burgar and his wife. They then went into 'autopilot', putting into effect an evacuation plan to make sure they and their two daughters, Alex and Charlie (five and seven), were out of the house quickly. Burgar had complained many times about the smell of petrol vapour and was so worried about safety at the depot that he was preparing to sell the house in the new year. As he ran to get the children, he saw the extent of the devastation, only 800 yards from the house. 'Flames were spread across half the horizon. I reckon they were already 400ft high. We were aware there were a lot more oil tanks, so another explosion was very likely. It was terrifying.'
The family have yet to return to the property for more than a day – they are living in a rented house a few miles down the road, paid for by their insurer, Norwich Union, while work is being done on their home, which Burgar estimates will probably take six months. But what about their plans to move? At the beginning of December their house was valued at £625,000 but a surveyor has just valued it at half that. 'We aren't going to be able to sell it now,' said Burgar. 'None of us are sleeping well and the slightest noise wakes us up. The children don't want to go home.'
Rachel Lampey, who works at Tesco, was diagnosed with post-traumatic stress and has been signed off work since 11 December. 'I've been suffering nightmares and undergoing counselling, as has my husband,' she said. 'The children have lost their appetite and had nightmares. Normally they are happy and independent, but it was only for the first time last week when I could leave them without them clinging on to me in tears and screaming.' She reckons somebody must be held responsible if only to make sure history does not repeat itself. 'This isn't the only depot in the country.'
Insurers, such as Halifax Home Insurance, sent staff to Hemel Hempstead within hours of the explosion to advise policyholders. 'We had many customers whose houses were uninhabitable and there was cover for alternative accommodation plus any damage that was the result of an explosion and subsequent fire,' said Martin Folds, senior manager in Halifax's claim team.
But what are the chances of compensation for the value of a house being halved or for an accident claim? 'Our policy can only pay for repair to any physical loss or damage resulting from the explosion,' said Folds. 'Obviously we sympathise, but the policy would not respond for loss of value like that.'
Des Collins, a solicitor acting for the 60 families, argues that the oil companies should accept liability under the law of nuisance. If landowners take something on to their land which is potentially dangerous they automatically bear responsibility for any damage, without the victim having to demonstrate negligence.
'People can't accept that the industry which blew their houses apart is fighting shy about saying whose fault it was or how they are going to be compensated,' said Collins. 'They have to accept responsibility.'
The BPA argues that the HSE has yet to report on its investigation into the incident and that it is, in the view of its lawyers, 'wholly inappropriate' to talk about liability at this stage.
Collins is calling for a public inquiry. 'We do not feel that the HSE is sufficiently independent, bearing in mind their role will also have to be subject to scrutiny. After all, they sanctioned the site being where it was in the first place and carried out a risk assessment and ultimately are responsible for it being there. That's a pretty big conflict of interest.' read more

This website and sisters royaldutchshellgroup.com, shellnazihistory.com, royaldutchshell.website, johndonovan.website, and shellnews.net, are owned by John Donovan. There is also a Wikipedia segment.

THE WALL STREET JOURNAL: OPEC Expected to Maintain Current Production Quota

A WALL STREET JOURNAL ONLINE NEWS ROUNDUP
January 28, 2006 11:49 a.m.
ALGIERS — OPEC will maintain its current production quota when it meets Tuesday in Vienna, Algerian Oil Minister Chakib Khelil said Saturday.
“There is a consensus with the member countries to maintain the current quota as there is enough oil in the market,” Mr. Khelil said in a press conference in Algiers. He predicted that economic growth in the world will continue, keeping prices high.
“I expect a barrel at $50 at least for the second quarter of the year,” he said.
The oil minister was asked whether the Organization of Petroleum Exporting Countries would put more oil on the market if Iran reduces exports, amid its nuclear dispute with the U.S. and European Union.
“OPEC is committed to help replace any lack of supplies as it did with Nigeria's production in 2003, but this still depends on the production capacity of its members,” he responded. The production quota for the 11-nation cartel of oil-producing nations is currently 28 million barrels a day, which is near capacity.
Regarding a recent price upsurge, Mr. Khelil said the situation is not due to a lack of supply. He ascribed high prices partly to market fundamentals, but the mostly to geopolitical uncertainties.
The situation is different than previous oil crunches, Mr. Khelil said. Price upsurges result from unexpected growing demand caused by economic growth in the United States and China, as well as to shortages in refining capacity, he said.
Speaking in Vienna, Nigerian oil minister Edmund Daukoru said Saturday that he expects four foreign hostages being held by kidnappers to be released within a week. The four oil workers — a Briton, an American, a Bulgarian and a Honduran — were kidnapped at a Shell oil platform in the oil-rich delta on Jan. 11. Militants who say they are holding the men are demanding the release of two tribal leaders and for Shell to pay local communities $1.5 billion in compensation for oil pollution.
Mr. Daukoru added that he doesn't see a need for OPEC to cut crude oil production if prices remain above $67 a barrel. read more

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THE WALL STREET JOURNAL: Nigerian Militants Warn Against Rescue Attempt

Associated Press
January 28, 2006 7:56 p.m.
LAGOS, Nigeria — Militants who claim to be holding four foreigners hostage in Nigeria's oil-rich delta warned the military Saturday against attempting to free them by force.
In a statement, the group claiming to hold the men accused the Nigerian government of planning military action with unidentified foreign countries “in a last ditch effort to release the hostages.”
“Any attempt to employ military force … shall be the greatest military mistake ever,” the statement said.
It was signed by Brutus Ebipadei, self-described leader of the Movement for the Emancipation of Niger Delta, which claims to be holding the hostages. The statement's authenticity could not be independently verified, but it came from an address used by the same group in the past.
Two Nigerian newspapers Friday published a photograph of the hostages for the first time since their Jan. 11 abduction from an oil platform.
The photos published Friday showed the four — Patrick Landry of Texas, Briton Nigel Watson-Clark, Bulgarian Milko Nichev and Honduran Harry Ebanks — sitting on white plastic chairs under palm trees. Behind them were several men, one sitting next to several automatic rifles mounted on tripods.
The four appeared to be in good health. On the ground before each was a transparent bottle containing orange-colored juice.
In exchange for the hostages, the militant group is demanding the release of Mujahid Dokubo-Asari, the oil region's best-known militia leader, who was jailed in September on treason charges. The group is also calling on Royal Dutch Shell PLC to pay $1.5 billion in compensation for oil pollution.
The group has also claimed a string of attacks on pipelines and oil facilities that cut oil exports by nearly 10% in Nigeria, Africa's leading oil producer and the fifth-biggest source of U.S. oil imports.
The militants have also said they want to secure local control of oil wealth for the impoverished ethnic minorities in the Niger Delta, who accuse bigger ethnic groups from other regions of denying them access.
Over the past two decades, oil companies in the Niger Delta have faced frequent disruptions to their operations, including protests, pipeline sabotage and kidnappings.
Most hostages, however, have been freed within days after ransom payments, and rarely harmed. read more

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The Observer: Oil delta burns with hate

Escalating violence means western firms are thinking of quitting Nigeria. China may be quick to fill the vacuum, writes Nick Mathiason
Sunday January 29, 2006
Levels of thuggery that once seemed acceptable to major oil firms operating in the Nigerian delta are now spilling over into widespread, vicious attacks. Will murder and kidnapping force them to pull out of the country altogether?
Fears are growing from investors, oil workers and agencies working in the Niger delta that the escalating violence may force the four major oil companies – Royal Dutch Shell, Chevron, Exxon and ENI – to close onshore operations.
Paul Horsnell, head of commodities research at Barclays Capital, said: 'There's always been low-level violence about not enough money trickling down or local difficulties, but this is different. There's a sliding scale of events that could happen and at one end it gets to the stage where it becomes impossible to continue operations in certain areas of the delta. There's no getting away from the fact that this is a possible outcome.'
And, in a new report out last week, Stakeholder Democracy Network, an anti-corruption campaign group active in the region, said: 'We, and most experts on the region, are gravely concerned by many strong indications that, despite the outward appearance of a year-long ceasefire, various factions are quietly arming as though for war… The most pessimistic assessments suggest Shell and foreign oil operators may have to go offshore altogether by 2008 as security and public order deteriorates.'
The report suggests that the crisis could worsen once the election primaries begin in a few months: 'This is far sooner than the 2007 horizon line … previously suggested by many analysts.' Attacks last week on Italian oil firm Agip resulted in the death of nine people. This followed the blowing up of a major pipeline and the kidnapping of four foreign oilmen working offshore.
Shell relies on Nigeria for 11 per cent of its global output. But it has suffered four attacks in recent weeks and had to cut production in the delta by 10 per cent. Now some Shell insiders are privately questioning how secure its operations are and to what extent it can rely on production there. Shutdowns would not only hurt the revenues of oil majors but also threaten a surge in oil prices.
The Niger delta is already classified by international agencies as a danger zone on a par with Chechnya and Colombia. The number of guns in circulation has increased dramatically since 2003, the year the last presidential elections were held. Those elections were widely condemned as being rigged, with armed gangs seizing ballot boxes and intimidating voters.
Since then hopes have dwindled that Africa's largest country, with a population of 129 million, would transform itself into a functioning democracy. The state has failed to protect its citizens from criminality and impose anti-pollution measures to curb the worst excesses of the oil industry.
Criminal gangs with international connections make billions of pounds by 'bunkering' – illegally siphoning off – a tenth of all Nigerian oil. Some say the oil firms must know oil bunkering happens but tolerate it so operations can continue. Bunkering gangs then launder their cash abroad and buy machine guns to bolster their criminal empires.
Then there has been the recent rise of the Movement for the Emancipation of the Niger Delta (Mend). The organisation claims responsibility for the kidnapping of Shell workers and is demanding $1.5bn compensation from the firm for the pollution it says Shell has caused.
'Mend has so far perpetrated the most brazen act of terror in the region for years and taken it on to a new level,' says an aid worker. 'There's a feeling of fear in communities near oil installations who are braced for government reprisals.'
Oil shutdowns in Nigeria would have serious implications as the light, sweet crude that lies beneath the delta is excellent for making gasoline. One analyst said: 'The Saudis have offered to make up for any loss of production but its oil is not of the same quality.'
In 50 years, Nigeria has earned more than $350bn from oil, but the consequent wealth has remained in the hands of a ruthless, corrupt elite. Former president Abaja moved several billion dollars out of the country and much of that cash went through banks in the Square Mile.
The country could have earned more: increased refining capacity would allow it to diversify its economy and charge more for oil exports.
Glasgow Labour MP John Robertson, chairman of the All-Party Parliamentary Niger Delta Group, led a Commons delegation to the region last year. He said signs of corruption were everywhere. Examples include roads of short distances costing several billion pounds that taper off into pot-holed dirt tracks. Ostentatious wealth – cars, jets, jewellery – taunt the majority of those living in poverty in the delta. But the dam appears to be breaking.
Meanwhile, the oil firms have lost credibility with communities, who blame them for failing to tackle gas flares and for the contamination of creeks and waterways that is ruining the fishing industry. The oil firms' attempts to engage with communities have been disastrous. Plans to provide facilities such as hospitals and schools have come to nothing. Empty buildings stripped of all valuable materials litter the countryside. And oil firms face accusations of paying militants to act as security for their operations, thereby fuelling the flames of gang rivalry.
Some suggest that the wave of violence will see oil majors sell out to Chinese firms desperate to secure oil supplies, who will come into the country with a clean slate. Two weeks ago, Cnooc, the state-owned Chinese energy company, said it would pay nearly $2.3bn to acquire a large stake in a Nigerian oil and gas field, one of the biggest overseas acquisitions by a Chinese company.
Others say that the Nigerian government has plans to take control of the oil industry in a tactic similar to that used by Russia's President Putin. One thing is clear, though: the oil supply from Nigeria is now far from secure – and it could not have come at a worse time for the global economy. read more

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Sunday Times: Shell and Exxon to smash transatlantic profit records

Tracey Boles
OIL companies on both sides of the Atlantic will gush record profits this week, with America’s Exxon Mobil posting the world’s biggest-ever profit, and Shell setting a new record for British companies.
Exxon is tomorrow expected to unveil a profit of about $32 billion (£18 billion) for 2005, according to Thomson Financial. It will be the largest single profit in the history of corporate America.
It shatters last year’s previous record for a company of $25 billion, set by Texas-based Exxon, the world’s largest listed oil company, and easily trumps the benchmark $22.1 billion made by Ford in 1998.
On Thursday Shell will top record-setting results with an estimated profit of $23 billion for 2005. This is up nearly a third from 2004, when its profits were $17.6 billion, at the time the biggest by a British company.
BP is expected to continue the trend on February 7 by revealing full-year profits estimated at $21.7 billion. This contrasts with earnings of $16.4 billion in 2004.
Oil-company profits, driven by the surging price of oil and gas, have drawn criticism as the cost of petrol remains high and domestic-heating bills soar.
Gordon Brown increased taxes on oil companies in his pre-budget statement in November. The tax rise, which came into effect this month, has already caused Shell to scale back its plans for exploration in the North Sea.
The bumper profits enjoyed by big British companies have caused several political outcries in recent years, especially those posted by Vodafone and HSBC.
In November American oil firms were forced to justify their bulging third-quarter profits to Congress, where they tried to dissuade the US government from imposing a windfall tax on their gains. Exxon has long been a focal point for criticism, not least because the $34 billion in its coffers could pay for the construction of more than a dozen refineries.
Shell, the world’s third-largest oil firm by market value, is still living down a reserves scandal that shocked investors two years ago.
The revelation that its oil and gas reserves were overstated hit Shell’s shares hard and forced changes in the way it is run.
The Anglo-Dutch company will announce the details of the 2006 share buyback programme alongside its results. Shell paid dividends of $10 billion in 2005, up from $7.2 billion in 2004, and bought back shares worth $5 billion, compared with $1.7 billion in 2004. read more

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Financial Mail, London, Week Ahead column

Daily Mail – London: KRTBN; Jan 29, 2006
Royal Dutch Shell is expected to make corporate history on Thursday when it announces the biggest profits from a UK company.
The figures, the first since the group merged its UK and Dutch sides last summer, are expected to show before-tax profits of GBP12.9 billion, up from GBP9.4 billion last year.
But Shell is unlikely to retain its record for long. Oil rival BP, Britain's biggest company, will release full-year figures next week, and some analysts predict pre-tax profits could top GBP18 billion. read more

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Daily Telegraph: Shell sets $20bn-plus profits record

By Sylvia Pfeifer (Filed: 29/01/2006)
Royal Dutch Shell, the Anglo-Dutch oil giant, is on course to set a British corporate record when it reports post-tax annual profits of about $23bn (£13bn) on Thursday.
Industry analysts forecast that Shell will announce adjusted net profits for the fourth quarter of $5.4bn, fuelled by high oil prices, which last week hit $66 a barrel. The forecast represents a 14 per cent rise from the $4.72bn Shell made during the same period last year.
Even if its earnings are half the level forecast, the oil giant is set to become the first UK-listed company to report annual profits above the $20bn mark and break its own record of $17bn last year.
The bulk of these record profits are likely to be reinvested as the industry struggles to find new oil and gas reserves. Last month the company raised its annual spending forecast by 27 per cent to $19bn, citing increasing costs and the need to find new reserves.
Jeroen van der Veer, Shell's chief executive, said the company would consider making acquisitions of up to $10bn (£5.6bn) in order to increase its proven oil and gas reserves.
“Even in times of high oil prices it's possible, but not sure, that you may do small acquisitions or swaps of up to $10bn,'' he said at the World Economic Forum in Davos.
He would not comment on possible targets, but the most likely strategy is for Shell to consider asset swaps or to buy oilfields because few groups in the industry are now worth less than $10bn.
Investors, however, are also in line to benefit from the profit bonanza. Last year Shell pledged to return $5bn to shareholders via a share buyback- at the higher end of previous expectations. Analysts expect the payout to remain at that level for the foreseeable future. At its third quarter results last year, the company also announced an interim dividend of €0.23 per share for the quarter.
Shell's stellar performance over the past 12 months is in marked contrast to the problems it faced two years ago when it admitted that it had overstated its proven oil and gas reserves.
The scandal led to the departure of its three most senior executives, including Sir Philip Watts, the chairman. It also acted as a catalyst for the wholesale shake-up of the group and prompted the historic merger of its two operating companies, Shell Transport & Trading and Royal Dutch Petroleum.
The company has paid more than $150m in fines imposed by US and British regulators over the reserves scandal. Last year it paid $90m to settle claims brought by its US employees, who also claimed that their pension fund had been hit by the reserves restatements.
Nevertheless, Shell is not out of the woods yet. Earlier this month, in a separate development, 26 mostly Dutch pension funds launched an action against the group for overstating its oil reserves between 1999 and 2003.
Led by ABP, Europe's largest retirement fund, the pension funds have withdrawn from a class-action lawsuit in the US and launched their own claim in a New Jersey court for several hundred million dollars.
read more

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