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2017-10-02 14:40:00

SHELL'S INVESTMENT RISKS

SHELL'S INVESTMENT RISKS

FT -  It must be tempting for Ben van Beurden to crow, "told you so," to critics who questioned his decision to commit Royal Dutch Shell to the $50bn takeover of BG Group during the depths of the oil market downturn in 2015.

Two years later, the enlarged group is generating more cash at oil prices of less than $60 a barrel than it did when crude was trading below $100. More than $10bn of annual operating costs and $20bn of capital expenditure have been stripped away, and net debt is on course to end the year $17bn lower than at its peak after the BG deal.

Yet, Mr van Beurden, chief executive of Shell, allows himself only the briefest self-congratulation. "All the milestones, we are either ahead or on track," he tells the Financial Times, referring to targets set at the time of the takeover. "But you are never done in this industry because everything is always in continuous decline."

The Dutchman is talking about the relentless pressure to find new resources to replace existing production. But, increasingly, there is an even bigger worry: that demand faces long-term decline as the world begins to shift away from fossil fuels.

For Mr van Beurden, the need to prepare Shell for a lower-carbon energy system is complicating an already tricky balancing act between investing for future growth and meeting promises made at the time of the BG deal to return $25bn to shareholders by the end of the decade.

Total's €237.5m acquisition last month of a stake in Eren, a French renewable power company, showed how large oil and gas companies are making tentative steps into cleaner technologies. Shell is active in renewables and biofuels but Mr van Beurden says he will not be rushed into larger bets.

"The point that you can be too early was proved by us," he says. "We were among the first of the big international oil companies to get into solar and we found out we could not make any money out of it."

Mr van Beurden says Shell will gradually acquire the skills needed to make a success of renewables, from developing wind and solar projects to selling the resulting electricity. Already one of the largest traders of renewable power in the US, it plans to begin supplying electricity direct to business customers in the UK next year.

These moves are designed to position Shell for increasing electrification of the global energy system — especially the shift to battery-powered cars. But Mr van Beurden says the transition will take decades and the risks from premature investments in technologies "we don't understand" outweigh the danger of moving too slowly.

"We have to continually find a balance," he says. "How fast can we go? What are sensible steps? But one thing I know for sure: this is a road we have to be on, that we have to win."

Shell has committed to invest as much as $1bn a year in "new energy" by 2020 — a fraction of its projected annual capital expenditure of $25bn-$30bn. The rest will continue to be ploughed mostly into oil and, increasingly, natural gas.

Mr van Beurden says he is confident Shell's traditional businesses can remain "completely relevant and healthy into the 2030s," driven by demand from the developing world.

Believers in a faster transition to green energy think that is a complacent view that risks leaving Shell with "stranded assets" when demand declines. Others, with more faith in the longevity of hydrocarbons, have the opposite concern: that Mr van Beurden is not spending enough developing new oil and gas projects.

Alastair Syme, analyst at Citigroup, claims Shell "is shrinking" at current levels of investment. He says that, even after the addition of BG's big Brazilian resources, the group is on course to have just six years' worth of reserves left by 2022, among the lowest in the industry.

This analysis is rejected by Mr van Beurden, who says the minimum investment required to keep the company sustainable is $18bn-19bn at current oil prices. This year's capital expenditure is expected to be about $25bn.

Mr van Beurden, a chemist who has spent much of his 34-year Shell career on the chemicals and refining side of the business, says volume of reserves is no longer the best "measure of health" in an industry transformed by the rise of hard-to-quantify US shale resources.

"I'm not a petroleum engineer so that means I probably have less emotional affinity with reserves," he says. "We are a company that produces dollars not barrels. Every time I invest in a petrochemical complex we don't get any barrels, but it pays the dividend."

Shell's downstream refining and marketing business generated almost six times more earnings than upstream production in the first half of this year, helping safeguard a dividend which, with a yield of more than 6 per cent, has not been cut since the second world war.

A scrip dividend — where shareholders have the option of being paid in shares rather than cash — has also eased pressure on the balance sheet but at the expense of diluting existing stock. Mr van Beurden says the scrip will be withdrawn as soon as cash flow is strong enough, followed by the promised $25bn buyback scheme to absorb shares issued for the BG transaction and the scrip.

Those objectives will be helped by a resurgence in oil prices. Brent crude last week breached $59 a barrel — its highest for more than two years. The longer-term outlook is fraught with uncertainty, but Mr van Beurden says Shell will keep adapting to the changing energy landscape: "We have enough flexibility not to be caught out."

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Earlier:

SHELL: 

   

 RENEWABLE:

       
 SHELL STARTS IN NIGERIA
August, 24, 14:00:00

SHELL STARTS IN NIGERIA

The Shell Petroleum Development Company of Nigeria Ltd joint venture has started production at Gbaran-Ubie Phase 2, a key project in Nigeria’s Niger Delta region.

     Renewable
September, 25, 13:10:00

RENEWABLE ENERGY UP

China accounts for the lion’s share of the upsurge. But Middle East and north African countries are scheduled to have installed 14GW in solar plants by the end of 2018 — a seven-fold increase from 2015. Central and South America are also expected to reach 14GW, nearly five times more than in 2015, while India is set to hit 28GW, a jump of nearly six times.

 

 SHELL INCOME $1.55 BLN
July, 28, 09:45:00

SHELL INCOME $1.55 BLN

Royal Dutch Shell Chief Executive Officer Ben van Beurden commented: “Shell’s strong results this quarter show that we are reshaping the company following the integration of BG. Cash generation has been resilient over four consecutive quarters, at an average oil price of just under $50 per barrel. This quarter, we generated robust earnings excluding identified items of $3.6 billion, while over the past 12 months cash flow from operations of $38 billion has covered our cash dividend and reduced gearing to 25%.

 

     Renewable
September, 20, 08:45:00

RENEWABLE'S FUTURE

The falling cost of renewable energy will increasingly allow wind and solar projects to make money without subsidies, say the top executives in Europe’s power industry.

 ГАЗПРОМ - ШЕЛЛ СПГ
June, 5, 15:05:00

GAZPROM - SHELL LNG

Alexey Miller, Chairman of the Management Committee of Gazprom, and Ben van Beurden, Chief Executive Officer of Royal Dutch Shell, signed at the St. Petersburg International Economic Forum 2017 the Heads of Agreement to set up a joint venture.

     Renewable
September, 15, 08:55:00

WORLD ENERGY CONSUMPTION UP TO 28%

The U.S. Energy Information Administration projects that world energy consumption will grow by 28% between 2015 and 2040. Most of this growth is expected to come from countries that are not in the Organization for Economic Cooperation and Development (OECD), and especially in countries where demand is driven by strong economic growth, particularly in Asia. Non-OECD Asia (which includes China and India) accounts for more than 60% of the world's total increase in energy consumption from 2015 through 2040.

 

 SHELL & SAUDI AGREEMENT
March, 7, 18:35:00

SHELL & SAUDI AGREEMENT

Royal Dutch Shell plc ("Shell") today announces the signing of binding definitive agreements between SOPC Holdings East LLC (a U.S. downstream subsidiary of Shell) and Saudi Refining Inc. ("SRI") (a wholly owned subsidiary of Saudi Arabian Oil Company (“Saudi Aramco”)) on the separation of assets, liabilities and businesses of Motiva Enterprises LLC (“Motiva”), a 50/50 refining and marketing joint venture.

 

     Renewable
July, 21, 08:50:00

CHINA'S RENEWABLE UP

CHINA’S installed solar power capacity surged over the first half year amid shrinking costs and government policies. Over the first six months, 23.6 gigawatts of solar power were installed, 34.2 percent higher from a year ago, UBS said yesterday, adding that it was “far more than expected as most domestic analysts predicted at the beginning of the year that only 20-25 gigawatts would be added for the whole year.”

 SHELL STARTS IN MALAYSIA
December, 14, 18:35:00

SHELL STARTS IN MALAYSIA

Located in waters up to 500-metres deep, Malikai is Shell’s second deep-water project in Malaysia, following the successful start-up of the Gumusut-Kakap platform in 2014. Malikai is expected to have a peak production of 60,000 barrels per day. As the company’s first TLP in the country, Malikai is an example of the strength of Shell’s global deep-water business, applying TLP expertise from decades of operations in the U.S. Gulf of Mexico.

 

     Renewable
July, 19, 14:35:00

CLEAN ENERGY PROBLEMS

A transition from fossil fuels to mitigate the impacts of climate change will require large amounts of metals and rare earth elements that could create environmental challenges, the World Bank has warned.

 SHELL INVESTS IN BRAZIL $10 BLN
November, 11, 18:40:00

SHELL INVESTS IN BRAZIL $10 BLN

Royal Dutch Shell Plc will invest $10 billion in Brazil over five years now that the country has increased opportunities for foreign companies in its oil industry, its chief executive officer said on Thursday.

 

     Renewable
July, 3, 13:35:00

GERMANY'S RENEWABLE UP

Germany raised the proportion of its power produced by renewable energy to 35 percent in the first half of 2017 from 33 percent the previous year, according to the BEE renewable energy association.

 THREE SHELL'S PRIORITIES
June, 7, 18:45:00

THREE SHELL'S PRIORITIES

We expect to see robust demand for oil and gas for decades to come, in a global energy system in a long-term transition to lower carbon fuels. As well as low oil prices today, we are seeing higher levels of price volatility, due to geopolitical change, the speed of information flows, and the pace of innovation in our sector.

     Renewable
June, 26, 23:40:00

RENEWABLE ENERGY EFFICIENCY: 90%

Keeping the rise of global temperatures below 2 degrees Celsius means reducing energy-related carbon dioxide emissions by more than 70 per cent by 2050 (compared to 2015 levels). Analysis by IRENA for the G20 Presidency has shown that renewable energy and energy efficiency could potentially achieve 90 per cent of those reductions.

 

 

Tags: SHELL, INVESTMENT, RENEWABLE, ENERGY

Chronicle:

SHELL'S INVESTMENT RISKS
2017, December, 15, 12:50:00

LUKOIL'S PLAN: $50

LUKOIL - The plan is based on the conservative $50 per barrel oil price scenario. Sustainable hydrocarbon production growth is planned in the Upstream business segment along with the growth in the share of high-margin projects in the overall production. In the Downstream business segment, the focus is on the improvement of operating efficiency and selective investment projects targeted at the enhancement of product slate.

SHELL'S INVESTMENT RISKS
2017, December, 15, 12:45:00

BP INVESTS TO SOLAR

BP - BP will acquire on completion a 43% equity share in Lightsource for a total consideration of $200 million, paid over three years. The great majority of this investment will fund Lightsource’s worldwide growth pipeline. The company will be renamed Lightsource BP and BP will have two seats on the board of directors.

SHELL'S INVESTMENT RISKS
2017, December, 13, 12:40:00

OIL PRICE: ABOVE $64 YET

REUTERS - Brent crude was up 69 cents, or 1.1 percent, at $64.03 a barrel by 0743 GMT. It had settled down $1.35, or 2.1 percent, on Tuesday on a wave of profit-taking after news of a key North Sea pipeline shutdown helped send the global benchmark above $65 for the first time since mid-2015. U.S. West Texas Intermediate crude was up 45 cents, or 0.8 percent, at $57.59 a barrel.

SHELL'S INVESTMENT RISKS
2017, December, 13, 12:35:00

RUSSIAN-TURKISH NUCLEAR

ROSATOM - On December 10, 2017, the construction start ceremony took place at the Akkuyu NPP site under a limited construction licence issued by the Turkish Atomic Energy Agency (TAEK). Director General of the ROSATOM Alexey Likhachev, and First Deputy Minister of Energy and Mineral Resources of the Turkish Republic, Fatih Donmez, took part in the ceremony.

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