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Last Updated: October 5, 2018
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Market Watch

Headline crude prices for the week beginning 1 October 2018 – Brent: US$85/b; WTI: US$75/b

  • Both international crude markers have hit key levels this week, with Brent at US$85/b and WTI at US$75/b – the highest level for crude prices since 2014, as traders fret about a fragile supply situation due to ongoing and impending supply losses from Iran and Venezuela
  • President Trump’s Twitter tantrums against OPEC has failed to budge the organisation from its stance that oil prices should be allowed to rise, feeding even more into an already bullish market
  • Possible industrial action in Nigeria could drive prices up even further, as unions representing two-thirds of upstream workers in Africa’s largest oil producer could go on strike
  • US$100/b oil by the year’s end could become a reality; Total is accepting that the market is heading towards this and expressed reservations over its impact, while BP think the new sanctions will have a larger impact than the previous ones, contributing to volatility over the remainder of 2018 and into 2019
  • Iranian customers across Asia – even loyal ones – continue to abandon ship to appease the US, hoping to qualify for waivers that would allow them to import some Iranian crude; Japan’s Cosmo Oil announced it will replace all its Iranian volumes with other Middle Eastern crudes, while India’s state refiners have not placed any orders from Iran for November loading
  • Meanwhile, Iran’s fleet of oil tankers are starting to disappear from global satellite tracking systems – with the most likely explanation that the vessels’ transponder systems have been switched off to prevent tracking, and hamper American ability to track its sales
  • It has been suggested that the US could temper the oil bull run by releasing stocks from the Strategic Petroleum Reserve, but Energy Secretary Rick Perry has ruled out that option for now
  • The EU is reportedly working on a plan with Russia and China to sidestep the US sanctions by using an alternative payment system, but the interconnected nature of global finance means the risk of punitive actions by the US remains, scaring off potential users of the proposed payment channel
  • Meanwhile, despite strong price signals, American drillers are still being cautious on introducing new rigs. The active US oil rig count lost three sites last week, offset by four gas gains to leave the total at 1,029. Most losses were in the Permian, where infrastructure bottlenecks continue to be an issue
  • Crude price outlook: The rise in crude prices will continue, although the market could take a breather for some profit-taking and steady itself. We see Brent trading in the US$84-86/b and WTI in the US$75-77/b range.


Headlines of the week

Upstream

  • Nigeria’s two main oil unions are preparing for a possible nationwide strike, aimed at pressuring Chevron to reverse its plan to sack thousands of workers
  • Chevron has received expressions of interest for its 40% of the Rosebank project in the UK Continental Shelf, with potential volumes of some 300 million barrels
  • Total has agreed to purchase the entirety of Chevron Denmark Inc from Chevron, earning it a 12% interest in the Danish Underground Consortium, as well as shares in License 8/06 and the Tyra West pipeline
  • BP will be proceeding with the development of the Vorlich field in the North Sea after receiving approval from the UK upstream operator, expected to start in 2022 and produce some 20,000 b/d of oil at peak
  • ExxonMobil has won exploration rights for the Titã pre-salt block in Brazil, adding more than 71,500 acres to its already large position in Brazilian upstream

Downstream

  • Saudi Aramco has signed a long-term supply deal with Zhejiang Rongsheng, providing crude for the private firm’s new 400 kb/d refinery in eastern China
  • ExxonMobil has started up a new ultra-low sulfur fuels units at its refinery in Beaumont, Texas, boosting its capacity for clean fuels by some 45,000 b/d
  • Total has sanctioned the expansion of its Texas Bay port Polymer joint venture, doubling polyethylene capacity to 1.1 million tons per year
  • Petrobras will be slashing the price of gasoline provided by its refineries after average pump prices in Brazil jumped to a record high last week
  • India is looking to overcome land acquisition issues for its mammoth planned refinery in Maharashtra by setting up a panel to provide suggestions to mollify the strong farmer lobby, as well as environmental and ecological impact
  • Indonesia’s plan to roll out strict adherence to its biodiesel mandate has hit snags, as a shortage of palm methyl ester and distribution difficulties means that only half of Pertamina’s fuel depots have received biodiesel components

Natural Gas/LNG

  • PetroChina and Korea Gas have given the go-ahead for Shell’s LNG Canada project, and final approval could come this week as Petronas, Mitsubishi and Shell are also due to sanction the long-dormant project
  • Total has made a ‘major’ gas discovery in the Glendronach well in the Shetlands, with potential recoverable volumes of some 1 trillion cubic feet
  • Total’s Shwe Yee Htun-2 discovery in Myanmar’s A6 Block has completed a successful appraisal, adding to the earlier Shwe Yee Htun-1 and Pyi Thit-1 finds that have a cumulative estimate of 2-3 tcf of natural gas
  • Delek Drilling, Noble Energy and Egyptian East Gas – partners developing and commercialising the Tamar and Leviathan fields in Israel – have purchased control of the Eastern Mediterranean Gas pipeline for US$518 million to connect up to 64 million cubic metres of gas through the Sinai
  • Pointe LNG in the US has started applying for permission for a planned 6 mtpa LNG project in Plaquemines Parish, Louisiana using three 2 mtpa trains
  • Enable Midstream is proposing to build a US$550 million, 165-mile natural gas pipeline, connecting the Haynesville and nearby shale regions to new LNG export terminals in Texas and Louisiana

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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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