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The destabilisation of Royal Dutch Shell gathers pace

Screen Shot 2014-01-20 at 15.21.18While speculation still swirls about the unexpected early exit by Peter Voser and the abrupt departure by Peter Rees, we can now add the name of Andy Brown to the mystery about the seismic developments and uncertainty that has engulfed Royal Dutch Shell Plc. 

By John Donovan 

Three weeks ago I published an article under the headline Voser wisely abandons an unstable ship.

I listed some of the factors that led me to make that assessment.

Since then the destabilisation of Royal Dutch Shell has gathered pace with the profits warning that shocked the markets on Friday. 

Today, Shell made an announcement about Andy Brown, the third exit (in his case extended medical leave after heart surgery) from the committee of executive directors in as many weeks.

While speculation still swirls about the unexpected early exit by Peter Voser and the abrupt departure by Peter Rees, we can now add the name of Andy Brown to the mystery about the seismic developments and uncertainty that has engulfed Royal Dutch Shell Plc. 

It really is an unstable ship with the new captain rightly or wrongly blaming his incompetent predecessors, especially Jeroen van der Veer, for the mess, the same man who apparently also impeded the progress of Ben van Beurden to the top job. 

Thus far there have been 101 excuses , but with no one stepping forward to admit responsibility. 

No word either from Shell Chairman Jorma Ollila, who seems to be presiding over the disintegration of the company. All reminiscent of the decline that overtook Nokia. 


Top 10 assets in Shell’s $30bn garage sale

As oil major Shell starts a disposal programme, we look at the assets that could be sold

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 By 12:28PM GMT 20 Jan 2014

Oil giant Royal Dutch Shell has started one of the largest asset disposal programmes in the global oil industry with the £700m sale of natural gas assets to Kuwait.

Ben van Beurden, who recently took over from Peter Voser as chief executive, needs to sell assets in order to balance the books at Shell, as the FTSE 100-listed group continues to invest heavily in oil exploration in harder to reach places.

Analysts from investment bank JP Morgan Cazenove recently drew up a shopping list of assets that could be on the chopping block:

 1 – 23.1pc stake in Woodside Petroleum worth $7bn

Shell wanted to own the whole refinery located in Perth, western Australia, but the deal was blocked by the Australian government, now it has an orphaned stake. Shell has already sold down a third of its holding in November 2010 for $3.3bn, so the remaining $7bn stake tops the list of assets that could be for sale. Rumoured buyers would be sovereign wealth funds interested in the long-term earnings potential of the facility.

 2 – 10pc of global retail network worth $4.4bn

Quite literally a garage sale, in early January Norwegian newspapers highlighted that Shell was considering selling more than 400 gas stations across Norway, this would be the beginning of a continued shrinking of the global network of Shell stations.

 3 – Pipelines worth $3.5bn

Shell has huge amounts of pipeline infrastructure that expose the group to maintenance and running costs that are arguably outside the group’s main focus of finding oil.

 4 – Shale oil assets worth $3bn

Shell has interests in US shale oil in Mississipi Lime, Kansas and Oklahoma. However, after drilling test wells this shale oil, or tight oil, does not meet with Shell’s long-term investment targets, basically it is too complicated and costly to get out of the ground in reliable amounts. Fine for a smaller operation but not suitable for an oil major.

 5 – Eagle Ford shale asset worth $2.1bn

Sale plans for the 106,000 acre shale oil site at Eagle Ford in South Texas were announced in September of last year. Once again smaller firms have thrived in this business but larger players have had an unhappy time and are looking to exit.

 6 – Nigerian Delta licenses worth $1.8bn

Oil exploration in Nigeria is fraught with difficulties. Theft, corruption and sabotage have been grabbing the headlines rather than profitability. Shell will probably want to distance itself from the region the sale of licenses in the East Niger Delta and the Nembe Creek Trunk Line would help this process.

 7 – Refinery operations around the world worth $1.8bn

Oil and gas refineries located around the world in places such as Geelong, Australia, and Buenos Airies, Argentina, are earning lower margins as competition increases.

 8 – Showa Shell stake worth $1.4bn

The Japanese based oil refinery operator in which Shell owns a 35pc stake could be sold off so the company can focus on exploration.

 9 – Liquefied Petroluem Gas (LPG) business worth $1.2bn

The oil major has been slowly exiting its LPG businesses around the world and the sale of remaining interests in Vietnam and elsewhere could be speeded up under a new strategy.

 10 – Property portfolio worth $545m

The group has built up some significant property holdings around the world during its history. As property prices rise it would make sense to capture some record high prices with well timed sales of around a third of the global portfolio.

The top ten assets make up $25bn of a potential $30bn in assets that Shell could sell during the next two years.

Monday’s sale comes after Shell warned on Friday that full-year profits would be “significantly lower” than expected, sending shares down 1.2pc. They fell another 0.9pc on Monday morning.

Mr van Beurden is expected to reveal his long-term plan for further asset disposals when he presents full-year results next week.


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