Shell cuts dividend for first time since 1940s as oil demand collapses

LONDON - Royal Dutch Shell cut its dividend for the first time in 80 years and suspended the next tranche of its share buyback program on Thursday following the collapse in global oil demand due to the coronavirus pandemic.

"Given the continued deterioration in the macroeconomic outlook and the significant mid and long-term uncertainty, we are taking further prudent steps to bolster our resilience, underpin the strength of our balance sheet and support the long-term value creation of Shell," Chief Executive Ben van Beurden said in a statement.

Starting in the first quarter, Shell will reduce its quarterly dividend to 16 cents per share from 47 cents in the previous quarter.

For decades, Shell has taken pride in having never cut its dividend since the Second World War, resisting such a move even during the deep downturns of the 1980s.

Shell's first-quarter net income attributable to shareholders based on a current cost of supplies (CCS) and excluding identified items, fell 46 percent from a year earlier to $2.9 billion, above the consensus in an analyst survey provided by the company.

Shell's fourth-quarter net income was also $2.9 billion.

The company said it cut activity at its refining business by up to 40 percent in response to the demand shock. 

-reuters-

Russia cements role as gas 'kingpin' with 3 new pipelines

MOSCOW — Russian President Vladimir Putin and Chinese leader Xi Jinping launch Monday a gas pipeline that is the first of 3 ambitious projects intended to cement Moscow's role as top gas exporter.

Putin and Xi are to inaugurate by video link-up the "Power of Siberia" pipeline, sending Siberian gas to China in a move that will strengthen their ties amid Moscow's confrontation with the West.

Russia is also planning to soon launch 2 more gas pipelines that will ramp up supplies to Europe while bypassing Ukraine.

TurkStream, which Putin and Turkish leader Recep Tayyip Erdogan hope to launch in January, is to transport Russian gas to Turkey.

Nord Stream-2, which would double Russian gas volumes to Germany, is expected to go online in mid-2020.

Analysts said the three projects have long-term economic and political benefits for Russia, which has inserted itself between European markets to the west and the rapidly growing Chinese market to the east.

"Russia is not only creating new income streams, but hedging its bets and bolstering its position strategically," said energy analyst Andrew Hill.

"The ability to play one off against the other will not have been lost on either Gazprom or the Kremlin," Hill, who leads the S&P Global Platts EMEA gas and power analytics team, wrote in a blog post.

He said the 3 projects were a sign that the Russian gas industry -- "this kingpin of the global gas sector" -- was becoming more mature.

Putin's spokesman Dmitry Peskov said the significance of the 3,000-kilometer Power of Siberia pipeline running from remote regions of East Siberia to Blagoveshchensk on the Chinese border was hard to overestimate.

"This is important for our country, this is important for China," he said ahead of the launch, stressing that the project would create jobs and infrastructure in Russia's Far East.

'BIGGEST CONSTRUCTION PROJECT' 

The pipeline, which Putin has called "the world's biggest construction project," crowns years of tough negotiations and work in difficult conditions.

A 30-year, $400 billion deal was signed in 2014 after a decade of tortuous talks. It was the Russian gas giant Gazprom's biggest contract.

Gazprom is to supply China with 38 billion cubic meters of gas annually when the pipeline is fully operational in 2025.

Gazprom stressed that the pipeline ran through "swampy, mountainous, seismically active, permafrost and rocky areas with extreme environmental conditions". 

Temperatures along the route plunge to below minus 60 degrees Celsius in Yakutia and below minus 40 Celsius in the Russian Far East's Amur Region.

Speaking in Moscow last week, Chinese vice foreign minister Le Yucheng said the pipeline would boost cooperation and allow the 2 countries "to complement each other's strengths and pursue common rejuvenation."

Ahead of the launch, officials also said work had been completed on the first road bridge between Russia and China.

The bridge, which is to open next year, will connect the city of Blagoveshchensk and the northern Chinese city of Heihe.

The Power of Siberia launch comes amid continued wrangling over Nord Stream 2.

The 9.5-billion-euro ($10.6-billion) pipeline has faced opposition from countries in eastern and central Europe, the United States and particularly Ukraine because it is likely to increase Europe's dependence on Russian natural gas.

US President Donald Trump has threatened to hit Nord Stream 2 and those tied to it with sanctions.

While praising Russia's gas projects with China and Turkey, Thierry Bros, an energy analyst at the Davis Center for Russian and Eurasian Studies at Harvard, said the Baltic energy link had become a victim of strong opposition from many in the West.

"Nord Stream 2 is not a success," he told AFP, noting that it was hard to say when Gazprom would be able to fully capitalize on its investment.

Agence France-Presse 

Shell CEO says further oil investments 'entirely legitimate'

LONDON - Royal Dutch Shell still sees abundant opportunity to make money from oil and gas in coming decades even as investors and governments increase pressure on energy companies over climate change, its chief executive said.

But in an interview with Reuters, Ben van Beurden expressed concern that some shareholders could abandon the world's second-largest listed energy company due partly to what he called the "demonization" of oil and gas and "unjustified" worries that its business model was unsustainable.

The 61-year-old Dutch executive in recent years became one of the sector's most prominent voices advocating action over global warming in the wake of the 2015 Paris climate agreement.

Shell, which supplies around 3 percent of the world's energy, set out in 2017 a plan to halve the intensity of its greenhouse emissions by the middle of the century, based in large part on building one of the world's biggest power businesses.

Still, the amount of carbon dioxide emitted from Shell's operations and the products it sells rose by 2.5 percent between 2017 and 2018.

A defiant van Beurden rejected a rising chorus from climate activists and parts of the investor community to transform radically the 112-year-old Anglo-Dutch company's traditional business model.

"Despite what a lot of activists say, it is entirely legitimate to invest in oil and gas because the world demands it," van Beurden said.

"We have no choice" but to invest in long-life projects, he added.

Shell and its peers have long insisted that switching away from oil and gas to cleaner sources of energy will take decades as demand for transport and plastics continues to grow. Investors have warned, however, that oil companies often rely on forecasts that underestimate the pace of change.

Shell plans to greenlight more than 35 new oil and gas projects by 2025, according to an investor presentation from June.

Oil and gas remain the backbone of profits for Shell, the largest listed company on London's main FTSE index.

While oil and gas account for the entirety of Shell's free cashflow today, it foresees a gradual diversification over the next two decades. Oil and gas are each still expected to provide a third of free cashflow, however, with the rest coming from power and chemicals.

Many oil and gas projects such as gas-processing plants, deepwater platforms or chemical plants take billions of dollars to develop and operate for decades.

"RED HERRING"

Shell, like many rivals, has become more selective in its investments as the outlook for oil prices and demand remains unclear. It targets new projects that can be profitable at oil prices of $20 to $30 a barrel and which emit relatively low greenhouse emissions. Oil is trading at around $60 a barrel.

"We can sustain an upstream portfolio all the way into the 2030s if there is an economic rationale for doing that and a societal rationale for doing that," van Beurden said.

"Fortunately enough, we have more of those than we have money to spend on them."

Van Beurden rejected as a "red herring" arguments that Shell's oil and gas reserves, which can sustain its current production for around eight years, would be economically unviable, or stranded, in the future.

A lack of investment in oil and gas projects could lead to a supply shortage and result in price spikes, he said.

"One of the bigger risks is not so much that we will become dinosaurs because we are still investing in oil and gas when there is no need for it anymore. A bigger risk is prematurely turning your back on oil and gas."

Shell plans to increase its annual spending to around $32 billion by 2025 from the current $25 billion, with up to one tenth allocated to renewables and the power business.

The company, the world's largest dividend payer, plans to return $125 billion to shareholders in the five years to 2025.

On liquefied natural gas, of which Shell is the world's biggest trader, van Beurden said the market would exhibit oversupply in the near term. "But (LNG) demand will continue to grow at a pace that is roughly four times that of oil," he said.

Shell has become a focal point of environmental protests, particularly in Europe, with regular demonstrations outside its London headquarters and the British National Theater dropping Shell's sponsorship in recent months.

At the same time, investors have sharply increased their scrutiny of companies' environmental performance.

Amid growing uncertainty over future demand, the share prices of Shell and its peers have underperformed relative to other sectors.

Van Beurden expressed concern that some investors could ditch Shell, acknowledging that shares in the company were trading at a discount partly due to "societal risk".

"I am afraid of that, to be honest," he said.

"But I don't think they will flee for the justified concern of stranded assets ... (It is) the continued pressure on our sector, in some cases to the point of demonization, that scares asset managers."

"It is not at a scale that the alarm bells are ringing, but it is an unhealthy trend."

Van Beurden put the onus for achieving a transformation to low-carbon economies on governments, warning that not enough progress had been made to reach the Paris climate goal of limiting global warming to "well below" 2 degrees Celsius above pre-industrial levels by the end of the century.

"Can that happen? I think it can ... Increasingly society is not putting up with the fact we are not making enough progress."

Delaying implementation of the right climate policies could result in "knee-jerk" political responses that might be very disruptive to society, he said.

"Let the air out of the balloon as soon as you can before the balloon actually bursts," van Beurden said.

source: news.abs-cbn.com

India investing $60 billion on gas grid to link up nation by 2024

NEW DELHI - India, one of the world's largest consumers of oil and coal, is investing $60 billion to build national gas grid and import terminals by 2024 in a bid to cut its carbon emissions, the oil minister said on Sunday.

India has struggled to boost its use of gas, which produces less greenhouse gas emissions than coal and oil, because many industries and towns are not linked to the gas pipeline network.

Gas consumption growth was running at 11 percent in 2010 but growth slid to just 2.5 percent in the financial year 2018/19.

Oil Minister Dharmendra Pradhan told reporters at India Energy Forum by Ceraweek that companies were investing $60 billion in the network and building new gas import facilities to link all states by mid-2024, when the government's term ends.

"I am not talking about potential investment. This number relates to the project that are under execution," he said.

Prime Minister Narendra Modi has previously set a target to more than double the share of gas in India's energy mix to 15 percent by 2030.

India's biggest gas utility Gail Ltd has said it was close to completing the 2,660 km (1,660 miles) Urja Ganga pipeline project, connecting the eastern states of Bihar, West Bengal, Jharkhand and Odisha. The pipeline will have capacity for 16 million standard cubic meters per day (mscmd) of gas.

"The Urja Ganga project ... will be ready by the end of 2020," Pradhan said on the conference sidelines.

India's overall gas consumption is about 166 mscmd.

The minister said the government had started building the northeast gas grid to connect eight states in northeastern India, a region bordering Bhutan, Myanmar, Bangladesh and China. He said the grid would be ready by 2023.

He added that, before the end of government's current term, "India will be connected by a pipeline ring that will help transport gas from any corner of India to a demand center."

Most of India's liquefied natural gas (LNG) import terminals are in the west, making it difficult for the industry in the east and elsewhere to secure regular gas supplies.

source: news.abs-cbn.com

GE lost billions by 'misjudging' renewables: report

PARIS - Investors in General Electric, once one of the world's most valuable companies, lost tens of billions of dollars after the Paris climate deal as it failed to adapt to the pace of the green energy transition, new analysis showed Thursday.

A report by the Institute for Energy Economics and Financial Analysis (IEEFA) said GE had lost a "simply staggering" $193 billion (172 billion euros) in just three years to 2018 -- amounting to almost three quarters of its market capitalization.

The Cleveland-based research group said GE and its principal shareholders misjudged the falling price of renewables as the world transitions to cleaner energy and suffered from a collapse of the gas turbine and thermal power construction markets.

"GE assumed wrongly that demand for natural gas and coal would continue to track global economic growth," they said, accusing GE of "an epic failure of corporate governance."

The 2015 Paris accord enjoins nations to work towards limiting global temperature rises to "well below" two degrees Celsius (3.6 Fahrenheit) and to a harder cap of 1.5C if possible.

To do so, governments must commit to curbing greenhouse gas emissions -- the leading source of which is burning fossil fuels such as oil, gas and coal for power.

As the price of renewable energy technologies such as wind and solar fell in recent years, the IEEFA said GE has been left with billions in stranded fossil fuel-related assets as cheaper alternatives curbed industry demand for coal and gas.

The company also failed to account for increasing energy efficiency, driven largely by renewables, which decoupled energy demand from global economic activity, according to the report.

In particular, GE's power division, which in 2016 equated to half of the company's pre-tax profit, continued to invest in gas turbine units even as global demand fell, the report said.

"The world is transitioning away from fossil fuels -- particularly expensive imported thermal coal and gas -- into low-cost, zero-pollution domestic renewables such as wind and solar," said Tom Sanzillo, IEEFA's director of finance.

"This is where the smart money is, but GE failed to pick the trend."

A global divestment movement is underway calling on pension and hedge funds, among others, to end investment in upstream fossil fuel projects. Hundreds of institutions in control of over $6 trillion in assets have joined the initiative.

When contacted by AFP, a spokeswoman referred to comments made by CEO Larry Culp to an energy conference last month, when he acknowledged there was "a lot of self-help required" to manage the company's assets.

"Some people would suggest that the gas business is dying (and) there are certainly structural challenges afoot," Culp said.

"We just don't think gas is going to zero in the near to medium term, right? So it really puts the onus on us to continue to innovate, continue to serve."

source: news.abs-cbn.com

US allows oil exports for 1st time since 1970s: WSJ

WASHINGTON - The US will allow two companies to export unrefined oil for the first time in four decades, taking steps to break a ban on crude exports, The Wall Street Journal reported Tuesday.

The Commerce Department will permit the two Texas-based companies to export the ultra-light condensate, which has grown in supply on the back of the boom in fracking-based exploration and production of natural gas.

"With relatively minimal processing, oil shipments could begin as early as August, according to one industry executive involved in the matter," the Journal said.

Pressure has been building for a year for the government to end the 1970s ban on exports, an energy security measure long seen crucial in a country heavily dependent on oil imports to meet domestic needs.

But the surge in production from shale-based deposits in areas like North Dakota and Texas, made possible by advances in hydraulic fracturing technology, has sharply reduced the need for imports and created regional surpluses due to distribution bottlenecks.

That has given rise to industry pressure to allow exports from areas like the Gulf of Mexico, even as the country imports crude through east coast ports.

Some resistance has come from refiners and consumer advocates who fear that competing with export markets for the crude could drive up their prices, and eventually raise the cost of fuel to consumers.

Still, despite pressure in Congress and from the industry, the ban on crude exports has not been lifted. The Commerce Department instead made a special ruling to allow the export of condensate on the grounds that it has been processed enough to qualify it for export, even if it has not been refined.

The US already exports large volumes of refined oil products.

The Journal said the two companies receiving permits to export condensate are Pioneer Natural Resources of Irving, Texas, and Enterprise Products Partners of Houston.

source: www.abs-cbnnews.com