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Shell, Eni venture to pay $1.1B to settle Kazakhstan dispute

By: , SA News Editor

An energy consortium led by Royal Dutch Shell (RDS.A, RDS.B) and Eni (NYSE:E) developing the Karachaganak gas condensate field will pay $1.1B to Kazakhstan’s government to settle a profit-sharing dispute, the country’s energy ministry says.

Kazakhstan says its production sharing agreement with the consortium also will amend terms so that it will receive a higher share of future revenues from one of the country’s biggest hydrocarbon fields. read more

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Kazakhstan’s $1.1B Karachaganak project to sustain high output, Shell says

By , SA News Editor

  • Royal Dutch Shell (RDS.A, RDS.B) says the $1.1B investment in the giant Karachaganak field in Kazakhstan reached this month is aimed at sustaining high production levels and creating significant value from the field.
  • Shell says the Karachaganak Debottlenecking Project “aims to extend the duration of the plateau liquid production and will bring significant value creation to both the [Russian] Republic and the contractor.”
  • Shell and Eni (NYSE:E) each hold 29.25% stakes in Karachaganak, which produced 247K bbl/day of liquids last year; other stakeholders are Chevron (NYSE:CVX) with 18%, Lukoil (OTCPK:LUKOY, OTC:LUKOF) with 13.5%, and state-owned KazMunaiGaz 10%.
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    Kashagan output crosses 300,000 b/d, but ‘giant’ increases unlikely: Shell executive

    London (Platts)–23 Feb 2018 510 am EST/1010 GMT

    Kazakhstan’s giant Kashagan oil field is achieving new production highs every month and has done better than 300,000 b/d, but development beyond the current phase is likely to be about “discretionary step-ups” rather than giant steps, Shell country chair and vice president Olivier Lazare said Thursday.

    Speaking at the IP Week conference in London, Lazare declined to specify the current production level, saying there were still reliability issues with the first phase, which started producing in 2016 after more than $50 billion of investment and multiple delays, and has a target of 370,000 b/d. read more

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    Dutch Court Upholds $5.2 Billion Asset Freeze On Kazakhstan Oil Field

    Frozen Assets Securing a $520 Million Award Against Republic of Kazakhstan 

    NEW YORK, Jan. 8, 2018 /PRNewswire/ — On January 5, 2018, Amsterdam District Court issued a judgment (the “Judgment”) in which it upheld an earlier ex parte attachment granted by the same court on September 8, 2017 to Anatolie Stati, Gabriel Stati, Ascom Group S.A. and Terra Raf Trans Traiding Ltd (together, the “Stati Parties”) with respect to the Republic of Kazakhstan’sshareholding in the Dutch entity KMG Kashagan B.V. (“Kashagan”) which shareholding is held via the Kazakh sovereign wealth fund Samruk-Kazyna (“Samruk”).  Through its stake in Kashagan, which has a nominal value of approximately US$5.2 billion, the Kazakh State participates in the international consortium relating to the Kashagan oilfield, one of the largest offshore oilfields in the Caspian Sea. Other members of the consortium include Eni, Royal Dutch Shell, Total, ExxonMobil, China National Petroleum Corporation and Inpex. read more

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    UPDATE 1-Kazakhstan may strike separate deal with OPEC on oil output curbs

    Kashagan has been developed by a consortium of China National Petroleum Corp, Exxon Mobil, Eni , Royal Dutch Shell, Total, Inpex and KazMunaiGas.

    By Mariya Gordeyeva: SEPTEMBER 7, 2017 / 2:28 PM

    ASTANA, Sept 7 (Reuters) – Kazakhstan is aiming for a standalone deal with leading global oil producers on restraining its crude production due to a need to crank up output at its Kashagan field, a Kazakh official said on Thursday. 

    The Central Asian nation increased oil and gas condensate output by 9.9 percent in January-July to 49.907 million tonnes, or 1.724 million barrels per day (bpd), exceeding its quota of 1.7 million bpd under a global supply pact. read more

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    Kazakhstan, Shell-Eni group continue talks over tax dispute

    January 26, 2017

    ASTANA (Reuters) – Kazakhstan has agreed to continue talks about a tax dispute with the Karachaganak consortium of oil majors led by Shell (RDSa.L) and Eni (ENI.MI) despite beginning arbitration proceedings, the Kazakh Energy Ministry said on Thursday.

    Quoting minister Kanat Bozumbayev, a ministry spokesman said the sides had agreed in December to extend talks by nine months and Kazakhstan might stop the arbitration if it was satisfied with the consortium’s offer. read more

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    Kashagan oil field allegations ignored by Shell exec Andy Brown?

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    By John Donovan

    Printed below are extracts from a communication received from a Shell Civil Engineer who, until recently, worked on the construction of the ill-fated Kashagan oil field.

    He says his dire warnings in regard to construction issues were escalated to Shell top management, including Andy Brown, but were ignored.

    He has also raised the subject of Shell depriving sacked workers tax breaks on redundancy pay. A policy he describes as theft.

    The same source supplied related, apparently authentic, Shell emails. read more

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    Kazakh President Says Partners in Shell Oil Field Face Tax Claim

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    Nariman Gizitdinov and Torrey Clark: November 24, 2016 — 6:42 AM EST

    Kazakhstan’s authorities are looking at whether the Karachaganak oil and gas venture, which includes Royal Dutch Shell Plc and Eni SpA, has unpaid taxes.

    “The tax authorities have tax issues — they didn’t pay,” President Nursultan Nazarbayev said in an interview on Tuesday in Astana, without elaborating. He also confirmed the government is now seeking to change how revenue from the field is shared with the companies, which is allowed by the terms of the contract. read more

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    Lament for Royal Dutch Shell

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    Kashagan AKA “Cash All Gone”

    Forgot the initial cost estimate, probably around $8-10 billion. Now 10+ years too late and ballooned to $50 billionMost normal companies would have gone bust long ago.

    Shell inherited some beauties from the boys of the roaring 90s. I hope someone will write a book one day on this era. 

    Reserve crisis, Pearl, Sakhalin, Kashagan, Alaska, tarsands, and I must have forgotten a few. Repeated over-promise and under-delivery. All many billions over budget, extreme overruns in startup, loss in AAA status, removal of operational and technical expertise. I find the silence on Prelude ominous. Probably goes the same way as the others. read more

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    Why Shell’s $73 Billion Merger Could be Cheating Dividend Investors

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    By Adam GalasMay 21, 2015

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    Royal Dutch Shell‘s (NYSE: RDS-A  ) $73 billion buyout of BG Group (NASDAQOTH: BRGYY  ) would be the second-largest oil merger in history, but long-term Shell investors should be asking whether the company overpaid. In examining the terms of the deal, and what Shell plans to do with BG’s assets, I think it becomes evident that some skepticism of this deal is warranted. 

    Terms of the deal
    BG stockholders will receive .4454 shares of Shell class B shares plus $5.94 per share in cash for each share of BG stock. The $73 billion price tag represents a 52% premium for BG Group, and if the deal is approved BG shareholders would own 19% of Shell when the merger is completed in 2016. 
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    Why Shell May Get Less Than It Bargained For In BG Deal

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    Screen Shot 2015-05-10 at 22.33.15By Andy TullyPosted on Tue, 19 May 2015 

    Royal Dutch Shell’s $70 billion purchase of BG Group may not be as attractive as it once seemed.

    According to BG’s 2014 annual report, if British-based BG were to be taken over by another company, the government of Kazakhstan would have the right to buy BG’s 29.25 percent share in a valuable Kazakh gas field, which so far has represented some 15 percent of the company’s total production and 9 percent of the $19 billion in revenue it made last year. read more

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    Shell Deal Puts BG Gas Holding at Risk

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    Shell Deal Puts BG Gas Holding at Risk

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    By SELINA WILLIAMS: May 17, 2015 

    LONDON—Buried deep in BG PLC’s annual report is a little-noticed risk for its $70 billion merger with Royal Dutch Shell PLC: The deal could cost Shell a huge Kazakhstan gas field.

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    Shell Chief Visits China to Win Backing for $70 Billion BG Deal

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    Screen Shot 2015-05-07 at 07.59.01Article by Rakteem Katakey published 6 May 2015 by Bloomberg.com

    The biggest obstacle to Royal Dutch Shell Plc’s $70 billion offer for BG Group Plc probably lies in China.

    Shell Chief Executive Officer Ben Van Beurden visits the country this week to convince officials that the combination of two large oil and gas producers poses little risk for the world’s biggest energy importer.

    He’s not certain to succeed given the clout the enlarged company will have in the global market for liquefied natural gas, according to Gordon Kwan, Hong Kong-based head of regional oil and gas research at Nomura International. read more

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    Landmark Deal Curbs Flaring Pollution

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    Top oil-producing nations and companies pledge to eliminate the waste of natural gas that also exacerbates global warming

    April 17, 2015 |By Lisa Friedman and ClimateWire

    Top oil-producing nations, including the Russian Federation, Kazakhstan and Angola, as well as Royal Dutch Shell PLC and other companies say they will stop flaring natural gas by 2030 as part of a landmark agreement with the World Bank.

    The deal was unveiled this morning during the World Bank’s Spring Meetings, where leaders said the voluntary agreement will curb 40 percent of the global gas flaring that results in 300 million tons of carbon dioxide emissions annually.

    “Gas flaring is a visual reminder that we are wastefully sending CO2 into the atmosphere,” said World Bank President Jim Yong Kim in a statement. “Together we can take concrete action to end flaring and to use this valuable natural resource to light the darkness for those without electricity.” read more

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    Kashagan to Start Production in 2017, Says Royal Dutch Shell Report

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    BY MICHELLE WITTE in BUSINESS on 13 APRIL

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    ASTANA – Production at Kazakhstan’s giant Kashagan offshore oil field is expected to restart in 2017, Royal Dutch Shell stated in its 2014 annual report.

    “After the start of production from the Kashagan field in September 2013, operations had to be stopped in October 2013 due to gas leaks from the sour gas pipeline. Following investigations, it has been decided that both the oil and the gas pipeline will be replaced. Replacement activities are ongoing, with production expected to restart in 2017,” page 27 of the annual report, released on March 12, said.

    After sour gas leaks forced production to halt soon after it began in late 2013 – already years behind the original schedule – predictions as to when the project would actually produce have been repeatedly made and then pushed back, and even in late January of this year, Energy Minister Vladimir Shkolnik was announcing that Kashagain would come online in late 2016. read more

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    Kashagan oil production to resume in 2017 – Shell

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    London, 13 March 2015

    Screen Shot 2014-10-30 at 09.22.43(Reuters) – Production from Kazakhstan’s giant Kashagan oilfield is expected to resume in 2017, more than three years after being suspended due to a pipeline leak, stake holder Royal Dutch Shell said.

    Operations at the major field, expected to reach production of 300,000 barrels of oil equivalent, started in September 2013 and were halted a month later due to gas leaks from the sour gas pipeline.

    In its annual report on Thursday, Shell said “replacement activities are ongoing, with production expected to restart in 2017.”

    Italian oil service company Saipem said last month it had won a contract to lay the replacement pipelines at Kashagan worth around $1.8 billion. It said it planned to finish the work by the end of 2016. read more

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    SEC continuing to scrutinise Shell’s claimed oil reserves

    Screen Shot 2015-02-05 at 15.06.08By John Donovan

    A letter emailed to Royal Dutch Shell Plc Chief Executive Officer, Ben van Beurden, on 23 Oct 2014, from the U.S. Securities & Exchange Commission, asked why Shell had omitted to supply in a Form 20-F filing, figures for Shell’s share of Kashagan proved undeveloped reserves.

    Shell’s partners in the much troubled Kashagan oil field consortium – years behind schedule and billions over budget – include Eni, KazMunayGas, Total, ExxonMobil, China National Petroleum Corporation and Inpex. The project is known in the oil industry as “Cash All Gone”. read more

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    Oil Price Slump

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    By John Donovan

    I have already highlighted the recent wishful prediction by Shell CEO Ben van Beurden that oil will return to “very robust” pricing in the long-term.

    We have all witnessed the subsequent slump in oil prices.

    Some extracts from a current Bloomberg article:

    The global crash in crude prices is reverberating through the oil and gas industry, pressuring producers to curtail investment to protect profits and avoid cuts to dividend payments.

    Exxon Mobil Corp., Royal Dutch Shell Plc and Total SA are already paring back as new investment fails to yield positive returns. read more

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    Robert Writt vs. Shell Oil Company – Update

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    The litigation relates to a corruption case in which Shell was ordered to pay $48 million (£29.4m) in civil and criminal fines after its contractor (Panalpina Inc.) bribed Nigerian customs officials. It appears Shell decided  to make Robert Writt the fall guy for Shell’s involvement in the massive corruption scheme (targeting officials of a host country) by turning Writt in to the US federal authorities in the belief that Shell was safe from legal retribution by him. The Appeals Court decided otherwise. read more

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    Project Delays Will Cost These Oil Majors Billions

    Screen Shot 2014-04-06 at 21.01.34Extracts from a Motley Fool article by Rupert Hargreaves published 28 July 2014

    In total, Kashagan is now expect to cost a total of $136 billion, more than 140% above initial estimates. Production has been consistently delayed; the most recent delay, which occurred at the end of last year, concerns the project’s pipelines. At present, the project is being overseen by Italy’s Eni, although ExxonMobil is shortly set to take over. Shell, Eni, and Total all have a 16.8% stake in the project, and Morgan Stanley’s analysts believe that as a result of the delays, these three companies will have their 2016 net income estimates reduced by $500 million each. That is a large figure, even for these oil giants. read more

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    Kashagan delays mar outlook for Eni, Total and Shell

    Screen Shot 2014-02-10 at 16.29.29Extract from FT article by Guy Chazan published 20 July 2014

    Three of Europe’s largest oil companies could take a $1.5bn hit to earnings as a result of delays to Kashagan, the $50bn oil project in the Caspian Sea that has been bedevilled by hold-ups and cost over-runs.

    FULL FT ARTICLE

    Copyright The Financial Times Limited 2014.

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    Reflections on the notorious Kashagan ‘Cash All Gone” project 

    By John Donovan

    In view of the recent shattering news from the jinxed Kashagan project…

    Production at Kazakhstan’s Kashagan Oil Field Halted Until 2016

    …it is interesting to reflect back on the situation as it was in 2007, reported in this Reuters article by Tom Bergin.

    It seems that not much has changed.

    It also explains why Royal Dutch Shell ended up issuing a profits warning and launching a fire sale of assets, following a succession of disastrous projects mired by incompetence.  read more

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    Pipeline problems cloud Kashagan oil outlook

    Screen Shot 2014-04-06 at 21.01.34Extract from a Geoff Hiscock article published by The Australian on 2 July 2014

    A YEAR ago, one of the world’s biggest oil and gas projects, the massive Kashagan field in Kazakhstan’s part of the Caspian Sea, was on the verge of starting production after more than a decade of development and US$40 billion in costs.

    Its backers, a combination of international oil companies ExxonMobil, Shell, Total, Eni, Japan’s Inpex, the China National Petroleum Corp (CNPC) and Kazakhstan’s state-owned KazMunaiGas, had every expectation Kashagan would be producing as much as 8 million tonnes of oil this year, equivalent to 170,000 barrels a day. read more

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