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Last Updated: May 10, 2019
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Market Watch

Headline crude prices for the week beginning 6 May 2019 – Brent: US$70/b; WTI: US$61/b

  • With trouble brewing for the US on the Iranian crude and Chinese trade front, worries over the state of the global economy has seen crude oil benchmarks fall back from recent highs
  • With President Donald Trump ratcheting up the trade rhetoric against China and an impending imposition of tariffs, a comprehensive trade deal between the two global economic supermajors appears to be very far from being achieved; this has sent a ripple throughout the global financial and commodity markets
  • These trade tensions have subdued crude oil prices globally, with impending weakness expected as the impact of the tariff imposition affects global trade
  • Iran and the USA have also traded threats, with Iran saying that the non-extension of the crude export waivers might lead it to close the vital Straits of Hormuz; in response, the US has dispatch an aircraft carrier strike groups and bomber force to the Middle East, with could spill into military escalation
  • Tensions within OPEC are also bubbling up; there are signs that global supply is not as tight as feared, but Iran is warning that OPEC is danger of collapse, accusing other producers in the cartel of undermining it, setting the stage for a confrontational atmosphere at the upcoming OPEC meeting in Vienna
  • Internal strife in Venezuela is also boiling over, impacting crude production there, and major oil buyers have been asking producers like Saudi Arabia, the UAE and Russia to increase production, muting the effect of the supply deal
  • In the US, drilling activity has remained muted, as sentiment has shifted from aggressive expansion to caution; after a huge 21 rig drop the previous week, the total active US rig count saw the net loss of one rig, with two oil rig gains offset by the dropping of three gas rigs
  • Jitters over the escalation of the US-China trade war will keep in lid on crude oil prices over the week. Along with abating supply worries, global crude prices should be trading in a narrow range, with Brent at US$70-71/b and WTI at US$61-62/b

Headlines of the week


  • Warren Buffet has waded into the Chevron and Occidental Petroleum war to acquire Anadarko Petroleum, announcing plans to inject US$10 billion into Occidental that is conditional on its takeover of Anadarko
  • Occidental Petroleum has also agreed to a sale of Anadarko’s assets in Algeria, Ghana, Mozambique and South Africa to Total for US$8.8 billion, which itself is contingent on Occidental’s successful acquisition of Anadarko
  • ExxonMobil and Hess have taken FID on the Liza Phase 2 project in Guyana, planning to use an FPSO with a capacity for 220,000 b/d in the Stabroek Block
  • Ukraine has completed its second upstream licensing round through online bidding, with six of the seven blocks on offer snapped up by state oil firm UGV; a third licensing round covering 9 blocks across 3 regions is scheduled for June

Midstream & Downstream

  • Petrobras is planning to sell up to 8 refineries in Brazil – including the new Abreu e Lima unit – as part of a corporate  refocus on its upstream business; as part of the plan, Petrobras is also looking to sell its fuel retail network in Uruguay and its stake in fuel distributor BR Distribuidora
  • ExxonMobil will be proceeding with its US$2 billion expansion of its Baytown petrochemicals plant in Texas, with expected start-up in 2022
  • Ahead of the ambitious new 175 kb/d Hengyi refinery starting up in Brunei, Chinese operators Hengyi Industries has been purchasing Zafiro crude from Equatorial Guinea to begin trial runs
  • Russian billionaire Mikhail Gutseriyev is taking control over the 120 kb/d Afipsky refinery in southern Russia, aiming to bring the site back to profitability by combining it with Forteinvest’s 280 kb/d refining system
  • IndianOil will be shutting down its Bongaigaon and Guwahati refineries in India’s northeast to upgrade them for Euro VI fuels production
  • Curacao’s Isla refinery has been exempted from US sanctions on Venezuela, which should allow PDVSA or a new operator to continue activities
  • Chevron has completed its acquisition of the 110 kb/d Pasadena Refining System refinery from Petrobras, gaining its second US Gulf Coast refinery

Natural Gas/LNG

  • Despite Cyclone Kenneth devastating the area in Mozambique where the Rovuma LNG plant is being developed, ExxonMobil announced that it still expects to sanction the US$30 billion project on schedule by late 2019
  • Venture Global LNG has received US Federal approval for its 20 mtpa Plaquemines LNG facility in Louisiana, with operations planned for 2023
  • Abu Dhabi is looking to raise up to US$5 billion by selling stakes in its domestic gas pipeline network to international players
  • Thailand’s PTTEP is reportedly looking at the Cash-Maple gas field offshore Western Australia after encouraging recent finds at the Orchid field
  • US independent player Kosmos Energy is looking to develop two new LNG facilities in the eastern Atlantic to tap into identified deepwater gas resources located offshore Mauritania and Senegal
  • The Summit LNG FSRU in Bangladesh has begun commercial operation, doubling the LNG import capacity of the country at a time when Bangladesh’s gas reserves and output is dwindling

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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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