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Shell clears major hurdle for Arctic drilling
Exploration plan calls for 2 ships to drill up to 6 wells northwest of Wainwright, Alaska
Just days ahead of a planned protest of Royal Dutch Shell’s Arctic drilling program in Seattle, the company on Monday cleared a major bureaucratic hurdle to drill off Alaska’s northwestern coast.
The Bureau of Ocean Energy Management approved the multi-year exploration plan in the Chukchi Sea for Shell after reviewing thousands of comments from the public, Alaska Native organizations and state and federal agencies.
“We have taken a thoughtful approach to carefully considering potential exploration in the Chukchi Sea, recognizing the significant environmental, social and ecological resources in the region and establishing high standards for the protection of this critical ecosystem, our Arctic communities, and the subsistence needs and cultural traditions of Alaska Natives,” the agency’s director, Abigail Ross Hopper, said in a statement. “As we move forward, any offshore exploratory activities will continue to be subject to rigorous safety standards.”
Before Shell can begin drilling this summer, the company must still obtain other permits from state and federal agencies, including one to drill from the Bureau of Safety and Environmental Enforcement and government opinions that find Shell can comply with terms and conditions of the Endangered Species Act.
Shell spokesman Curtis Smith said the approval “is an important milestone and signals the confidence regulators have in our plan. However, before operations can begin this summer, it’s imperative that the remainder of our permits be practical, and delivered in a timely manner.
“In the meantime, we will continue to test and prepare our contractors, assets and contingency plans against the high bar stakeholders and regulators expect of an Arctic operator,” Smith said in an email to The Associated Press.
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Get Ready for Oil Deals: Shale Is Going on Sale
Get Ready for Oil Deals: Shale Is Going on Sale
(Bloomberg) — A decision by Whiting Petroleum Corp., the largest producer in North Dakota’s Bakken shale basin, to put itself up for sale looks to be the first tremor in a potential wave of consolidation as $50-a-barrel prices undercut companies with heavy debt and high costs.
For the first time since wildcatters such as Harold Hamm of Continental Resources Inc. began extracting significant amounts of oil from shale formations, acquisition prospects from Texas to the Great Plains are looking less expensive.
Buyers are ultimately after reserves, the amount of oil a company has in the ground based on its drilling acreage. The value of about 75 shale-focused U.S. producers based on their reserves fell by a median of 25 percent by the end of 2014 compared to 2013, according to data compiled by Bloomberg. That’s opening up new opportunities for bigger companies with a better handle on their debt, said William Arnold, a former executive at Royal Dutch Shell Plc.
“In this market, there are whales and there are fishes, and the whales are well armed,” said Arnold, who also worked as an energy-industry banker and now teaches at Rice University in Houston. “There are some very vulnerable little fishes out there trying to survive any way they can.”
Smaller producers with significant debt that depend on higher prices to make money are the most likely early targets for buyers such as Exxon Mobil Corp. or Chevron Corp., companies that have bided their time for years as the value of some shale fields soared to $38,000 an acre from $450 just a few years earlier.
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This Week In Energy: ExxonMobil On The Hunt
This Week In Energy: ExxonMobil On The Hunt
Oil prices continued to pick up steam for the week ending on February 13. Brent crude traded above $60 per barrel for the first time in 2015, a psychological threshold that caught the markets by surprise and points to a potential price rebound quicker than many had previously thought.
The price surge is underpinned by a continued pull back by the industry. There were also several catalysts this week that pushed oil higher. Apache Corporation (NYSE: APA) reported its fourth quarter earnings this week, and announced a significant draw down in its drilling plans for the year. One of the biggest drillers in Texas, and in the Permian basin in particular, Apache plans on reducing its drilling fleet by 70%, and revised its estimated production growth down to essentially zero.
Also, Royal Dutch Shell’s (NYSE: RDS.A) CEO Ben van Beurden warned investorsabout the potential for prices to spike in the next two years or so. Echoing prior comments from OPEC officials, van Buerden said that severe cutbacks in investment and drilling could result in a supply shortage, not necessarily in 2015, but in the coming years.
Several other background indicators supported oil prices, including positive news coming out of Europe. German GDP figures beat estimates, reducing fears of a European-wide recession. The markets also raised hopes that a resolution to the Greek debt situation would be less intractable than previously thought. Greek officials are meeting with international creditors on February 13. Moreover, the U.S. dollar weakened a bit this week. Retail sales in the U.S. disappointed, falling 0.8% in January from a month earlier. That contributed to a 1% decline in the dollar index. Since oil is priced in U.S. dollars, the depreciation helped push up oil prices.
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Oil Searching For A Bottom As Union Threatens More Walkouts
Oil Searching For A Bottom As Union Threatens More Walkouts
The strike at US refineries got a bit bigger over the weekend – all amid the mostvolatile, and now downward, price swings seen in the last six years. Investors have yet to lose hope in a sustainable rebound, but another prolonged fall may be looming ahead.
The United Steelworkers union (USW) and Royal Dutch Shell – big oil’s lead representative in the matter – failed to reach an agreement on wages, safety measures, and benefits last week. As a result, 1,400 workers at two BP-owned refineries joined the work stoppage on February 8. Since the beginning of the month, USW members have walked out of 11 refineries, leaving approximately 1.82 million barrels per day of refining capacity in the hands of retirees and last-minute, non-union replacement workers.
Still in its early stages, the strike has room to grow. The USW national contract – which expired February 1 – covers nearly 30,000 workers, 65 facilities, and around two-thirds of the nation’s refining capacity. The nature of the negotiations remains unclear, but the sides appear to be far apart. The union has already rejected five offers from Shell and threatened further walkouts if progress is not made.
To date, contingency plans and local bargaining have limited any drop in output – positive pressure on both crude and gasoline prices has been virtually non-existent. Instead, downward pressure caused by the work stoppage has only increased the recent volatility, muddying any understanding of the true bottom. The last strike, in 1980, lasted three months.
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Union says U.S. refinery strike widened; cites unfair labor practices
Union says U.S. refinery strike widened; cites unfair labor practices
(Reuters) – The United Steelworkers union said on Saturday the strike by U.S. refinery workers is expanding to two more plants early on Sunday due to unfair labor practices by oil companies.
Walk-outs at BP Plc’s Whiting, Indiana, refinery and the company’s joint-venture refinery with Husky Energy in Toledo, Ohio, shortly after 12 a.m. local time on Sunday would bring the number of plants with striking hourly workers to 11, including nine refineries accounting for 13 percent of U.S. refining capacity.
BP said on Friday it had received notice of the walk-outs at the two refineries, but the Steelworkers had said little about them until Saturday.
The union said in a statement that U.S. refinery owners led by Royal Dutch Shell Plc have failed to discuss health and safety issues and engaged in “bad-faith bargaining, including the refusal to bargain over mandatory subjects; undue delays in providing information; impeded bargaining; and threats issued to workers if they joined the strike.”
A Shell spokesman said the company was unaware of any unfair labor practice charge filed against it with the U.S Department of Labor.
“We regret that we have been unable to reach a mutually satisfactory agreement with the USW prior to contract expiration,” said Shell spokesman Ray Fisher. “We remain committed to resolving the remaining issues through collective bargaining at the bargaining table.”
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Oil Majors’ Profits Take A Beating
Oil Majors’ Profits Take A Beating
The first quarterly earnings reports since the collapse of oil prices are in and the numbers show a significant deterioration in profits for the oil majors.
Royal Dutch Shell went first on January 29, revealing a big jump from the same quarter a year ago, but down from the third quarter of 2014. In fact, Shell announced that it would cut $15 billion in spending over the next few years, an about-face from just a few months ago when it stated that it would leave capital expenditures unchanged in 2015. Shell’s CEO, concerned about the poor state of oil and gas markets, said that it may even consider withdrawing itself from significant assets held around the world, retrenching and focusing on North America.
On the same day, ConocoPhillips also reported gloomy numbers. It plans onslashing 2015 spending by an additional 15 percent, which comes after a December announcement of a 20 percent cut in expenditures for the year.
Related: Schlumberger To Retake Oil Services Crown With New Deal
Chevron followed that up on January 30, posting its worst showing in five years. The $3.5 billion in earnings for the fourth quarter of 2014 was 30 percent lower than from the previous year. The California-based oil major says that it will trim spending by 13 percent.
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Arctic Oil On Life Support
Arctic Oil On Life Support
Oil companies have eyed the Arctic for years. With an estimated 90 billion barrels of oil lying north of the Arctic Circle, the circumpolar north is arguably the last corner of the globe that is still almost entirely unexplored.
As drilling technology advances, conventional oil reserves become harder to find, and climate change contributes to melting sea ice, the Arctic has moved up on the list of priorities in oil company board rooms.
That had companies moving north – Royal Dutch Shell off the coast of Alaska, Statoil in the Norwegian Arctic, and ExxonMobil in conjunction with Russia’s Rosneft in the Russian far north.
But achieving the goals of tapping the extensive oil reserves in the Arctic has been much harder than previously thought. Shell’s mishaps have been well-documented. The Anglo-Dutch company failed to achieve permits on time, had its drill ships run aground, and saw its oil spill containment dome “crushed like a beer can” during testing. That delayed drilling for several consecutive years.
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Shell Cuts $15 Billion of Spending as Profit Misses Expectations
Shell Cuts $15 Billion of Spending as Profit Misses Expectations
(Bloomberg) — Royal Dutch Shell Plc will cut $15 billion of investment over the next three years as the crash in oil prices saw fourth-quarter profit miss forecasts.
Shell, the first of the world’s largest oil companies to report earnings following the slump in crude to a five-year low, will review spending on about 40 projects worldwide, Chief Executive Officer Ben van Beurden said today in an interview.
“We see pressure on our investment program,” van Beurden said on Bloomberg TV. “It’s a game of being prudent but at the same time not overreacting.”
Profit excluding one-time items and inventory changes was $3.3 billion in the quarter, up from $2.9 billion a year earlier, Shell said today. That missed the $4.1 billion average of 13 analyst estimates compiled by Bloomberg.
Shell shares dropped as much as 4.4 percent in London and traded at 2,067 pence at 10:17 a.m.
The global industry is scurrying to respond as oil below $50 a barrel guts cash flows. Statoil ASA, Tullow Oil Plc and Premier Oil Plc have delayed projects or cut exploration spending. BP Plc has frozen wages and Chevron Corp. delayed its 2015 drilling budget. By cutting spending, companies aim to protect returns to investors.
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