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Last Updated: March 29, 2019
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Market Watch

Headline crude prices for the week beginning 25 March 2019 – Brent: US$67/b; WTI: US$59/b

  • Global crude oil prices saw a mixed start to the week, trading in a narrow range, as fears of a global recession subdued the market, offsetting continued concerns over tensions in Venezuela and Iran
  • Slowing manufacturing and bond indicators in the USA, France and Germany have hinted that a recession might be in the offing, spooking markets; but of greater concern is the tangible slowdown in Chinese economic growth, raising fears over global oil demand
  • Traders are also disappointed in a lack of progress in US-China trade war, as well as apparent fissures appearing between Saudi Arabia and Russia that postponed the OPEC+ meeting due in April to review the supply deal
  • The situation with US sanctions on Venezuelan crude continues to bite, as Nicolas Maduro clings on to power and attempts to isolate opposition leader Juan Guaidó; although a reprieve was given to Citgo, American refiners took no Venezuelan crude for the first time since 2010 last week
  • As US waivers on Iranian crude exports ticks down to expiry in May, the Petroleum Association of Japan is looking to avoid any imports of Iranian oil in April unless it gets clarity on a waiver extension
  • Despite WTI prices inching up towards US$60/b, US drillers continue to drop rigs; the Baker Hughes active rig count fell by 10 rigs – 9 oil, 1 gas – for a fifth consecutive week, to an overall 1,106
  • We expect crude prices to remain in their tight ranges, buffeted between OPEC’s attempts to stabilise supply and global unease over economic growth. Brent should be at US$66-68/b and WTI at US$58-60/b 

Headlines of the week

Upstream

  • Upstream independent Murphy Oil is exiting Malaysia after 20 years, selling its two primary Malaysian subsidiaries – Murphy Sabah Oil and Murphy Sarawak Oil – to Thailand’s PTTEP for some US$2.127 billion
  • Adnoc has awarded 35-year exploration rights for the Abu Dhabi onshore Block 4 to Japan’s Inpex, with Adnoc holding an option for a 60% stake if the project reaches commercial production phase
  • Spirit Energy has started production at its North Sea Oda field five months earlier than planned, with peak production estimated at 35,000 b/d
  • Canada’s state government of Alberta gas will increase crude production limits by 25,000 b/d per month over May and June to match distribution capacity
  • Nigerian President Muhammadu Buhari has ordered Shell to hand over operatorship of the prized OML 11 concession in Ogoniland to state firm NPDC

Midstream & Downstream

  • Refurbishment works on Aruba’s 209 kb/d refinery will continue after the US Treasury gave PDVSA’s American subsidiary Citgo a reprieve from sanctions
  • Ecuador has started plans to build a new 300 kb/d refinery with bidding on construction beginning in May 2019, which will also include a concession to upgrade the under-performing 110 kb/d Esmeraldas refinery
  • Despite some denials from Oman, it appears that Sri Lanka will be getting a new US$3.85 billion, 200 kb/d refinery near the Hambantota port through the combination of India’s Accord Group and Oman’s Ministry of Oil and Gas
  • Peru will be halting operations at its 65 kb/d Talara refinery for a year beginning November 2019 to complete a 5-year, US$5 billion expansion plan that will expand capacity to some 95 kb/d
  • Nigeria’s NNPC has recommitted to its plan to upgrade its four refineries, with the initial focus on revamping the ageing 210 kb/d Port Harcourt refinery
  • Mechanical completion of Sasol’s Westlake petrochemical complex in Louisiana – including a 1.5 mtpa ethane cracker – has been completed by Fluor

Natural Gas/LNG

  • Yet another US Gulf LNG project has received environmental approval to go ahead, with the 4 mtpa Texas LNG Brownsville LNG export terminal now looking to commence production by 2024
  • Gazprom has launched full-scale development of the Karasaveyskoye field in Russia’s Yamal Peninsula, which is expected to start production in 2023 as the second most important node in Yamal gas production after Bovanenkovskoye
  • Vietnam is looking to up its consumption of LNG through a US$7.8 billion investment in four gas-fired power plants, as the country hastens its transition away from coal through the US$ Ca Na LNG complex planned in Ninh Thuan
  • Egypt will now only begin to receive gas from Israel under a US$15 billion deal by late 2019 at the earliest, as ‘unexpected issues’ with the pipeline connecting the two countries forced a delay from the initial timeline of mid-2019
  • Tanzania is looking to finalise details and partners for its US$30 billion LNG project by September 2019, with Equinor, Shell and Ophir Energy involved
  • The Canada Pension Plan Investment Board (CPPIB) agreed to form a US$3.8 billion joint venture with pipeline infrastructure firm Williams, that will include the Ohio Valley Midstream and Utica East Ohio Midstream gas systems
  • Shell and Energy Transfer are moving forward with their 16.45 mtpa Lake Charles LNG project in Louisiana, kickstarting bids for EPC contracts

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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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