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Posts on ‘February 2nd, 2006’

The Moscow Times: Sakhalin Official Supports Protests Against Shell

Friday, February 3, 2006. Issue 3345. Page 7.
Bloomberg
LONDON — Sakhalin Governor Ivan Malakhov supported ecologists' protests against a venture led by Royal Dutch Shell, which plans to invest $20 billion in the Far East to make liquefied natural gas, because of possible environmental damage.
Malakhov met Thursday with officials from the European Bank for Reconstruction and Development in Yuzhno-Sakhalinsk, the capital of the Sakhalin region, the governor's press service said in a statement. The bank is holding public consultations on Shell's Sakhalin-2 project before approving a loan to fund the project.
More than 300 ecologists held a demonstration on Sakhalin Island on Jan. 28 in front of the gates of the proposed LNG plant.
They were protesting “against the widespread damage,” Sakhalin Environment Watch said last week.
Mitsubishi and Mitsui, Japan's largest trading companies, are Shell's partners in the project.
“The main disputes about the project are caused by untimely Sakhalin-2 participants' reaction to incurring problems, which quickly get public reaction,'' Malakhov told the bankers.
Malakhov joined last week's protesters, who included fishermen and local citizens, the environmental group said. “This was the first time that the regional governor has publicly backed public concerns about the Sakhalin-2 mega project,'' the group said.
Sakhalin Energy Investment, the project operator, said on Jan. 26 that it did not support the protest. The company, in which Shell holds a 55 percent stake, outlined in the statement its measures to cut environmental impact and preserve bio-resources. The demonstration “will neither contribute to the strengthening of the dialogue on these issues, nor help to resolve their concerns,'' Sakhalin Energy said last week. read more

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Associated Press: Royal Dutch Shell 4Q profit drops 4 pct.

The company's main long-term problem is seen as the gap between the amount of oil and gas it is currently pumping and how much it will be able to produce in the future. AMSTERDAM, Netherlands
By TOBY STERLING
Associated Press Writer
FEB. 2 12:39 P.M. ET Royal Dutch Shell PLC reported a 4 percent drop in fourth-quarter net profit and a 2 percent decline in sales Thursday, as lower production and the impact from hurricanes Katrina and Rita outweighed the high price of oil.
Net profit at the world's third-largest oil producer came to US$4.37 billion (euro3.61 billion), down from US$4.57 billion, while sales fell to US$92.8 billion (euro76.6 billion) from US$95.1 billion.
By comparison, the largest global oil company, Exxon Mobil Corp. reported a 27 percent rise in fourth-quarter earnings earlier this week.
At the same time, Shell's full-year earnings rose 37 percent to US$25.3 billion (euro20.8 billion) while sales rose 12 percent to US$379.0 billion (euro312.9 billion). The earnings were the largest ever for a British or Dutch company, but are likely to be passed by BP next week.
Shell's new CEO Jeroen van der Veer tried to emphasize the positive in the results, citing “record cash and earnings” for the full year and “success in exploration and gaining access to new resources.”
In Amsterdam trading, Shell shares fell 2.6 percent to close at euro27.39 (US$33.17).
The company's main long-term problem is seen as the gap between the amount of oil and gas it is currently pumping and how much it will be able to produce in the future.
Shell is recovering from a major accounting scandal in which it was forced repeatedly to reduce the size of its estimated oil reserves in 2004 and 2005, ultimately forcing the departure of then-Chief Executive Philip Watts. It also led the company to merge its British and Dutch arms into a single company.
Van der Veer Shell said Shell planned to invest US$19 billion (euro15.7 billion) in 2006, most of that in “upstream” activities: exploration and production. He said the company expects to add around 750 million to 850 million barrels to proven reserves this year, and expects to return to a “100 percent reserves replacement” by 2008.
But Fortis Bank analyst Paul Andriessen said the 2005 rate of 60 to 70 percent replacement was about 10 percent less than he expected. Van der Veer's 2008 target may be seen as unrealistic, a main reason why investors were disappointed with Thursday's results, he said.
Still, he was positive about Shell's outlook. “The oil price in 2006 as a whole will probably be higher than it was in 2005 and you'll see that reflected in next year's earnings,” he said.
Despite President George W. Bush's call this week on U.S. consumers to break their “addiction” to oil, CEO Van der Veer said the global appetite for energy is likely to increase by half over the next 25 years, which means a continued dependency on fossil fuels for a long time.
“No one should underestimate the energy challenge facing us all,” he said, adding that Shell was also investing heavily in biofuels.
Jerry Taylor, a senior fellow at the Cato Institute, agreed that oil will continue to be the main source of global energy for years but said the company's current profits should be seen as exceptional.
Although crude oil futures were trading above US$65 per barrel Thursday, Taylor said recent industry deals show oil reserves can be purchased for less than US$15 per barrel and new fields are discovered for as little as US$9 per barrel, suggesting Shell may reach its replacement targets after all.
More importantly, Shell and others are constantly improving the yield from fields they do develop, he said.
He said the current high oil prices are part of a cyclical boom that will likely lead to over-investment in the industry and a possible price collapse at the end of the decade.
In any case “the lights are not about to go out on the industrial economy,” he said.
For the quarter, Shell's earnings from exploration increased 22 percent to US$3.56 billion (euro2.94 billion) because of the high prices, even as oil and natural gas production declined in terms of volume.
Hurricane Katrina drove crude oil prices to a high of US$70.85 a barrel after it battered the Gulf Coast, and Shell said its crude oil prices were around 29 percent higher in the fourth quarter than a year earlier.
Shell said it expected the hurricane damages to rigs and pipelines to total around US$275 million (euro227 million), of which US$130 million (euro107.3 million) has already been spent. It said it didn't know how much of that it will ultimately get back from insurance companies.
In Shell's oil refining division, profits fell by 51 percent to US$828 million (euro683.7 million) due to lost intake during the hurricanes, and lower refining earnings. The company had also had an US$405 million windfall in 2004 due to a revaluation of assets. read more

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BBC NEWS: Shell in talks on field closure

Oil giant Shell is to begin talks on taking Britain's biggest oilfield out of service, BBC Scotland has learned. Shell said it was looking to set up a new structure to manage the four platforms in the Brent field, which is located off Shetland.
The company said it wanted to consult widely on options for what happens when oil and gas reserves ran out.
Shell denied a claim from the offshore union OILC that workers had been told decommissioning could start by 2010.
The news comes on the day Shell reported a record annual profit for a UK-listed company – £13.12bn.
The results follow a year in which the cost of crude jumped from below $45 a barrel to break the $70 mark.
Managers on Brent's four oil platforms have recently been briefing workers that major changes were on the way.
Benchmark price
The company wants to treat the Brent platforms as a separate entity and is seeking to recruit a new asset leader to carry out the task.
The remit will be to maximise the potential of Brent's remaining reserves of oil and gas.
They will also be expected to come up with options for when the oil and gas runs out.
Shell want to consult widely to avoid the protests that surrounded its attempts in 1995 to decommission the Brent Spar loading facility by dumping it in the Atlantic.
Brent is Britain's biggest oilfield.
It has been producing oil and gas for 30 years and provides the benchmark price for North Sea crude.
The offshore union OILC said workers had been told decommissioning would start with Brent Alpha in 2010 and end with Brent Charlie in 2015. read more

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The Scotsman: Shell rejects 'profiteering' claims

Royal Dutch Shell hit back at claims it was profiteering at the expense of consumers after revealing it made £12.93 billion last year – the highest profits yet for a UK company.
The energy giant raked in the equivalent of almost £1.5 million an hour on the back of surging oil and gas prices, but insisted it was a good corporate citizen of the UK.
Shell said that only a tiny amount of its profits were made at the petrol pumps. It said it had paid twice as much as tax to the Treasury as in 2004 and large sums had been invested in its network of refineries and oilfields in the UK.
Accusations that Shell was cashing in at the expense of motorists came from consumer groups, which demanded that more should be done to protect consumers.
Fuel Lobby, which organised protests in an effort to force the Government into bringing down tax on fuel last year, said: “Yet again the British motorist is being hammered by, if not excessive taxation, then excessive profiteering.”
Such criticism was rejected by Shell chief executive Jeroen van der Veer who said: “It is not correct to think that all the profits are coming out of the UK. It is a world market and these are world market prices. This is the reality of the world.”
Shell said its profits came from more than 140 countries, with operations outside the UK making up significantly more than 90% of the haul. Mr van der Veer said Shell had invested significantly in the UK over the last 10 years and this had been very important for the UK economy.
His comments cut little ice with campaigner National Energy Action (NEA) which claimed Shell's profits came at the expense of one million more UK households falling into fuel poverty.
Motorists are paying more at the forecourts after the cost of crude oil rose to more than 70 US dollars a barrel last summer, prompted by a particularly bad hurricane season in the Gulf of Mexico.
Although tax makes up two-thirds of the cost of petrol in the UK, a Treasury spokesman said fuel duty had fallen by around 14% in real terms since 2000, saving around 7p a litre for the average motorist. read more

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Times Online: Shell deserves congratulations, not catcalls

As the oil giant's record-breaking annual profit draws criticism from all sides, Graham Searjeant asks: what's our problem?
Rationally, we should be celebrating the highest profit ever reported by a British, or at least partly British, company. The newly merged Royal Dutch Shell, the world’s third biggest stock market listed oil group, made $22.94 billion last year, equivalent to £12.9 billion at today’s exchange rate, although it is soon likely to be eclipsed by BP, the second biggest.
The biggest beneficiaries will be people working right across the private sector, whose pension funds are the dominant holders of Shell shares. They should benefit directly from dividends to the funds, from reinvestment of undistributed profits and, more obliquely, by Shell buying back $6 billion worth of its own shares to reduce the supply. From Aberdeen to Amsterdam, ordinary people’s retirement prospects are a little better thanks to Shell.
But this is Britain so, instead of celebration, Shell’s announcement was greeted by a ritual chorus of boos and catcalls from all sides.
Consumer groups, echoing anger at high oil prices, charged Shell with profiteering and claimed it had single-handedly pushed a million vulnerable British people into fuel poverty, even if its main business is oil, rather than gas. The head of the Transport and General Workers Union bizarrely urged the government to impose a windfall tax in order to help the “pensions crisis”.
Environmental groups such as Friends of the Earth complained that Shell was evilly profiting from climate change, so a windfall tax should be levied to invest in alternative energy sources. Perhaps the money would come from the investment Shell itself is making in renewables, not least in the ethanol technology newly favoured by President Bush.
In a similar vein, the Amicus union, which also favours more tax on Shell, demanded more investment in the North Sea. Yet the Chancellor has already announced an extra 10 per cent tax on North Sea profits and , as a sadly predictable result, Shell has cut its investment plans for the North Sea in favour of other oil provinces.
Even the City was chippy and unhappy. Analysts complained that Shell’s profits were not as buoyant as those of Exxon Mobil, the industry’s number 1, whose results produce hand-wringing in America but little criticism here. Profits in the October to December quarter fell below City forecasts, a deadly sin; payouts should have been higher and Shell’s record at finding oil , though much improved last year, was still not good enough to replace what it took out of the ground. So the shares fell as much as 2 per cent.
The pension funds that own Shell have certainly benefited enormously from the high price of oil, which had nothing to do with their own or Shell’s efforts.
By the same token, Shell is hardly to blame. Opec is a cartel dedicated to keeping oil prices high, so that the money can feed the state coffers of Saudi Arabia, Iran, Indonesia, Nigeria, Algeria, Venezuela, Kuwait and the Gulf states, where not a little is wasted in excess, war or corruption. Gazprom, the state-controlled Russian gas giant, has consciously imposed higher prices on key customers for political purposes. In the UK, we as taxpayers have gained more from higher oil prices than Shell because of the higher VAT on fuel, let alone taxes on North Sea activity.
Profit that is publicly announced, not just counted in private, is the easiest target for our discontent. If Shell wants to avoid the flak, it had better arrange for itself to be taken over by the Iranian government. Don’t be a British company with shares quoted on the stock exchange. read more

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Investments & Pensions Europe: Shell facing costs from Dutch funds’ action

IPE.com 2/Feb/06: GLOBAL – Oil giant Shell today says the two class actions brought against it by Dutch pension schemes and German and Luxembourg institutions could dent its earnings significantly.
Shell said in its full-year results that the claims are linked to a pending securities class action in the US.
Shell management stated it could not predict when the matters would be resolved nor how they would be resolved.
It is also “currently unable to estimate the range of possible losses from such matters and does not currently believe the resolution of these pending matters will have a material impact on Royal Dutch Shell’s financial condition, although such resolutions could have a significant effect on periodic results for the period in which they are recognised”.
Last month, IPE reported that Stichting Pensioenfonds ABP, the Dutch civil service fund, is leading a group of 26 funds in a class action lawsuit against Royal Dutch Shell over the oil giant’s reserves scandal.
The group is seeking hundreds of millions of dollars in damages following Shell’s improper accounting of its oil and natural gas reserves between 1997 and 2003.
The schemes, which bought over 200m between 1999 and 2005 in predecessor firm Royal Dutch, claim they acquired their shares at artificially inflated prices and that the overall value of their holdings suffered massive losses.
Shell did not respond to IPE questions on the matter.
In other news, the South African arm of Shell has been accused of “improperly” using surplus pension fund money according to a 2001 amendment of the Pension Funds Act.
According to local reports, a tribunal set up by Registrar of Pension Funds has ruled that Shell should repay millions of rands to the staff DB pension scheme.
The ruling found, amongst others, that the Shell Southern Africa Pension Fund had enjoyed a contribution holiday since December 2001.
Reports also state that a shortfall was created because insufficient assets were shifted following a transfer of members from other funds – largely Shell subsidiaries Cera, Easigas and Veetch.
The Financial Services Board (FSB) is reviewing the ruling, but has yet to make a final decision.
The scheme, Alexander Forbes (scheme administrator) and Edward Nathan (scheme attorneys) could not be reached for comment.
By Meagan Rees read more

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Friends of the Earth: Shell reports record profits – Pacific Grey Whales pay the price?

Friends of the Earth today (Thursday 2 February) called for a windfall tax on the oil giant Shell which has reported record annual profits of £12.93bn [1]. The campaign group said Shell was profiting from climate change and people and the environment were paying the price.
The group also highlighted the threat posed by Shell's activities to the last remaining population of Western Pacific Grey Whales. Shell is currently seeking funding for a further oil platform and pipeline off the Russian island of Sakhalin, disturbing the endangered species' feeding grounds [2]. An independent international panel of experts convened by the World Conservation Union last year warned Shell that the Sakhalin II project increased the risk of extinction for the Western Pacific Grey Whale [3]. Shell agreed to alter the route of the pipeline, but has refused to relocate the platform, as recommended by the experts.
Local fishermen and members of the public took part in a protest at Shell's activities on Sakhalin just last weekend. Friends of the Earth is calling for funding for the project – due to be decided by the European Bank of Reconstruction and Development later this year – to be blocked. It says that Shell must do more to reduce the damaging environmental impacts of its activities overseas.
Shell is also accused of profiting from climate change. Although the company has invested in renewable energy in recent years, such investments represent a tiny proportion of the profits it has made. Friends of the Earth is calling on the Chancellor to introduce a windfall tax on oil company profits – with the revenue invested in renewable technologies to heat and power public buildings.
Friends of the Earth's Head of Corporate Accountability Craig Bennett said:
“Shell is profiting from the current high oil prices, but we are all paying the price. Oil companies must be forced to face up to their wider responsibilities – on climate change, on the environment and on human rights. Shell claims the costs are too great to protect the Western Pacific Grey Whale – but yet again announces record profits. This just shows the need for Government intervention to make companies do more to minimise the environmental damage they cause.”
Friends of the Earth is calling on the Government to use the Company Law Reform Bill, currently going through Parliament, to introduce tougher requirements for companies to report on their environmental and social impacts [4]. It also wants the Chancellor to make use of the coming Budget to introduce a windfall tax on oil companies who are reporting record profits on the back of the rising oil price.
Notes
[1] www.shell.com
[2] Shell has a 55% stake in the Sakhalin Energy Investment Company which is operating the Sakhalin II oil and gas project in the Russian Far East. It has requested a loan of $300 million from the European Bank of Reconstruction and Development (EBRD) – a public bank funded by taxpayers money. The Bank is currently consulting on the loan and is expected to announce its decision later this year.
[3] www.iucn.org/themes/business/Docs/ISRP_Report_with_covers_low_res.pdf (PDF†)
[4] www.foe.co.uk/campaigns/corporates/press_for_change/ ¬
company_law_697/index.html
read more

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ShellNews.net: THE SHELL ENRON LINK

By Alfred Donovan

The following information confirms how the Royal Dutch Shell Group (at the time under the leadership of Sir Mark Moody-Stuart) planned to “emulate Enron’s success”. That may help to explain the reserves fraud. Shell’s reputation is now ranked alongside Enron and perhaps senior current and former Shell directors may end up in the same courts as the directors of Enron. It may not be the emulation that Shell had in mind.

PRAVDA
News and Analysis on-line
2002.07.15/15:23
Troubles At Shell Trading Unit read more

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Forbes: Shell 4Q Profit Drops on Storm Impact

Royal Dutch Shell PLC said Thursday fourth-quarter earnings dropped 4 percent and sales dipped 2 percent, as the impact from hurricanes Katrina and Rita outweighed the high price of oil.
Net profit was $4.37 billion, down from $4.57 billion, while sales fell to $92.8 billion from $95.1 billion.
By comparison, Exxon Mobil Corp. reported a 27 percent rise in fourth-quarter earnings earlier this week.
Shell's full-year earnings rose 37 percent to $25.3 billion while sales rose 12 percent to $379.0 billion. The earnings were the largest ever for a British or Dutch company, but are likely to be passed by Britain's BP PLC next week.
Shell's new CEO Jeroen van der Veer tried to emphasize the positive in the results, citing “record cash and earnings” for the full year and “success in exploration and gaining access to new resources.”
“Our financial position is solid, and we returned over $17 billion to our shareholders through dividends” and share buybacks in 2005, Van der Veer said. “We focus on delivery now and building the future.”
In Amsterdam trading, Shell shares fell 1.5 percent to 27.72 euros ($33.57).
Despite President Bush's call this week on U.S. consumers to break their “addiction” to oil, Van der Veer said the global appetite for energy is likely to increase by half over the next 25 years, which means a continued dependency on fossil fuels for a long time.
“No one should underestimate the energy challenge facing us all,” he said.
Shell, which planned to pump $19 billion into investments in 2006, is increasingly looking to “new energy solutions so that we can grow without environmental degradation,” with a focus on developing biofuels, he said.
The company's main long-term problem is seen as the gap between the amount of oil and gas it is currently pumping and how much it will be able to produce in the future. In terms of volume, oil production fell 8 percent in the quarter and 7 percent in the year, while gas was down 6 percent for the year and 10 percent in the quarter.
For the quarter, Shell's earnings from exploration increased by 22 percent to $3.56 billion (2.94 billion euros) because of the high prices, even as oil and natural gas production declined in terms of volume.
The company said it expects to add around 750 million to 850 million barrels to proven reserves this year, and expects to return to a “100 percent reserves replacement” by 2008.
Analyst Antoine Leurent of KBC Peel Hunt said the results were more or less in line with expectations and the reserve replacement showed Shell is “getting back on its feet again.”
Hurricane Katrina drove crude oil prices to a high of $70.85 a barrel after it battered the Gulf Coast, and Shell said its crude oil prices were around 29 percent higher in the fourth quarter.
Hurricanes Katrina and Rita also knocked out rigs and caused other damage. Shell said it expected the hurricane damages to production to total around $275 million, of which $130 million has already spent. It said it didn't know how much of that it will ultimately get back from insurance companies.
In Shell's oil refining division, profits fell by 51 percent to $828 million due to lost intake during the hurricanes, and lower refining earnings. The company had also had an $405 million windfall in 2004 due to a revaluation of assets.
Van der Veer also welcomed the release Monday of four international workers who had been held hostage for two weeks by secessionists in southern Nigeria, and said his company would not abandon the African country.
“Shell has been in Nigeria for over 50 years, and we will stay there,” he told a news conference.
Shell is recovering from a major accounting scandal in which it was forced repeatedly to reduce the size of its estimated oil reserves in 2004 and 2005, ultimately forcing the departure of then-chief executive officer Philip Watts. It also led the company to merge its British and Dutch arms into a single company. read more

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The New York Times: Shell Profit Hits UK Company Record

By REUTERS
Published: February 2, 2006
Filed at 7:55 a.m. ET
Skip to next paragraph LONDON (Reuters) – Royal Dutch Shell Plc posted a record $23 billion profit for 2005 on Friday, up 30 percent from the previous year, as higher oil prices and fat refining margins outweighed a sharp fall in production.
Shell said in a statement on Thursday that current cost of supply (CCS) net profit, which excludes unrealized inventory gains, rose 3 percent to $5.395 billion in the fourth quarter.
Excluding exceptional items that resulted in a net gain of $34 million, the “clean'' figure was in line with an average forecast of $5.385 billion in a Reuters poll of 10 analysts.
Analysts consider the “clean'' net income figure as the best measure of an oil firm's underlying health.
Shares in the world's third-biggest listed oil company by market value fell, however, as investors focused on its weak performance upstream in finding oil and gas.
“Shell has had another poor performance with the drill bit,'' said Peter Hitchens, an oil analyst at Teather & Greenwood.
Investors were also disappointed, because Shell failed to copy Exxon Mobil in beating market forecasts earlier this week, when the U.S. major also posted a record $36 billion annual profit.
“The figures were fine, but didn't sparkle like Exxon's,'' said Brendan Wilders, an oil analyst at Oriel Securities.
In London, Shell “A'' shares fell 1.6 percent to 1,881 pence at 1100 a.m. British time, outpacing a 0.8 percent fall in the DJ Stoxx European oil and gas sector index.
NEW UK RECORD
All the oil majors are expected to report bumper results for 2005 thanks to prices that reached a record above $70 per barrel during the year and to record refining margins.
Shell's $22.94 billion CCS result for 2005 is also a record annual profit for a UK-listed company, analysts said, beating the previous record of $17 billion reported by Shell for 2004.
Its exploration and production business was the main profit driver, with earnings jumping 22 percent in the fourth quarter compared with a year earlier.
This came even though production fell to 3.5 million barrels of oil equivalent per day (boepd) from 3.84 million boepd in the fourth quarter of 2004. Hurricanes hit its production hard in the Gulf of Mexico in the past two quarters.
Shell replaced just 60 to 70 percent of the oil it pumped with new additions to reserves, measured under Securities and Exchange Commission rules, a Shell spokesman said.
This is well below the 100 percent rate needed to stop an oil firm's asset base from shrinking.
It is up, however, from its rate of 49 percent in 2004 excluding divestments, or 19 percent including divestments, the spokesman said. Analysts say this poor record is due to underinvestment in exploration from 1998 to 2004.
Shell said it continued to target 100 percent replacement over 2004-2008 but that most proved reserves would be added in the latter part of the period.
Analysts said this would be challenging. They are divided on whether Shell has turned around its upstream business after a reserves overbooking scandal in 2004 and massive cost overruns in 2005.
“(The target) would require the group becoming one of the best explorers among the integrated oil companies, rather than one of the worst,'' Hitchens added.
DISTRIBUTIONS DISAPPOINT
Shell also said it expected to return $5 billion to shareholders by repurchasing stock in 2006, in line with last year's share repurchases.
“They did have the flexibility to increase that, so I think some investors will not be impressed,'' Jason Kenney, head of oil and gas research at ING said.
Citigroup said in a research note that the failure to hike the buyback amount was “likely to raise question marks over whether the company is planning acquisitions.''
Chief Executive Jeroen van der Veer reiterated to journalists on a conference call that he did not think that acquisitions above $10 billion were likely to create value for shareholders but suggested that smaller ones could.
Shell also kept its dividend steady at 0.23 euros per share.
“A higher dividend would have been nice,'' Jaap Barendregt at FBS Bankiers said. read more

royaldutchshellplc.com and its sister websites royaldutchshellgroup.com, shellenergy.website, shellnazihistory.com, royaldutchshell.website, johndonovan.website, shellnews.net and shell2004.com are all owned by John Donovan. There is also a Wikipedia article.

MarketWatch: SolarWorld buys Shell's crystalline solar operations

Edited Press Release
BONN (MarketWatch) — German solar energy company SolarWorld AG (SWV.XE) said Thursday it will assume 100% equity interest in the crystalline solar activities of Royal Dutch Shell PLC (RDSA) subject to the approval of the anti-trust authorities.
The sale and purchase agreement signed by both parties results in the transfer of the following Shell locations: Vancouver, Washington and Camarillo, California, which manufacture solar silicon crystals, wafers, cells and modules, Gelsenkirchen, Germany, which produces solar cells, as well as the sales companies in Munich, Germany, Singapore and South Africa and the research and development team focusing on silicon technology based in Munich, Germany.
The production capacities that will be transferred to SolarWorld under this agreement amount to some 80 Megawatt. The Shell Solar Rural business is not included in the transaction.
The parties have agreed not to disclose the financial conditions of the deal.
-Contact: 201-938-5400 read more

royaldutchshellplc.com and its sister websites royaldutchshellgroup.com, shellenergy.website, shellnazihistory.com, royaldutchshell.website, johndonovan.website, shellnews.net and shell2004.com are all owned by John Donovan. There is also a Wikipedia article.

RIA Novosti (Russia): EBRD mulls financing for Far East energy project

12:06 | 02/ 02/ 2006
VLADIVOSTOK, February 2 (RIA Novosti, Veronika Perminova) – The European Bank of Reconstruction and Development will reach a decision within two months on crediting an energy project off the island of Sakhalin in Russia's Far East that has come under attack from environmentalists, the local administration said Thursday.
The Sakhalin Region administration said EBRD Secretary General Horst Reichenbach met with regional governor Ivan Malakhov in the regional center of Yuzhno-Sakhalinsk, and that the bank was considering providing a credit line to the Sakhalin II oil and gas development project.
Reichenbach said at the meeting that EBRD was currently reviewing its strategy in Russia and its Far East region for the next 2-3 years
The EBRD official said a bank delegation had met with the authorities and locals of the Korsakov district, where a protest was held Saturday against the construction of a natural gas liquefaction plant in area as part of the Sakhalin II project.
Malakhov said he supported the protesters' demands.
“The main source of dispute over the project is the slow reaction of participants in the Sakhalin II project to contentious issues that have arisen, against which the public has reacted swiftly,” the governor said.
On January 30, Russia's Green Party called for an investigation into the environmental damage caused by Sakhalin II, saying that an $11 million package of compensation from Sakhalin Energy to the local fishing industry was insufficient.
At a news conference with party representative Andrei Nagabin and Alexei Tyndik, a lawyer representing the interests of Sakhalin fisherman, Nagabin said, “The level of compensation should be calculated by independent specialists; funds received from the company have already gone to the construction of fish farms.”
Sakhalin Energy was established by Shell (which holds a 55% stake) and two Japanese companies, Mitsui (25%) and Mitsubishi (20%), to implement and develop the Sakhalin II project, which has an estimated cost of more than $20 billion. Sakhalin II is based on a production sharing agreement that was signed in 1994.
On January 27, Sakhalin Energy announced it had paid $11 million in compensation in October 2005 for environmental damage in the region.
In its statement, the company said, “The compensation paid went to developing four fish farms in Sakhalin, in accordance with an agreement between Sakhalin Energy, the administration of the Sakhalin Region, the Federal Fisheries Agency, and the state management of Sakhrybvod [the region's regulatory body for fishing]”
All construction and production work is being carried out on the basis of authorizing documents issued by the federal and local authorities, the company said, adding that work on installing a pipeline from the north to the south of the island was being carried out during the winter, when salmon does not spawn. read more

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ShellNews.net: WWF seeking information from those concerned about Sakhalin

Statement by WWF

Shell’s Sakhalin II project in far east Russia is an example of how not to do a mega-project. Its costs have doubled to US$ 20 billion, local communities are protesting over damage to fisheries, and the 100 remaining western gray whales are at risk of extinction. WWF’s views on the project can be found in the report “Risky Business” and on its website www.panda.org/sakhalin

Shell had already admitted it has managed environmental aspects badly, and has lost control of its contractors that are crossings the 1100 rivers on Sakhalin Island. The European Bank for Reconstruction and Development (EBRD) has acknowledged the project breached its environmental policy, but is considering whether to let Shell off and fund the project anyway. The EBRD has officially launched its consultation period on Sakhalin II. http://www.ebrd.com/new/pressrel/2005/175dec14.htm read more

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Shell Insider Article with Leaked Shell Internal document: Our "Leader" – TOM BOTTS: Shell Executive VP

FROM A SHELL INSIDER
Hello Alfred
Below is the crap we receive from our ‘leader’. It continues to baffle me that these politicians keep finding hollow words for their messages that never change. This cowboy from Wyoming expects a few things to be different this year (see bullet points at the bottom). This means in his eyes:
– We are NOT honest to each other.
– We do NOT learn quickly from mistakes
– There are gaps in the Operating Model (actually his personal invention)
– We do not simplify things and try to make shortcuts

All these statements are actually correct!!
Good to hear this from the ‘leader’ who is very good at scaring the hell out of his underlings and who simply will quench any opinion (and the bringer of that opinion) which does not lead to more bonus for himself. He is the prime example of how NOT to make a learning organisation.
A true learning organisation must be especially honest to itself. Bad news must travel fast without killing the messenger. And people must have fun. The rest will then follow automatically.
But surrounding oneself with sycophants, being very angry when bad news surfaces, destroying the messengers of the bad news and then publishing crap like the stuff below, is like in the old Kremlin days. They said something and did something else. We all know what happened to them.
I am so glad your website is open for sharing this with others.
A disgruntled shell employee.
LEAKED SHELL INTERNAL DOCUMENT DATED 30 JANUARY 2006
Message from Tom on 2005 Performance and Looking Ahead
30-Jan-2006
Tom Botts, Executive Vice President – Europe
Colleagues,
First, let me wish each of you a happy and safe New Year. I hope most of you were able to take some time off, relax, and spend time with family and friends. EP Europe is now in its third year—it's hard to believe. I want to tell you I am very proud of the progress we have made on many fronts. At the same time, I also fully recognise the many challenges we still have in front of us to really make EPE Europe 'be all it can be'. The key point for me is we are delivering very strong financial returns to the Group and our plateau production forecasts for the future extend further in time than ever before. In short, we are a cash engine for the Group and there is still a long future ahead of us.
Clearly the lowlights of 2005 are the four fatalities. We are making every effort possible to gain and embed all the learnings from these tragedies. Performance against our business targets was mixed. We generally did well on gas production, project delivery, providing growth opportunities, environmental performance, and recruiting new graduate and experienced people. We missed our targets on liquids production, opex, and of course have struggled getting the Corrib project back on track. Details of Group and EPE performance and the Business Performance Factor will be outlined in early February with the Q4 Business Results.
Looking ahead, we must shoot to meet or beat our EP Roadmap targets as outlined in the 2005 EPE Business Plan. Given the critical role we play in the Group, we must focus – month on month – on delivering our part. Our first priority remains safety. Thereafter the Roadmap targets of reserves, production, growth, project delivery, operational excellence and cost. All this is underpinned by using our professional skills and talents to their best effect. Those skills are our strength in EPE and they have really impressed me over the past 3 years. But we need to continue to help our people develop and contribute more effectively.
I know that last part is most important. If we don't get that right, we can't achieve what we've set out to do. Along those lines, I have sent a letter to your home address outlining the upcoming EPE Connecting Days which builds on the enhanced engagement we started at the ELN conference in Groningen in November. The EPE Connecting Days aim to bring together the entire EPE community to collectively review where we have come from, where we are going, and how we can make EPE better. My ELT colleagues and I look forward to seeing you all there!
Lastly, a word on what I expect to be different this year. Starting with myself and my Leadership Team, we will:
Have more honest talk and listening – bring issues into the room
Highlight successes, learn quickly from mistakes, and move on
Address the gaps in the operating model so we can maximise business value
Make the most of the EPE Connecting days to reengage the organization.
Find ways to simplify things, one step at a time

We are making progress and putting in place a sustainable foundation and legacy. As Jeroen said in his year end message, none of us joined Shell to be second best. If we stay on course, I know we will be a winning team!
Tom
Message from Tom on 2005 Performance and Looking Ahead
30-Jan-2006
Tom Botts, Executive Vice President – Europe
FROM A SHELL INSIDER: Hello Alfred: Below is the crap we receive from our ‘leader’. (Tom Botts, Shell Executive Vice President – Europe) read more

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Jyoti Munsiff: Shell’s Chief Ethics and Compliance Officer: analogous to putting a fox in charge of a hen house.

FROM A SHELL INSIDER

Dear Alfred

The message below was found on the Shell Web today. I have been with Shell for quite some years, but this beats everything. They are now mixing up the General Business Principles and Ethics (which are from the good old days and perfectly adequate today) with Legal Compliance.
In the past it was very simple: you behave decently and all was well. It was obvious to all one had to remain within the law. I understand that the enormous mountain of regulations and controls rolled out by the various Authorities needs sharpening up some internal processes so one does not forget to submit some document. Otherwise the shysters will get you on a technicality. read more

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Jyoti Munsiff: more analogous to a poacher turned gamekeeper

By Alfred Donovan
A Shell insider has drawn attention to the remarkable spectacle of Jyoti Munsiff, the former Company Secretary of Shell Transport, being appointed as the Chief Ethics and Compliance Officer of Royal Dutch Shell plc. They have amusingly used the analogy of “putting a fox in charge of a hen house”. With all due respect, the situation is more analogous to a poacher turned gamekeeper.
The first link below displays a letter that my son received some years ago from Ms Munsiff. As can be seen she was intent in her skilfully drafted letter from preventing the terms of a “Deed” from being disclosed to Shell shareholders.
The “Deed” in question was a Confidentiality Agreement/Deed signed on behalf of Shell UK Ltd by its then Managing Director David Varney and by Richard Wiseman who is General Counsel of Shell International. My son (John) and I signed on behalf of our former company, Don Marketing UK Ltd and as co-founders of an NGO, the Shell Corporate Conscience Pressure Group. (David Varney is now the head of the combined UK Inland Revenue and HM Customs and Excise.)
The primary purpose of the “Deed” was to impose confidentiality on us because Shell management did not want its shareholders to know what was going on in their name; in other words, a good old fashioned Shell cover-up involving the most senior executives of the Royal Dutch Shell Group. Top management were copied on the incriminating correspondence, including individuals who are still Shell directors.
The second link displays an astonishing letter from Mark Moody-Stuart, the then Chairman of Shell Transport who was sufficiently agitated to actually issue a threat against us on behalf of Shell UK Limited. Bizarrely, his wife, Lady Judy Moody-Stuart, subsequently intervened in relevant matters without her husbands’ knowledge.
The third link displays a copy of my sons reply to Mark Moody-Stuart. I draw attention in particular to paragraph five.
The last link displays a news article referred to in the correspondence with Moody-Stuart. It is recommended reading.
Jyoti Munsiff was up to her neck in trying to cover-up the cover-up (it is only in reference to Shell management that I could end up writing such a comment). Consequently I am shocked at her new role as the keeper of Shell ethics. Frankly it’s laughable (but I'm not laughing).
FIRST LINK
http://shell2004.com/2004 Documents/letters/letterfromshelltransportcompanysec6april98.pdf
SECOND LINK
http://shell2004.com/2004 Documents/letters/letterfrommarkmoodystuart6april1998.pdf
THIRD LINK
http://shell2004.com/2004 Documents/letters/letterfromjohndonovantoMoody-Stuart14april98.htm
FOURTH LINK
http://shell2004.com/2004 Documents/guardian/guardian15nov97.htm read more

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CNN NEWS: Shell posts record $23B profit

Thursday, February 2, 2006; Posted: 3:58 a.m. EST (08:58 GMT)
Shell's result follows record earnings at larger rival Exxon Mobil earlier this week.
LONDON, England (Reuters) — Royal Dutch Shell posted a record profit for a UK-listed company on Thursday, helped by high oil prices and strong refining margins.
The company reported a 3 percent rise in fourth-quarter current cost of supply (CCS) net profit to $5.395 billion, in line with forecasts,
Excluding a net gain of $34 million related to exceptional items, the result was in line with a Reuters poll of 10 analysts which gave an average forecast of $5.385 billion, and up around 13 percent from the post-exceptionals result last year.
Shell said production fell to 3.5 million barrels of oil equivalent per day (boepd) in the quarter from 3.84 million boepd in the same period of 2004.
Full-year CCS net profit for 2005 was $22.94 billion, a record for a UK-listed company, analysts said.
The world's third-biggest listed oil firm by market value said it expected to return $5 billion to shareholders by repurchasing stock in 2006, in line with last year's share repurchases.
Shell said its reserve-replacement ratio — the rate at which it matches the oil it pumps with new finds — was 70 to 80 percent, including mineable reserves from Athabasca Oil Sands and year-end pricing impact and acquisitions and divestments.
Companies target a rate of at least 100 percent to avoid depletion of their asset base and the suggestion their business is eroding.

Shell is under pressure from investors for its poor reserve-replacement rate after achieving a ratio less than 50 percent in 2004. Analysts believe this shows Shell will struggle to grow its upstream oil and gas production business in coming years.
Shell said it would pay a dividend of 0.23 euros per share for the fourth quarter.
Shell's result follows record earnings at larger rival Exxon Mobil earlier this week. read more

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Forbes/AFX News: Royal Dutch Shell to develop glass-film solar panels

AFX News Limited
Saint-Gobain, Royal Dutch Shell to develop glass-film solar panels
02.02.2006, 03:31 AM
PARIS (AFX) – Saint-Gobain SA said it has formed a partnership with Royal Dutch Shell PLC to develop a new technology of solar panels consisting of thin films of copper indium selenide (CIS) on glass, instead of traditional silicon wafers.
Shell has been developing the CIS technology over the past four years, and Saint-Gobain will contribute its experience with film deposits on glass, acquired from years of operating in the automobile and building markets.
Financial details of the partnership were not disclosed.
'This partnership will strengthen Saint-Gobain's competitive advantages in its technical business through innovation, which is consistent with the group strategy of increasing its research and development effort in the high performance materials and flat glass sectors,' the company said.
Shell previously announced this morning that as part of its focus on CIS technology, it has sold its silicon solar panels activities to Germany's SolarWorld AG.
[email protected]
js/ma read more

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BNR Nieuwsradio, Netherlands: Persbericht Shell – activiteiten alternatieve energie

AMSTERDAM (FD.nl/Betten) – Hier volgt een persbericht uitgegeven door Shell inzake alternatieve energie:
MEETING THE ENERGY CHALLENGE – SHELL'S COMMITMENT TO ALTERNATIVE ENERGY
New developments in Biofuels, Wind, Solar and Hydrogen announced
Royal Dutch Shell plc provided an update of its activities in alternative energy including Biofuels, Wind, Solar and Hydrogen. Shell has now invested over US$1 billion in alternative energies, making it one of the world's leading companies in the sector.
“In Shell, we aim to develop at least one alternative energy such as wind, hydrogen or advanced solar technology, into a substantial business,” commented Shell CEO Jeroen van der Veer. “In addition, we continue our efforts to further expand our position as the largest marketer of Biofuels. The actions announced today are consistent with this long-term vision.”
Shell has an established position as the world's largest marketer of Biofuels, as well as a leading developer of advanced Biofuels technologies. Biofuels are fuels derived from biomass such as plant crops like oil seed, or plant wastes like straw. They can be used either pure or blended with standard automotive fuels dispensed at today's filling stations with the potential for much lower CO2 emissions.
In partnership with Iogen of Canada, cellulose ethanol Biofuels are being successfully produced from plant waste. By producing Biofuels from plant waste instead of food crops, the potential stress on the food chain is alleviated. The Iogen process produces a fuel which can be used in today's cars, cutting CO2 lifecycle emissions by 90% compared with conventional fuels. Shell recently announced a Memorandum of Understanding with Volkswagen and Iogen to explore the economic feasibility of producing cellulose ethanol in Germany. Shell Canada has been working with Iogen to develop a viable commercial framework for a facility in Canada.
These projects complement Shell's existing partnership with CHOREN Industries of Germany. CHOREN have a patented Biomass-gasification process that converts biomass – such as woodchips – into ultra-clean synthetic gas that can then be converted for use in diesel through Shell's Gas- to-Liquids technology. CHOREN is preparing construction for the world's first commercial biomass-to-liquids facility in Freiberg, Germany.
Wind is currently one of the most promising sources of renewable energy. Shell's share of wind energy capacity is currently greater than 350MW, and is expected to reach approximately 500MW in 2007. Included in this growth is the first Dutch offshore wind project, the 108MW Offshore Windpark Egmond aan Zee (Shell share: 50%). Full construction will begin on this project in March 2006, and first electricity production is expected around the end of the year. Progress has also been made with the development of the London Array offshore project in the UK (Shell share: 33.3%). This project has a potential capacity of 1,000MW, making it one of the world's largest planned wind farms.
In the United States, Shell is already one of the largest wind energy developers, and is actively progressing projects in Texas, Wyoming, Idaho, West Virginia, California, and Hawaii. Shell recently acquired the development rights to Mount Storm, a 300MW wind park (Shell share: 50%) in West Virginia – potentially one of the largest new projects in the USA. Progress has also been made in permitting the 200MW Cotterel Mountain wind project (Shell share: 50%) in Idaho.
Shell also announced a Memorandum of Understanding today outlining plans to explore the potential for wind energy developments in China in partnership with Guohua Energy Investment Corporation of the China Shenhua Group, a leading national energy supplier.
In the area of Solar energy, Shell has been progressing the next generation of technologies, including CIS 'thin-film'. Shell believes that non-silicon based technologies such as CIS are more likely to become competitive with retail electricity in the coming years. Shell's CIS technology is supported by four years of manufacturing and marketing experience. The technology recently achieved a 13.5% world record efficiency for thin-film products, and is supported by International Electrotechnical Commission certification.
Shell today announced the signing of a Memorandum of Understanding with Saint-Gobain, one of the world's leading producers of glass and other building materials, to further explore the Shell CIS technology and consider joint development. Saint-Gobain's expertise in glass processing and building material manufacturing provides an excellent fit for joint exploration of this technology.
In light of this focus on CIS 'thin film' technology, Shell decided to divest its crystalline silicon solar business activities to SolarWorld AG. Shell's silicon-based business has an annual production of approximately 80MW. Manufacturing facilities, sales and marketing, and silicon research and development activities in Germany and the United States (Washington state and California) will transfer to SolarWorld, including all 579 staff currently involved in silicon PV.
Shell will continue to provide solar energy to the developing world, and has signed a Letter of Intent with Good Energies Inc. with a view to further expanding the business.
Finally, Shell today announced that it will be opening at least two new Hydrogen stations in the U.S.A. in 2006, supporting continued efforts to demonstrate the viability of a future Hydrogen economy. Shell is also active in this area in Asia, and is supporting the recently announced Hydrogen station at Tongji University in Shanghai. Shell Hydrogen continues to take a leading role in joint government/industry discussions and partnerships to plan and develop hydrogen and fuel cell activities, including the EU Hydrogen & Fuel Cell Technology Platform, the California Fuel Cell Partnership and the Japan Hydrogen and Fuel Cell Demonstration Project.
(c) Het Financieele Dagblad in samenwerking met Betten Beursmedia News (contact: [email protected]/ 020-5928456 read more

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Channel 4 News: Shell announces staggering £12.9bn profits

Last Modified: 2 Feb 2006
Source: ITN
Shell has announced record-breaking annual profits of £12.93 billion – that's almost £1.5 million an hour.
The staggering figure is equal to that spent by the 27.7 million foreigners who visited Britain on holiday in 2004 or that of Sudan's Gross Domestic Product.
The profits are up nearly one-third on last year, when Shell set a UK record of £9.8 billion profits.
Shell's fourth-quarter CCS net profit excludes exceptional items such as asset sales and notional derivatives charges.
The company said production fell to 3.5 million barrels of oil equivalent per day (boepd) in the quarter, compared to 3.84 million boepd in the same period of 2004.
It follows a year in which the cost of crude jumped from below $45 dollars a barrel to hit a new record above $70 dollars.
Shell said its production outlook for 2006 is unchanged from earlier guidance, and in the lower half of the range of 3.5 to 3.8 million barrels a day.
It expects its Mars platform in the Gulf of Mexico to start production by the middle of this year following hurricane damage, with full production set to resume during the second half of the year. read more

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THE WALL STREET JOURNAL: Addicted to Polls

February 2, 2006; Page A10
President Bush has seen the energy future, and he has two words of advice: wood chips. Somewhere in his cardigan sweater next to a fireplace, Jimmy Carter is smiling.
That gets to the uncomfortable heart of Mr. Bush's startling turn on energy policy Tuesday night. An Administration that once promoted drilling in Alaska and other ways to expand domestic oil and gas supplies is now lecturing the nation that it's “addicted to oil” and extolling the merits of cellulosic biomass, a k a wood chips. This may not be as bad as 1970s-style price controls, but it's also a long way from a sensible energy policy.
If there is an unhealthy addiction right now, it may be the White House fixation on polls showing Americans are anxious about gas prices. This, and only this, could explain the decision to co-opt Democratic energy ideas in order to deflect their political attacks in the run-up to mid-term elections. Karl Rove may believe he needs to do this to save a Republican Congress in November, but nobody should think it's going to do much for energy supplies or prices.
For starters, this perpetuates the myth that America can somehow swear off oil. Mr. Bush was careful not to use the words “energy independence,” though his promise to replace more than 75% of oil imports from the Middle East by 2025 is as big a leap of faith. As the nearby chart shows, all sources of “renewable” energy combined supply just 3.3% of U.S. energy needs. There are limits on what solar or wind energy can provide or how much ethanol we can produce. Save for a miracle in cold fusion, fossil fuels including Mideast oil will be with us for decades to come.
Mr. Bush's proposed subsidies may be small, but he has started a political bidding war that will prove very costly before it's done. Every energy lobbyist with a K Street address will be lining up for another tax or spending subsidy: synthetic fuels, biodiesel, wind farms and, the granddaddy of them all, ethanol. That subsidy used to be limited to corn farmers, but Mr. Bush opened the door to make the fuel from cane sugar and switch grass. And this for a fuel that has been heavily subsidized since the 1970s and still can't pull its own market weight.
Mr. Bush's comparison of oil to a narcotic was especially inapt, as if Americans who drive SUVs are somehow sinners. Those are his own exurban voters Mr. Bush is talking about. The truth is that America is twice as energy efficient as it was 50 years ago, and some of the greatest gains have come during periods of high oil prices. Yet some of the same politicians calling for limits on oil use now are those who happily basked in 80-cent-a-gallon gasoline in the 1990s.
The market is similarly working to increase supply, at least where the government allows. One overlooked energy story is the extraordinary capital the oil industry is sinking into new production. Oil sands in Canada's Alberta province hold 175 billion barrels of proven oil reserves, second only to Saudi Arabia's estimated 260 billion. Shell Canada chief Clive Mather recently suggested there could be as many as two trillion barrels. Today's high prices make it economical to extract oil from sand, and Canada's oil sands are already producing a million barrels a day. Yet, remarkably enough, Mr. Bush made no reference at all to the limits that Congress has imposed on drilling in the Arctic, or in the Outer Continental Shelf, where there are vast non-Mideast oil and gas reserves.
About the only idea Mr. Bush didn't steal from the liberal playbook was a call for greater fuel efficiency standards. But give it time: The “addiction” line will surely jumpstart calls for precisely those types of limits on consumer choice. Such rhetoric will also add to the political clamor for another gas tax, although with today's high prices this has so far been a political non-starter.
At least Mr. Bush bothered to mention nuclear energy, which is the only realistic substitute to fossil fuels short of a technological breakthrough. Then again, this country hasn't built a new nuclear plant since the 1970s, and the recent flurry of companies seeking licenses for new reactors has sent environmental activists around the bend. Companies have faced similar difficulties building new terminals to import liquified natural gas, a substitute for home heating oil.
The truth is that many green groups, and the political liberals who follow them, don't object to imported oil because it comes from the Middle East. They are opposed to fossil fuels, and nuclear energy for that matter, on principle. They want to live in a world that runs on wood chips, and it's hardly useful to have a conservative President telling the country he agrees with them. read more

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THE WALL STREET JOURNAL: Addiction Treatment Bush's Latest Energy Solution, Like its Forebears, Faces Hurdles

Fuel from 'Cellulosic Ethanol'
Is Costly, Hard to Dispense;
Broad Political Support
Enthusiasm From Detroit
By JOHN J. FIALKA and JEFFREY BALL
Staff Reporters of THE WALL STREET JOURNAL
February 2, 2006; Page A1
With oil prices stuck at more than $60 a barrel, President Bush is touting “cellulosic ethanol” as a 21st-century panacea for the U.S.'s addiction to oil. In his State of the Union address Tuesday, Mr. Bush said energy made from “wood chips, stalks or switch grass” could be available at gas pumps in six years and could supply nearly a third of the fuel needed to keep Americans on the road.
The plan is the latest in a long line of promises from Washington to back new forms of alternative energy, going back to President Carter's promotion of synthetic fuels. It offers some intriguing new technology and the possibility of widespread support from environmentalists, farmers and auto makers.
Like earlier promises, most of which failed, Mr. Bush's surprise promotion of cellulosic ethanol also faces huge hurdles. For one, the budget-constrained White House is offering little money to back up its rhetoric: just $150 million next year, hardly enough to revolutionize a multibillion dollar energy market.
The fuel also faces distribution problems and a lack of properly equipped vehicles. And an unpopular gas tax might well be needed to make ethanol a competitively priced product at the pump.
The proposal marks a switch in emphasis for a politically weakened president. The administration previously has said the route to energy independence lay in encouraging domestic oil and gas drilling, including opening the Arctic National Wildlife Refuge. Such proposals, which have repeatedly died in Congress amid bitter political wrangles, were notably absent in this year's speech.
By contrast, cellulosic ethanol can draw support from a surprisingly diverse political coalition. Scientists, investors and policy makers say it is increasingly viable to make fuel from farm waste, also known as “biomass.” For one, it is cheaper than corn-based ethanol, the fuel that has been a heavily subsidized favorite in Washington. Private-sector investors — from Virgin mogul Richard Branson to Canada's Iogen Corp. — are putting money into the concept in hopes of seeing an ethanol boom in the U.S. similar to one in Brazil.
Environmentalists like the idea because burning the fuel doesn't pollute as much as conventional gasoline. Defense hawks, notably Reagan Secretary of State George P. Shultz and Clinton Central Intelligence Agency Director James Woolsey, promote it as a way to boost national security. Struggling U.S. auto companies like it because they have a competitive advantage over the Japanese on so-called flexible-fuel vehicles that can switch between gasoline and alternatives.
STATE OF THE UNION REVIEW
• Can President's Plan Keep America Competitive?
• Bush Takes Dual Tack on Immigration
• Industry Cheers Cleaner-Coal Push
• Full Text: Read the complete prepared text of the address.
• Question of the Day: Which topic should the Bush administration make its top priority this year?
And because the fuel can be made from a wide range of agricultural products, it draws backing from a geographically diverse range of politicians, from New York Republican Gov. George Pataki to a bipartisan group of elected officials in California. The fuel is even popular in farm states such as Iowa that tout conventional corn-based ethanol, since it can make heavy use of corn stalks.
Many experts say conservation or a gas tax is the best way to dent import demand. Mr. Bush has rejected these approaches as conflicting with his free-market bent and has preferred throughout his term to focus on new drilling and new technologies. The White House estimates the president has provided $10 billion in spending on new energy technologies since taking office in 2001.
Beyond ethanol, Mr. Bush's new “Advanced Energy Initiative” includes spending for research on hydrogen cars and hybrid-car batteries that can be recharged overnight, as well as money for solar and wind energy. His grand goal, as he stated in his national address, is “to replace more than 75% of our oil imports from the Middle East by 2025.”
Significant Departure
That would mark a significant departure from the future the government now predicts. The Energy Information Administration says the U.S. will import more crude oil and finished petroleum products, not less — more than 70% of projected oil use in 2025, compared with 62% last year. Mideast imports are expected to become more important, rising to 30% of U.S. crude-oil and refined-product imports in 2025 from 21% last year.
The EIA soon will release new data ratcheting down the expected U.S. reliance on imports, based on the rise in oil prices, which the EIA reasons will spur higher conservation and domestic production. Nonetheless, Mr. Bush's plan would mark “quite a change,” says John Conti, director of the office of integrated analysis forecasting at the EIA. It is “a very aggressive goal.”
John Felmy, chief economist at the American Petroleum Institute, the oil industry's main trade group, says the goal is “achievable,” but not without big changes. He says it would likely require a boost in domestic drilling, a major conservation effort or an increase in U.S. oil imports from other parts of the world, none of which is under way.
Nearly half of the oil consumed by the U.S. is burned in cars and trucks. Over the years, the U.S. has debated toughening federal fuel-economy requirements, created in the mid-1970s in the wake of the Arab oil embargo. Still, the average fuel economy of cars and trucks has been flat for more than a decade. One reason: Sport-utility vehicles and pickup trucks, which Americans snapped up when gas prices were low, aren't subject to the toughest fuel standards.
Some auto makers argue that improving fuel economy won't reduce oil consumption: Consumers whose vehicles go farther on a gallon of fuel will simply drive them more.
Hence the appeal of alternative sources. One concerted effort, which ratcheted up amid high oil prices in the early 1980s, was a government-sponsored research program to convert coal into synthetic natural gas. The project succeeded in the lab but “synthetic fuel” didn't make much of a market impact after oil prices subsequently fell.
In the 1990s, the auto industry talked up the potential of battery-powered cars, largely as a way to meet clean-air regulations in California, the nation's biggest auto market. That effort fizzled in part because of the cost and difficulty of producing batteries that lasted long enough.
A few years ago, proponents began talking enthusiastically about cars that would run on fuel cells powered by hydrogen. President Bush promoted the technology in his 2003 State of the Union address. Though he still touts it, some of the euphoria has subsided. The most realistic way to produce hydrogen is from a fossil fuel — natural gas. There also is no viable infrastructure for delivering hydrogen to filling stations.
Some vehicles run on compressed natural gas — another fossil fuel but one that burns more cleanly than does gasoline or diesel. But it also isn't widely available at gas stations and its use is limited to fleets, such as buses and taxis, which can be refueled at central locations.
Biggest Barrier
Now comes the focus on cellulosic ethanol. The biggest barrier to its widespread use is cost. The International Energy Agency, a Paris-based energy watchdog for industrialized nations, estimates that cellulosic ethanol costs about $3.40 a gallon to produce, according to Pierpaolo Cazzola, an IEA analyst. That is far higher than the current average U.S. price of regular, unleaded gasoline of $2.35 a gallon, according to AAA, the motor group, and doesn't even include a markup. Other experts, however, say the cost could be lower.
Car makers periodically argue that only by raising gasoline taxes, a politically unsustainable proposal, will consumers make the switch to more fuel-efficient vehicles.
Even if ethanol costs come down, distribution remains tricky. Ethanol can be transported along existing pipelines as long as it is blended with petroleum products in concentrations of less than 10%, Mr. Cazzola says. Any more than that and ethanol can corrode pipelines. How to manage the distribution of ethanol is “a bit of debate,” he says.
About five million vehicles that can use gas and ethanol are on the road now, but many of those drivers don't know their vehicles are capable of using ethanol. Only 600 filling stations offer E85, a blend of 85% ethanol and 15% gasoline, and they are mostly concentrated in the Midwest. That number could quadruple this year, but it still would be a fraction of the 170,000 fueling stations in the country. Michigan, home to the American auto industry, has only a handful of E85 stations.
Some auto companies — notably the Japanese, who haven't invested much in the technology — remain cautious. Toyota Motor Corp. sells flex-fuel vehicles in Brazil, but not in the U.S. Bill Reinert, national manager of Toyota's U.S. advanced-technologies group, is skeptical of corn-based ethanol because of the huge amounts of land and water required to grow the corn. Made in large quantities, he says, cellulosic ethanol holds more promise.
Still, he has questions: How does it perform in the car? What might future production look like? What are the environmental issues associated with that production? “There's no real silver bullet out there,” Mr. Reinert says. “Each fuel has its own particular problems.”
A Success Story
Brazil is the main success story touted by ethanol enthusiasts — it gets half its motor fuel from ethanol. The country's effort was launched in 1975, but ethanol in Brazil only became competitive recently after gasoline prices rose sharply. It also took years of government subsidies totaling at least $16 billion, plus tax breaks that cost several billion dollars more. Brazil mandated that the fuel be available at 29,000 filling stations — a cost borne by state-run oil giant Petrobras.
Bush officials are optimistic their efforts can push the technology over the hump. The $150 million they are seeking for the year starting Sept. 30 — up from $90 million this fiscal year — would go to research on enzymes and yeast that can break down materials including wood chips and “switch grass,” a grass that grows quickly without much fertilizer. The process is similar to making bootleg whiskey.
According to Doug Faulkner, acting assistant secretary for energy efficiency, the Department of Energy's researchers had a breakthrough in 2004 when they figured out how to drastically cut the cost of producing sugar from corn stalks. Now, he says, they can produce ethanol from corn waste for $2.30 a gallon, well below the IEA estimate.
The Energy Department has received unverified reports from outside researchers that the cost could be as low as $1.30 a gallon.
Congress last year authorized loan guarantees for companies that want to start cellulosic-ethanol plants. If the money is approved, the loans would cover as much as 80% of the cost of the first four cellulosic-ethanol plants built in the U.S., up to $250 million each.
Officials say once production costs fall, other hurdles should disappear. “The marketplace will take care of that,” Allan Hubbard, head of the White House National Economic Council, told reporters. “Once the product is available, the distribution system will respond quickly.”
In the private sector, the front runner is Iogen, a closely held Ottawa company. It has attracted powerful partners, including Royal Dutch Shell PLC, to help build industrial-scale plants to produce the fuel.
'A Good Signal'
“The President's speech was a good signal,” says Jeff Passmore, Iogen's executive vice president. He says the company is looking at sites in southwestern Idaho and in the Canadian provinces of Alberta and Saskatchewan for its first plants and is preparing to break ground at one of them in the summer of 2007.
Mr. Passmore said Iogen has signed contracts with 300 Idaho farmers to take 400,000 tons of their wheat and barley straw a year. The lead sponsor of the loan guarantees was Idaho Republican Sen. Larry E. Craig, who has been pushing to get Iogen to locate a plant in his state.
Mr. Bush's push for cellulosic ethanol gives a small helping hand to General Motors Corp. and Ford Motor Co., who both are suffering from significant financial woes. While Toyota has shunned ethanol, those companies see it as a way to improve their environmental image, which is tainted from pushing SUVs.
“Ethanol can provide relief for customers at the pump and lessen America's dependence on foreign oil,” said Bill Ford, chairman and chief executive of Ford, in a written statement yesterday welcoming the White House initiative.
GM is spending tens of millions of dollars on an ethanol-awareness campaign: “Live Green Go Yellow.” It is set for an expensive launch during Sunday's Super Bowl in both pre- and post-game advertising spots. This year, GM plans to send a letter to the one million owners of its flex-fuel vehicles, including those who might not know they run on ethanol. It will offer them a free, yellow gas cap that can be installed at their local dealer to remind drivers the car can run on ethanol.
–Karen Lundegaard in Detroit, David Luhnow in Mexico City and Bhushan Bahree in Vienna contributed to this article.
Write to John J. Fialka at [email protected] and Jeffrey Ball at [email protected] read more

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THE WALL STREET JOURNAL: Shell Posts 4% Profit Decline, Struggles With Falling Output

By CHIP CUMMINS
Staff Reporter of THE WALL STREET JOURNAL
February 2, 2006 3:00 a.m.

Royal Dutch Shell PLC said its fourth-quarter earnings fell 4%, partly as a result of a big, one-time gain in the year-earlier period.
Soaring oil and natural-gas prices boosted the bottom-line at Shell, but the Anglo-Dutch energy giant continued to struggle with declining output and an inability to replace all the oil and natural-gas reserves it depleted last year through production.
Shell said net income for the quarter ended Dec. 31 was $4.37 billion, or 66 cents a share, down from $4.57 billion, or 68 cents a share, a year earlier. The results reflected a net gain for special items in the latest quarter of $34 million, compared to a net gain in the fourth quarter of 2004 of $499 million.
Shell's revenue fell 1% to $75.5 billion from $76.3 billion in the year-earlier quarter. Shell's numbers conform to international financial-reporting standards, which differ from U.S. generally accepted accounting principles.
Shell said total oil and gas production fell 9% to 3.5 million barrels of oil equivalent a day from 3.84 million a day a year earlier.
For the full year, Shell said it earned $25.31 billion, 37% higher than for 2004. The large annual profit comes as governments around the world ratchet up the pressure on oil companies benefiting handsomely from today's sky-high energy prices. In addition to threats by some U.S. lawmakers to push new taxes on oil companies, countries as diverse as Britain and Bolivia have signaled they plan to ratchet up their take of oil revenue at the expense of companies. Despite a handful of sharply higher tax regimes around the world and sharply escalating costs for everything from drilling rigs to engineers, high oil prices have more than made up the difference for Shell and other large oil companies.
The company said it expects its closely watched reserve-replacement ratio – the rate at which a company finds new reserves of oil and gas to replace the energy it pumps out of the ground each year – would be between 60% and 70% in 2005. Companies typically try to achieve 100% reserve replacement to satisfied investors worried about future production growth.
While other companies have struggled recently replacing reserves, Shell has been one of the industry's biggest laggards. It spent the last two years recovering from a devastating disclosure that its reserve base was much smaller than it had been telling investors.
Write to Chip Cummins at [email protected] read more

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The Times: Shell breaks profit record

By Bryce Elder and agencies
Shell announced record profits for a quoted UK company, with the oil giant reporting earnings of $22.94 billion (£12.93 billion).
The figure — which works out at nearly £1.5 million an hour — was up almost a third on last year’s profit of $17.59 billion. It is equivalent to just over 1 per cent of Britain’s gross domestic product, or the entire GDP of Sudan.
The group said it expected to use some of the windfall to return up to $5 billion to investors through share buybacks in 2006.
The record number comes for a year when oil prices rose from around $45 a barrel to reach a record of $70.85 on Aug. 30, a day after Hurricane Katrina struck the Gulf of Mexico and damaged production facilities.
The bulk of Shell’s profits come from its “upstream” business – getting oil and gas out of the ground. This division has been boosted by the spiralling cost of crude oil, which came as tensions over the safety of supplies from oil-producing countries and the damaging hurricane season.
But the storms also disrupted Shell’s production, shutting refineries temporarily and forcing it to invest on repairs. Production fell to 3.5 million barrels a day during the final quarter, down from an equivalent figure of 3.8 million barrels last time.
Chief executive Jeroen van der Veer said: “Our good performance in the fourth quarter of 2005 gives us a solid platform to build on in 2006.”
For the final quarter of 2005, Shell said profit rose 3 per cent to $5.395 billion on a current cost of supply (CCS) basis. That matched City expectations, which were centred at around $5.385 billion.
Shell's results come in the same week that Exxon Mobil, the world’s largest oil company, revealed $33.86 billion profits in its last financial year — the biggest so far in corporate history. That result beat investor expectations.
Jaap Barendregt, an analyst at FBS Bankiers, told Reuters that Shell’s results “are as expected, but the result in itself is a bit disappointing. We could have expected somewhat more given the surprise we saw with Exxon.”
In early deals on the London Stock Exchange, shares of Shell were down 34p to £19.71. They are up about 60 per cent over the last year.
BP is expected to continue the trend of record profits next week 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. read more

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Daily Telegraph: Backpost: Is it right to presume that reserves are now a problem of the past?

You bet daily
Royal Dutch Shell is expected to have increased profits by 26pc to $23billion. But the oil giant faces a number of questions. Is it right to presume that reserves are now a problem of the past? What plans does Shell have for future exploration? Are Nigeria's problems containable?
Since October 2005 Shell's B share price has risen from 1,775p to 2,006p. Cantor Index offers a March contract related spread of 2,006p-2,017p.
www.cantorindex.com

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The Guardian: It's capitalism or a habitable planet – you can't have both

Our economic system is unsustainable by its very nature. The only response to climate chaos and peak oil is major social change
Robert Newman
Thursday February 2, 2006
There is no meaningful response to climate change without massive social change. A cap on this and a quota on the other won't do it. Tinker at the edges as we may, we cannot sustain earth's life-support systems within the present economic system.
Capitalism is not sustainable by its very nature. It is predicated on infinitely expanding markets, faster consumption and bigger production in a finite planet. And yet this ideological model remains the central organising principle of our lives, and as long as it continues to be so it will automatically undo (with its invisible hand) every single green initiative anybody cares to come up with.
Much discussion of energy, with never a word about power, leads to the fallacy of a low-impact, green capitalism somehow put at the service of environmentalism. In reality, power concentrates around wealth. Private ownership of trade and industry means that the decisive political force in the world is private power. The corporation will outflank every puny law and regulation that seeks to constrain its profitability. It therefore stands in the way of the functioning democracy needed to tackle climate change. Only by breaking up corporate power and bringing it under social control will we be able to overcome the global environmental crisis.
On these pages we have been called on to admire capital's ability to take robust action while governments dither. All hail Wal-Mart for imposing a 20% reduction in its own carbon emissions. But the point is that supermarkets are over. We cannot have such long supply lines between us and our food. Not any more. The very model of the supermarket is unsustainable, what with the packaging, food miles and destruction of British farming. Small, independent suppliers, processors and retailers or community-owned shops selling locally produced food provide a social glue and reduce carbon emissions. The same is true of food co-ops such as Manchester's bulk-distribution scheme serving former “food deserts”.
All hail BP and Shell for having got beyond petroleum to become non-profit eco-networks supplying green energy. But fail to cheer the Fortune 500 corporations that will save us all and ecologists are denounced as anti-business. Many career environmentalists fear that an anti-capitalist position is what's alienating the mainstream from their irresistible arguments. But is it not more likely that people are stunned into inaction by the bizarre discrepancy between how extreme the crisis described and how insipid the solutions proposed? Go on a march to the House of Commons. Write a letter to your MP. And what system does your MP hold with? Name one that isn't pro-capitalist. Oh, all right then, smartarse. But name five.
We are caught between the Scylla and Charybdis of climate change and peak oil. Once we pass the planetary oil production spike (when oil begins rapidly to deplete and demand outstrips supply), there will be less and less net energy available to humankind. Petroleum geologists reckon we will pass the world oil spike sometime between 2006 and 2010. It will take, argues peak-oil expert Richard Heinberg, a second world war effort if many of us are to come through this epoch. Not least because modern agribusiness puts hundreds of calories of fossil-fuel energy into the fields for each calorie of food energy produced.
Catch-22, of course, is that the very worst fate that could befall our species is the discovery of huge new reserves of oil, or even the burning into the sky of all the oil that's already known about, because the climate chaos that would unleash would make the mere collapse of industrial society a sideshow bagatelle. Therefore, since we've got to make the switch from oil anyway, why not do it now?
Solutions need to come from people themselves. But once set up, local autonomous groups need to be supported by technology transfers from state to community level. Otherwise it's too expensive to get solar panels on your roof, let alone set up a local energy grid. Far from utopian, this has a precedent: back in the 1920s the London boroughs of Wandsworth and Battersea had their own electricity-generating grid for their residents. So long as energy corporations exist, however, they will fight tooth and nail to stop whole postal districts seceding from the national grid. Nor will the banks and the CBI be neutral bystanders, happy to observe the inroads participatory democracy makes in reducing carbon emissions, or a trade union striking for carbon quotas.
There are many organisational projects we can learn from. The Just Transition Alliance, for example, was set up by black and Latino groups in the US working with labour unions to negotiate alliances between “frontline workers and fenceline communities”, that is to say between union members who work in polluting industries and stand to lose their jobs if the plant is shut down, and those who live next to the same plant and stand to lose their health if it's not.
We have to start planning seriously not just a system of personal carbon rationing but at what limit to set our national carbon ration. Given a fixed UK carbon allowance, what do we spend it on? What kinds of infrastructure do we wish to build, retool or demolish? What kinds of organisational structures will work as climate change makes pretty much all communities more or less “fenceline” and almost all jobs more or less “frontline”? (Most of our carbon emissions come when we're at work).
To get from here to there we must talk about climate chaos in terms of what needs to be done for the survival of the species rather than where the debate is at now or what people are likely to countenance tomorrow morning.
If we are all still in denial about the radical changes coming – and all of us still are – there are sound geological reasons for our denial. We have lived in an era of cheap, abundant energy. There never has and never will again be consumption like we have known. The petroleum interval, this one-off historical blip, this freakish bonanza, has led us to believe that the impossible is possible, that people in northern industrial cities can have suntans in winter and eat apples in summer. But much as the petroleum bubble has got us out of the habit of accepting the existence of zero-sum physical realities, it's wise to remember that they never went away. You can either have capitalism or a habitable planet. One or the other, not both.
· Robert Newman's History of Oil will be broadcast on More4 next month
· [email protected] read more

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Irish Independent: It's oil to play for in the battle to keep the wheels of global industry – and economy – turning

It's oil to play for in the battle to keep the wheels of global industry – and economy – turning. One argument predicts doom within a decade as supplies peak and begin to runrun out, the other is slightly more optimistic, writes MICHAEL HARRISON
Feb 02, 2006
As the oil price hovers around the $69 per barrel mark, on heightened concerns about disruption to supplies from Iran and Nigeria, a small group of geologists, economists and commodity traders met in London in recent weeks to consider a more fundamental question: when will the world begin to run out of oil?
That moment is known as 'peak oil' – the point at which production stops increasing and goes into inexorable decline. Some commentators believe that moment may be as little as two years away, some reckon we do not need to worry for another 20 years and some think the peak of production is so far in the distance that it is pointless to even try to put a timescale on it.
But one thing that all shades of opinion are agreed on is that when peak oil does happen, its impact on the world economy – and the consumer lifestyles so many of us take for granted – will be profound. Chris Skrebowski, editor of the Energy Institute's Petroleum Review, believes peak oil will occur in 2008, at which point the world will move into “a land without maps where we are all likely to be poorer”.
For oil is essential to almost everything we do – 90pc of world transport is oil-dependent; all petrochemicals are produced from oil; 99pc of our food relies on oil in some way, either to grow it or get the produce to market; and 95pc of lubricants are oil-based. And, in many cases, oil is not easily replaceable. There are no realistic alternatives to oil for fuelling aircraft and ships, producing petrochemicals or powering cars, without massive investments in technology such as hydrogen.
Given that world oil consumption has doubled since 1970 from 42 million barrels a day to 84 million, that poses a stark challenge. At present rates of depletion, five million barrels a day of new production will need to be brought on stream for the next 10 years just to keep world output rising.
The peak oil debate tends to divide into two camps. On the one hand there are geologists who argue it is almost upon us or shortly will be, based on analysing past production and discovery rates and field exhaustion and extrapolating into the future.
On the other hand, there are economists, political scientists and the oil majors who believe that oil producers – be they governments or companies – will always find a way to meet demand, whether through cleverer ways of finding and extracting oil or greater fiscal incentives to discover and produce more.
Yesterday's conference in London, organised by the Dutch investment bank Insinger de Beaufort, represented both strands of opinion. Mr Skrebowski says that the world's big five oil majors all produced less in 2005 than they did in 2004, while North Sea oil production is declining so rapidly that it will halve in the next seven years.
According to the University of Reading's Dr Roger Bentley, secretary of the Association for the Study of Peak Oil & Gas, the evidence is irrefutable. He points out that 64 of the world's 100 or so oil-producing countries are already past the point of peak production and on the downward slope.
Although there may be a “mini-glut” as output is stepped up from Russia, the Caspian and Iraq and new sources come on stream such as deepwater oil and oilsands, he says the trend is unmistakable.
Dr Bentley believes that non-Opec production will reach a peak within the next 30 months while global output will start to decline between 2010 and 2015 or 2020 at the latest, depending on the contribution from non-conventional sources such as oilsands. “Alongside global warming, this is one of the two extraordinary challenges facing mankind,” he says. “The numbers may slip a little but the fundamental underlying direction does not change.”
Dr Jeremy Leggett, an oil industry geologist-turned-environmental campaigner-turned-chief executive of a solar energy company, paints an even more apocalyptic scene. He believes that peak oil will occur some time this decade.
That will not only produce “horrible economic pain” as oil prices rise to choke off demand but it will also precipitate environmental disaster as oil-consuming countries switch to coal and hasten global warming. “The shortfall between current expectations of oil supply and actual availability will be such that neither gas, nor renewables, nor liquids from gas and coal, nor nuclear, nor any combination thereof will be able to plug the gap in time to head off economic trauma,” he warns.
What is his evidence? Dr Leggett points to the lessons of history. In 1956, a world-renowned geologist, M K Hubbert, predicted that US oil production would peak in 1971, much to the disbelief of almost everyone, including his employer Shell.
. . . the 'Hubbert curve' falls
smoothly to this day, pointing
to a peak between 2005 and
2010
He turned out to be wrong – peak production occurred a year earlier in 1970. Using the same methodology, the 'Hubbert curve' falls smoothly to this day, pointing to a peak sometime between 2005 and 2010. Despite the ingenuity of the oil industry in extracting oil from ever more hostile environments, it is, adds Dr Leggett, a quarter of a century since the world discovered more oil in one year than it produced. In 2000 there were 16 discoveries of giant fields containing 500 million barrels or more – in 2003 there were none.
Not all those attending yesterday's conference are sold on the idea of peak oil. Mike Lynch, an adviser to the US government who runs his own energy and economic research consultancy, is one of the biggest sceptics. He says that the study of peak oil is not a science and that those who advocate it are guilty of naivete, ignorance and plain manipulation of the data.
“There are a lot of zealots out there and a lot of claims are made which are not tested,” he says. “It is true that oil is finite but since 1989 people have repeatedly predicted the peak too soon and have had to keep on increasing their estimate of reserves. Just because a country's output has peaked and gone into decline, it doesn't mean that production can't rise again.” He cites the example of the fall in North Sea production in the 1980s which supporters of peak oil attributed to geological factors but which was, in fact, due to more stringent safety measures after the Piper Alpha fire.
Mr Lynch is one of the few pundits who forecasts that oil prices will begin to ease, but as even he jokes: “I have predicted nine of the last two price decreases.” read more

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Irish Independent: New crisis as Corrib pipeline opponents shun talks

Feb 02, 2006
Tom Shiel
A 900m project to bring gas ashore from the Corrib Field was plunged into further crisis yesterday.
It followed the decision of the Rossport Five to withdraw from a mediation process claiming that a Government minister was interfering in the talks.
The men, who spent 94 days in jail for contempt of court last year arising from their opposition to an onshore pipeline, said Marine and Natural Resources Minister Noel Dempsey was involved in continued and direct interference with the mediation process.
They alleged that Mr Dempsey was instructing Government-appointed mediator, Peter Cassells, to source information on other gas projects in the country instead of confining his role to talks with Shell and the Rossport group.
But last night Mr Dempsey denied any interference and claimed that concerns about the safety of the project and what may happen in the future had been raised with him by local people.
In that context Mr Cassells, former Ictu general secretary, had spoken to him to see what the Government was doing and how these concerns might be met.
“I don't know how anybody could come to the conclusion that this process was going to be between five men in Rossport, Peter Cassells and Shell,” Mr Dempsey said.
Mr Cassells also called on the Rossport Five to return to talks.
He said that Mr Dempsey insisted he had made it clear from the start that he would request updates on the negotiations.
“Obviously as part of the mediation process it was necessary and clearly understood that these issues would be conveyed to me and that Mr Cassells would brief me on people's concerns,” said Mr Dempsey.
The mediator had sought a meeting with the five men to clarify their position and discuss the next stage of the mediation process, he said.
Defending the five men's withdrawal from the mediation process yesterday, Dr Mark Caravan, spokesman for the Shell to Sea protest campaign, said what happened did not constitute mediation.
The Rossport Five, Philip McGrath, Brendan Philbin, Vincent McGrath, Willie Corduff and Micheal O Seighin, allege that Mr Dempsey had continually contacted Mr Cassells and had publicly warned him there was limited time to achieve a resolution.
In a statement yesterday Shell E&P Ireland (SEPIL) urged all parties to support meaningful dialogue.
The company expressed disappointment at the Rossport men's withdrawal from talks but agreed, however, with their statement that “meaningful mediation is the way forward”. read more

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The New York Times: Sen. Specter Weighs Action Against Big Oil

By REUTERS
Published: February 1, 2006
Filed at 12:24 p.m. ET
WASHINGTON (Reuters) – The chairman of the U.S. Senate Judiciary Committee said on Wednesday that Congress would attempt to address growing concerns about rising fuel prices and soaring oil industry profits.
“We intend to do something about'' rising prices to consumers, Chairman Arlen Specter said at a hearing into whether oil industry mergers in recent years have made gasoline more expensive at the pump.
Specter, a Pennsylvania Republican, said he was shocked by the size of oil company profits, adding, “It just may be time to legislate in this field.''
After the hearing, Specter raised the possibility of modifying federal antitrust laws to impose tougher oversight on mergers in the industry and crack down on any abuse of market power.
Further investigation was needed before reaching any final conclusions, Specter told reporters, but the number of mergers in recent years has been “excessive on its face.''
“There are a lot of red flags out there,'' he said, referring to rising prices and record industry profits.
Exxon Mobil Corp. said Monday it earned $10.7 billion in the fourth quarter of last year and $36.1 billion for all of 2005 — bigger than the economies of 125 countries.
Some industry critics have called for an excess profits tax.
Sen. Mike DeWine, chairman of the committee's antitrust subcommittee, said the biggest reason for the spike in fuel prices to consumers was rising crude oil prices.
DeWine, a Republican from Ohio, called for conservation measures and use of alternative fuels. “Try as we might, we simply can't drill our way out of this crisis,'' he told the hearing.
President George W. Bush said the United States was ''addicted to oil'' in his State of the Union speech on Tuesday, and called for developing alternative energy sources, such as ethanol-blended gasoline and hydrogen fuel cells.
Officials from six major oil companies refused to testify at the hearing. Specter criticized their failure to appear and said he might seek subpoenas to compel their testimony.
The Judiciary Committee had asked representatives from Exxon Mobil, Chevron Corp., ConocoPhillips, Valero Energy Corp. and the U.S. units of BP Plc and Royal Dutch Shell Plc to tell their side of the story.
William Kovacic, a member of the U.S. Federal Trade Commission, told the hearing that most sectors of the petroleum industry remained unconcentrated or moderately concentrated.
The FTC is investigating whether oil companies manipulated gasoline prices and oil refining production levels. The agency plans to finish its probe and send its findings to Congress this May. read more

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The New York Times: Shell Posts Biggest Ever U.K. Company Profit

By REUTERS
Published: February 2, 2006
Filed at 2:43 a.m. ET
LONDON (Reuters) – Royal Dutch Shell posted a record profit for a UK-listed company on Thursday, helped by high oil prices and strong refining margins.
The company reported a 3 percent rise in fourth-quarter current cost of supply (CCS) net profit to $5.395 billion, in line with forecasts,
Excluding a net gain of $34 million related to exceptional items, the result was in line with a Reuters poll of 10 analysts which gave an average forecast of $5.385 billion, and up around 13 percent from the post-exceptionals result last year.
Shell (RDSa.L) said production fell to 3.5 million barrels of oil equivalent per day (boepd) in the quarter from 3.84 million boepd in the same period of 2004.
Full-year CCS net profit for 2005 was $22.94 billion, a record for a UK-listed company, analysts said.
The world's third-biggest listed oil firm by market value said it expected to return $5 billion to shareholders by repurchasing stock in 2006, in line with last year's share repurchases.
Shell said its reserve-replacement ratio — the rate at which it matches the oil it pumps with new finds — was 70 to 80 percent, including mineable reserves from Athabasca Oil Sands and year-end pricing impact and acquisitions and divestments.
Companies target a rate of at least 100 percent to avoid depletion of their asset base and the suggestion their business is eroding.
Shell is under pressure from investors for its poor reserve-replacement rate after achieving a ratio less than 50 percent in 2004. Analysts believe this shows Shell will struggle to grow its upstream oil and gas production business in coming years.
Shell said it would pay a dividend of 0.23 euros per share for the fourth quarter.
Shell's result follows record earnings at larger rival Exxon Mobil earlier this week. read more

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Irish Independent: Production from Corrib gasfield takes on a new sense of urgency

THE spat between Ukraine and Russia over the price of gas not only threw into sharp focus our own dependence on gas but also the painfully slow progress in bringing the Corrib field on stream.
Ireland, much like the rest of Europe, is a net importer of gas and with supplies from traditional sources such as the North Sea now in decline, the question of security of supply has become paramount. Estimates suggest that the UK, which has enjoyed the benefits of North Sea gas for four decades, will this year become a net importer of the fuel. That may seem an academic question as far as Ireland is concerned, but like the Ukraine, it leaves us vulnerable in the face of an exceptional event, for instance if a spell of unusually cold weather forced up consumption in Britain or a disaster caused a breakage in the North Sea supply lines. Would our neighbours be content to continue supplying us if those supplies were needed at home?
It is for reasons such as these that the European Commission has taken a keen interest in the gas market. Three years ago it failed in a bid to secure powers to compel member states to hold reserves of gas – and if necessary to sell them to other countries. This proposal is now back on the agenda and thanks to events in Ukraine may get a more receptive hearing – from countries like Ireland at least.
Bord Gais pressed ahead with the building of a second gas interconnector between Ireland and Britain despite persistent claims that it would lie empty and idle. It was a brave decision in the circumstances but still does not guarantee our gas supply. The second interconnector does reduce the chance of an interruption along the Irish Sea route as the chance of simultaneous breaks in the two undersea pipelines is very remote. But the same cannot be said of the land line delivering those imports across the Scottish landmass.
The vast bulk of the island's gas supply still goes through a single onshore pipeline in Scotland, so desite the provision of a second interconnector, we are still vulnerable to an accidental or intentional interruption of supply.
For this reason the ESRI has suggested that consideration be given to the strengthening of the onshore gas transmission system in Scotland on which nearly all of our gas supplies currently depend.
It is estimated that 86pc of Irish energy is supplied by imported fuels. Our own natural gas reserves have declined, and our only other indigenous energy resources are peat and renewables. Peat production is in terminal decline, while the renewable energy industry is at a fledgling stage and is still some years away from making a serious contribution to our energy needs.
Irish energy consumption is projected to grow by 26pc over the next four years as demand for heat, electricity and transport fuels continues to soar.
According to the ESRI, the country is increasingly dependent on gas to supply its energy needs and by 2010 the bulk of electricity generation will depend on gas.
The development of the Corrib field is critical as it will enhance the physical security of Irish energy supply. But Corrib itself will only provide a part of the answer, and a dwindling part at that. When first discovered it was thought that Corrib contained a trillion cubic feet of recoverable gas. This was later downgraded to 850bn cubic feet and, due to difficult structures, the recoverable reserves could be lower still.
The stark reality is, according to oil industry executives, Corrib is a marginal field in economic terms. Shell and its partners can justify the huge capital outlay on the project – running at about $1bn – because the offshore licensing terms introduced by Ray Burke are exceptionally generous. In effect, they mean that Corrib will still bring a return to its owners, albeit a small one.
While Statoil's drilling on the Cong prospect, located quite close to Corrib, proved a major disappointment, there are others waiting to be drilled. Top of the list is the Inishbeg Prospect, located to the north of Corrib and, ironically, quite similar geologically. Drilling is scheduled to commence here this summer, while another well is scheduled to be drilled on the Old Head of Kinsale prospect in the Celtic Sea. read more

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Financial Times: European bourses poised for higher open

By Neil Dennis
Published: February 2 2006
European equities were poised for gains on Thursday following strong sessions in the US and Asia, while fourth-quarter numbers from Deutsche Bank and Royal Dutch Shell provided no nasty shocks.
Spread betters were expecting the three main European indices – London’s FTSE 100, Frankfurt’s Xetra Dax and the CAC 40 in Paris – to open between 15 and 30 points higher.
In New York overnight, the Dow Jones Industrial Average gained 0.8 per cent to 10,953.95 in a choppy session, driven by fluctuations in the price of oil. The Nasdaq Composite added 0.2 per cent to 2,310.56.
Royal Dutch Shell, the oil major, reported fourth-quarter earnings that came in line with market forecasts. A 3 per cent rise in net profit at the current cost of supply (CCS) to $5.395bn beat expectations of $5.385bn. Full-year CCS net profit was $22.94bn a record for a London-listed company.
Deutsche Bank’s full-year pre-tax profit beat expectations thanks to strong growth in trading revenues.
Alcatel, the French mobile phone equipment maker, announced a forecast-beating 16 per cent rise in fourth-quarter operating profit and provided an optimistic outlook on first-quarter sales and 2006 growth. The company said it would propose a dividend for 2005 of €0.16, its first payout since 2001. read more

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Email to Jyoti Munsiff from a Shell Whistleblower

Email from Dr John Huong to Jyoti Munsiff
Jyoti Munsiff SCO
Chief Ethics and Compliance Officer
Royal Dutch Shell plc
Shell Centre, London SE1 7NA
Tel: +44 020 7934 3080 Fax: +44 20 7934 5140 Mobile: +44 7768 993 600
Email: [email protected]
Jyoti Munsiff,
Congratulations on your appointment as Chief Ethics and Compliance Officer for Royal Dutch Shell Plc.
As you know I am being sued by eight companies of the Royal Dutch Shell Group for alleged defamation. The relevant Shell companies have obtained a restraining order which prevents me for speaking the TRUTH in line with the United Nations Universal Declaration on Human Rights. My rights to freedom of expression have in fact been restrained for over 18 months. I had thought that Shell supported this UN Declaration, but it seems that this assumption must be incorrect. I would welcome your clarification on this point as I am sure that my analysis must be at fault?
I am also perplexed by the fact that Shell apparently allows Mr. Alfred Donovan to publish negative commentary about Shell on his website unhindered while I have been sued for articles posted by him on his website under my name? Mr. Donovan has also published an extract from a legal submission purportedly made by Shell International to the World Intellectual Property Organisation in which Shell stated that it supports the right of Mr. Alfred Donovan to criticise Shell on his website. I have also read the November 2005 email to Alfred Donovan from Shell International General Counsel Mr. Richard Wiseman in which Mr Wiseman confirms how tolerant Shell is of Mr. Donovan’s postings on his website. I trust that you can appreciate why I am so puzzled at the apparent disparity in treatment. I am sure there must be a logical explanation?
It therefore seems appropriate to ask you in your new capacity whether the relevant postings by Mr. Donovan i.e. the claimed extract from Shell’s submission to the WIPO and the November 2005 email from Mr. Wiseman are genuine? Surely they must be false??? Why would Shell encourage Mr. Donovan to indulge in his rights to freedom of expression while simultaneously adopting a totally different approach towards me? Something really must be seriously amiss. The answers to my questions are important if – as I assume must be the case – you genuinely want to encourage whistleblowers to speak out if they become aware of misdeeds which are in contravention of the Shell Statement of General Business Principles (SGBP).
It is surely essential in this regard that an even-handed approach is adopted in such matters so that would be whistleblowers and parties with genuine grievances are not deterred by the prospect that they could be ostracized, victimized, sacked and/or sued if they do come forward. In regards to this paragraph I am speaking of course in general terms, not about my case, as that would be inappropriate under the current ongoing litigation.
This letter also seeks confirmation from you for me to make significant inputs for improving ethics and compliance at Shell. I sincerely believe that for obvious reasons I have a unique perspective on the question of Shell employees engaging professionally in whistle blowing when faced with ethical, moral and/or legal dilemmas.

I also believe that it is fair to make readers of this communication aware that apart from the High Court Restraining Order, I am also constrained in my comments by a threat of imprisonment.

I am sure that the eight Royal Dutch Shell companies who collectively decided to sue me believe that their action is an appropriate and proportionate response to the alleged defamatory comments by one former Malaysian employee of 29 years.

Thank you
Sincerely,
Dr. John Huong
Note: This letter will also be copied to Mr. Alfred Donovan because his name was also mentioned. read more

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Legal Week:

A new environment
The Equator Principles are designed to help control and monitor the impact of environmental damage caused by large-scale project financing. Paul Watchman and Charles July consider the practicalities of implementing green principles
The Equator Principles (EP) provide a voluntary framework for assessing environmental and social issues in project financing. Based on International Finance Corporation (IFC) and World Bank safeguards, they are applied by banks and financial institutions when deciding whether to provide finance to projects costing $50m (£28m) or more.
By the beginning of January 2006, the EP had been adopted by almost 40 banks (Equator banks), representing about 80% of project finance funds worldwide. In practice, the EP’s influence is even greater as Equator banks also apply the principles when co-financing with other banks or when taking part in syndication of other banks’ projects.
The EP are, without doubt, a huge step forward for responsible banking. The Equator banks undertake “only to provide loans directly to projects”, which have been categorised and screened appropriately, with a comprehensive Environmental Impact Assessment (EIA) report necessary for those deemed particularly complex or risky. That said, there are a number of legal and practical issues that still need to be addressed.
Accountability
How can Equator banks be held accountable for failing to apply the EP or failing to apply them consistently? There is no legal redress against the Equator banks for failure to comply with the EP and no dispute resolution mechanism for dissatisfied third parties. While the project sponsor may create a complaints mechanism or an external expert review panel to handle complaints, these bodies may not be regarded as particularly objective or effective as a means of legal redress.
So local communities and non-govern-mental organisations (NGOs) must turn to the law courts (perhaps in several jurisdictions), with obvious potential for long delay in the construction stages of the project.
It is unlikely that the Equator banks owe third parties a common law or contractual duty of care in applying the EP and they are not discharging public law functions. More likely targets are sovereign governments or the Export Credit Agencies (ECAs) and regulators who carry out EIAs or issue construction and operating permits.
Equator banks may, at least in theory, attract legal liability, for example where the lenders exercise their powers to take over and manage the project. Alternatively, lenders may be at risk of prosecution for environmental damage, if they can be shown to be “knowingly permitting” pollution. This requires both proof of knowledge, perhaps obtained through reports supplied under the environmental management plan (EMP); and also power to prevent
pollution, possibly granted under the loan covenants. In practice, this risk can be easily avoided by having a good information handling system; however, it is a potential pitfall.
Transparency
How do third parties obtain information on how the Equator banks apply the EP? NGOs feel that there is a lack of transparency as to how the Equator banks implement projects in accordance with the EP. Unlike the IFC or the European Bank for Reconstruction or Development (EPRD), the Equator banks are not empowered to publish derogations from their policies or the EP. While some Equator banks have begun to provide general information about the total value of deals, they do not usually provide details of individual projects. Banks are bound by strict rules of confidentiality, which prevent Equator banks from disclosing information about their clients’ projects. In some jurisdictions, the penalties for unauthorised disclosure may even include criminal sanctions.
A third party may obtain more information by focusing on the multinational lenders and the ECAs, which often co-finance major projects.
These institutions’ practices favour disclosure except in respect of commercial confidentiality, state security and highly sensitive information and they may have duties to provide information under international or national freedom of information laws.
So, what legal standards should be applied by the Equator banks in implementing the EP? One of the main issues is which legal norms are to be applied to the project. The host country or countries’ environment and human rights laws may be much less onerous than World Bank or IFC safeguard policies. Equally, a host country may not have any, or may have only limited, legal requirements in relation to an EIA. Finally, a host country may not have ratified important public international law treaties or documents, such as the International Labour Organisation conventions on child labour and slavery.
The decision as to which laws or standards should apply always involves a balance, but there is little merit in Equator banks applying lower standards to projects in jurisdictions where the legal requirements for EIA are rudimentary or even non-existent. Indeed, the lack of legal redress, disregard for due process and human rights, the vulnerability of local communities and potential difficulties with enforcing such standards, would suggest that the standards applied by the Equator banks should be more stringent.
Can Equator banks rely on the objectivity of the due diligence carried out by or on behalf of the sponsor? Selection of reputable professional advisers by the project sponsors is vital to the credibility of the project. Another advantage is the avoidance of costs or delay to a project if the Equator banks can be confident in the quality of the advisers.
Equator banks, though, have no contractual relationship with the sponsor’s advisers and it is unusual at present to include a provision allowing the Equator banks to rely on the work or reports of the sponsor’s advisers. Finance providers cannot be expected to rely on sponsors’ experts against whom they have no legal recourse, even if there were no issues as to the objectivity of such advisers.
In practice, the financiers usually appoint their own technical people to review the advisers’ work. An alternative and less costly solution could be the joint appointment by sponsors’ advisers with express provision that the financiers should be able to rely their outputs. Provided the terms of the appointment are appropriately drawn, this will give advisers pause for thought, as well as provide Equator banks with a long-stop means of legal redress in cases of professional negligence or failure to discharge the terms of the contract of appointment.
The EP have put environmental and social issues centre stage. Project sponsors must adapt to this new reality if they are to find financing at reasonable rates. A New Year’s resolution for project sponsors would be to talk to lenders, including the Equator banks, and potential objectors in the local and NGO communities earlier in the project lifecycle. An equally valuable move would be to engage professional advisers who clearly understand the EIA and how the relevant national laws, transnational laws and public international laws can enhance the prospects of constructing projects which are fit for sustainable development in the 21st century.
At $20bn (£11.3bn), Sakhalin II, the largest integrated oil and gas project in the world, may prove the litmus test for the EP and how they work in practice.
Paul Watchman and Charles July are partners at Freshfields Bruckhaus Deringer.
Author: Legal week
Source: Legal Week
Start Date: 02/02/2006
End Date: 09/02/2006 read more

royaldutchshellplc.com and its sister websites royaldutchshellgroup.com, shellenergy.website, shellnazihistory.com, royaldutchshell.website, johndonovan.website, shellnews.net and shell2004.com are all owned by John Donovan. There is also a Wikipedia article.