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Last Updated: April 5, 2018
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Headline crude prices for the week beginning 2 April 2017 – Brent: US$67/b; WTI: US$63/b

  • After the Easter break, oil prices started the week on a weaker note as geopolitical development exacerbated operational concerns.
  • Chatter in the market suggests that Saudi Arabia will be cutting the price for the crude grades it sells to Asia, sparking off speculation that Aramco will aiming to recapture lost market share and signalling an end to the production freeze.
  • Russian crude output also rose in March, from 10.95 mmbpd to 10,97 mmbpd, in spite of the OPEC/NOPEC supply cut agreement still in place.
  • The trade spat between the US and China has also been escalating, with China replying with tariffs on some US$50 billions of US imports after the White House announced more tariffs on Chinese products last week; the potential trade war has been rattling financial markets, especially in Asia.
  • Bahrain’s announcement that it has made its largest oil discovery in decades also caused traders to take stock of the major upstream projects in the pipeline that will raise supply in the long run.
  • With US crude production still rising and crude inventories also building, the host of bearish factors is likely to weigh on traders’ minds; however, the API reported that overall crude inventories declined by 3.28 million barrels last week, which has lifted prices slightly.
  • Despite their numbers, Russia and Saudi Arabia say they will set up a joint mechanism to govern OPEC and NOPEC cooperation will be set up by the end of the year, with talk at an energy conference in Baghdad suggesting that the supply freeze may have to be extended, instead of cut short.
  • The active US rig count unexpectedly declined by 2 last week, with a 7 site drop in oil rigs, bringing the overall total to 979 sites.
  • Crude price outlook: Although concerns over geopolitical and trade spats will cap gains, a more optimistic sentiment this week should see Brent trade at US$68/b and WTI at US$64/b. The new Shanghai crude contract will be in line with WTI prices.


Headlines of the week

Upstream

  • The new Shanghai crude futures contract is attaining benchmark status faster than expected, as Unipec – Sinopec’s trading arm – inked a one-year deal to purchase Middle Eastern crude from a ‘western oil major’ based on the Shanghai crude contract, displacing the Dubai and Oman markers.
  • Just as its fuel retail business is attracting foreign investment, almost half of 35 shallow water blocks offered by Mexico have been awarded, with European majors like Total, Eni and Repsol being the major winners.
  • Repsol has officially declared force majeure over the US$2 billion Ca Rong Do development, as Vietnam capitulates to Chinese pressure.
  • Reliance’s exit from US shale plays continues as its sold shale assets to Sundance Energy for US$100 million, including some Eagle Ford sites.
  • ExxonMobil emerged with eight blocks from Brazil’s recent offshore block auction – either alone or in partnership – with interest in the pre-salt concessions more than doubling the government’s estimates.
  • Iraq will be holding an oil and gas field auction for 11 sites on April 15, attracting major interest from ExxonMobil, Total and Lukoil.
  • Apache has made a ‘significant’ new discovery in Block 9/18a Area-W in the UK North Sea, with Graten possibly have 10 million barrels of light oil.


Downstream

  • India’s BPCL has announced plans to build a US$3 billion petrochemical plant in Mumbai, having purchased 202 hectares of land in March. The petchem complex will be integrated with its 240 kb/d Mumbai refinery.
  • The RAPID refinery in Johor is finally getting off the ground, as Saudi Aramco finalised its deal to buy a US$7 billion stake in the project and supply an initial 50% of its crude, with an option to rise to 70%.
  • The Trump administration is moving to reverse Obama-era fuel efficiency regulations for cars and light trucks, arguing that the Environmental Protection Agency targets were ‘too aggressive’.
  • Iraq is looking into building crude oil storage facilities in Japan and South Korea to increase sales to East Asia, following the example of Aramco.
  • Adnoc has signed two 3-year deals with Japan’s Idemitsu Kosan and Thailand’s SCG Chemicals to deliver up to 1.5 mtpa of naphtha per year.


Natural Gas/LNG

  • Petronas is reviving its K5 sour gas project in Sarawak, which will serve as a pilot project to test its carbon capture and storage technology.
  • China’s Sinopec has set out a plan to increase its natural gas supply capacity to some 60 bcm/y across its domestic output and imported volumes over the next 6 years, up from a current 27 bcm/y. Sinopec will also be doubling its LNG handling capacity to 26 mtpa.
  • Thailand’s PTTEP is now looking at a gas-to-power concept for the Aung Sinkha gas condensate field in Myanmar, part of the M3 gas block.
  • Iraq has officially enlisted Baker Hughes and General Electric to process natural gas extracted from the Nassiriya and Al Gharraf oilfields, which are currently being flared due to lack of gas capture facilities.

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December, 01 2021
Royal Dutch Shell Poised To Become Just Shell

On 10 December 2021, if all goes to plan Royal Dutch Shell will become just Shell. The energy supermajor will move its headquarters from The Hague in The Netherlands to London, UK. At least three-quarters of the company’s shareholders must vote in favour of the change at the upcoming general meeting, which has been sold by Shell as a means of simplifying its corporate structure and better return value to shareholders, as well as be ‘better positioned to seize opportunities and play a leading role in the energy transition’. In doing so, it will no longer meet Dutch conditions for ‘royal’ designation, dropping a moniker that has defined the company through decades of evolution since 1907.

But why this and why now?

There is a complex web of reasons why, some internal and some external but the ultimate reason boils down to improving growth sustainability. Royal Dutch Shell was born through the merger of Shell Transport and Trading Company (based in the UK) and Royal Dutch (based in The Netherlands) in 1907, with both companies engaging in exploration activities ranging from seashells to crude oil. Unified across international borders, Royal Dutch Shell emerged as Europe’s answer to John D Rockefeller’s Standard Oil empire, as the race to exploit oil (and later natural gas) reserves spilled out over the world. Along the way, Royal Dutch Shell chalked up a number of achievements including establishing the iconic Brent field in the North Sea to striking the first commercial oil in Nigeria. Unlike Standard Oil which was dissolved into 34 smaller companies in 1911, Royal Dutch Shell remained intact, operating as two entities until 2005, when they were finally combined in a dual-nationality structure: incorporated in the UK, but residing in the Netherlands. This managed to satisfy the national claims both countries make on the supermajor, second only to ExxonMobil in revenue and profits but proved to be costly to maintain. In 2020, fellow Anglo-Dutch conglomerate Unilever also ditched its dual structure, opting to be based fully out of the City of London. In that sense, Shell is following the direction of the wind, as forces in its (soon to be former) home country turn sour.

There is a specific grievance that Royal Dutch Shell has with the Dutch government, the 15% dividend tax collected for Dutch-domiciled companies. It is the reason why Unilever abandoned Rotterdam and is now the reason why Shell is abandoning The Hague. And this point is particularly existentialist for Shell, since its share prices has been battered in recent years following the industry downturn since 2015, the global pandemic and being in the crosshairs of climate change activists as an emblem of why the world’s average temperatures are going haywire. The latter has already caused the largest Dutch state pension fund ABP to stop investing in fossil fuels, thereby divesting itself of Royal Dutch Shell. This was largely a symbolic move, but as religious figures will know, symbols themselves carry much power. To combat this, Shell has done two things. First, it has positioned itself to be at the forefront of energy transition, announcing ambitious emissions reductions plans in line with its European counterparts to become carbon neutral by 2050. Second, it is looking to bump up its dividend payouts after slashing them through the depths of the Covid-19 pandemic and accelerating share buybacks to remain the bluest of blue-chip stocks. But then, earlier this year, a Dutch court ruled that Shell’s emissions targets were ‘not ambitious enough’, ordering a stricter aim within a tighter timeframe. And the 15% dividend tax remains – even though Prime Minister Mark Rutte’s coalition government has been attempting to scrap it, with (it is presumed) some lobbying from Royal Dutch Shell and Unilever.

As simplistic it is to think that Shell is leaving for London believes the citizens of the Netherlands has turned its back on the company, the ultimate reason was the dividend tax. Reportedly, CEO Ben van Buerden called up Mark Rutte on Sunday informing him of the planned move. Rutte’s reaction, it is said was of dismay. And he embarked on a last-ditch effort to persuade Royal Dutch Shell to change its mind, by immediately lobbying his government’s coalition partners to back an abolition of the dividend tax. The reaction was perhaps not what he expected, with left-wing and green parties calling Shell’s threat ‘blackmail’. With democracy drawing a line, Shell decided to walk; or at least present an exit plan endorsed by its Board to be voted by shareholders. Many in the Netherlands see Shell’s exit and the loss of the moniker Royal Dutch – as a blow to national pride, especially since the country has been basking in the glow of expanded reputation as a result of post-Brexit migration of financial activities to Amsterdam from London. The UK, on the other hand, sees Shell’s decision and Unilever’s – as an endorsement of the country’s post-Brexit potential.

The move, if passed and in its initial stages, will be mainly structural, transferring the tax residence of Shell to London. Just ten top executives including van Buerden and CFO Jessica Uhl will be making the move to London. Three major arms – Projects and Technology, Global Upstream and Integrated Gas and Renewable Energies – will remain in The Hague. As will Shell’s massive physical reach on Dutch soil: the huge integrated refinery in Pernis, the biofuels hub in Rotterdam, the country’s first offshore wind farm and the mammoth Porthos carbon capture project that will funnel emissions from Rotterdam to be stored in empty North Sea gas fields. And Shell’s troubles with activists will still continue. British climate change activists are as, if not more aggressive as their Dutch counterpart, this being the country where Extinction Rebellion was born. Perhaps more of a threat is activist investor Third Point, which recently acquired a chunk of Shell shares and has been advocating splitting the company into two – a legacy business for fossil fuels and a futures-focused business for renewables.

So Shell’s business remains, even though its address has changed. In the grand scheme of things, never mind the small matter of Dutch national pride – Royal Dutch Shell’s roadmap to remain an investment icon and a major driver of energy transition will continue in its current form. This is a quibble about money or rather, tax – that will have little to no impact on Shell’s operations or on its ambitions. Royal Dutch Shell is poised to become just Shell. Different name and a different house, but the same contents. Unless, of course, Queen Elizabeth II decides to provide royal assent, in which case, Shell might one day become Royal British Shell.

End of Article 

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