Royal Dutch Shell Cl B (RDS-B)
$38.15 1.62 (4.07%)
19:56 EST RDS-B Stock Quote Delayed 30 Minutes
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Market Cap 159.14B
PE Ratio 10.42
Volume (Avg. Vol.) 2.46M
Day's Range 37.91 - 38.94
52-Week Range 19.19 - 59.02
Dividend & Yield 3.76 (9.86%)
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Hot dogs, coffee, and candy are driving results at RDS. And that's a great thing for investors in Royal Dutch Shell.
From Wall Street Journal
A consortium that includes oil majors Royal Dutch Shell and ExxonMobil has requested a total of 2.1 billion euros ($2.55 billion) in subsidies for a project to store CO2 gasses in empty Dutch gas fields in the North Sea, the Dutch Economy ministry said on Thursday. The subsidies were requested together with industrial gas suppliers Air Liquide and Air Products for a project which aims to capture carbon dioxide emitted by factories and refineries in the Rotterdam port area in order to significantly reduce emissions in Europe's largest sea port. The Dutch government has said it will grant a total of 5 billion euros in subsidies in 2021 for technologies that will help it achieve its climate goals.
(Bloomberg) -- After years building out export capacity and hiring traders, producers of liquefied natural gas and commodity trading houses are seizing on an unprecedented surge in the price of the fuel.The combination of a severe cold snap in Asia, supply outages and maritime congestion has propelled spot prices for LNG to previously unforeseen heights. The North Asian price benchmark has now risen 18-fold in less than nine months, outperforming other commodities -- even Bitcoin.Winners in this rally include Exxon Mobil Corp., which sold a cargo last week for a record $130 million to Japan, and Total SE, which secured $126 million on Tuesday in a sale to trading company Trafigura Group. Other producers, such as Royal Dutch Shell Plc and Houston-based Cheniere Energy Inc., are also taking the opportunity to offload consignments that aren’t tied to long-term supply contracts. Owners of LNG tankers, meanwhile, are reaping record charter rates.The rally is a milestone in the evolution of the global LNG market. While the super-chilled fuel has been around for decades, seaborne volumes have risen considerably in recent years to serve burgeoning power-generation demand in Asia and countries seeking to transition from coal. Many of the world’s largest oil and gas producers have invested tens of billions of dollars in plants that liquefy natural gas prior to export. They’ve also sought to leverage their position as major suppliers by building up sizable trading operations in Singapore, London and elsewhere. Trading houses such as Trafigura Group, Vitol Group and Gunvor Group Ltd. have grabbed a slice of the action as well.The spike in prices is also a vindication for producers and traders following several lean years of disappointingly mild northern hemisphere winters and new supply hitting the market. North Asian spot prices dropped almost to zero in April. On Tuesday, the benchmark rose above $30 per million British Thermal units, the highest since S&P Global Platts began its assessments in 2009. The Total-Trafigura deal was done at $39.30.“The LNG market is the winner in this rally, and the people who believe in it -- people who believed that, after two to three winters that were warm, something can happen,” said Sarah Behbehani, a veteran LNG trader and managing director at BEnergy Solutions DMCC in Dubai.As is so often the case with natural gas, the primary driver in this dramatic market move has been the weather, in this case the fierce conditions driving demand in North Asia. In Japan, which is reliant on imported energy, utilities Kyushu Electric Power Co. and Jera Co. are likely among the biggest losers after being caught short.Efforts to divert more LNG tankers to the Pacific have come up against congestion on the Panama Canal. Since the start of December, 11 U.S. cargoes opted to use the Suez Canal instead and six chose the Cape of Good Hope, both of them longer routes, ship-tracking data on Bloomberg show. In the scramble for vessels, daily charter rates climbed to the previously unheard-of level of $350,000 a day.“While there was evidence back in summer that demand could be strong this winter, I don’t think anyone could have anticipated how the combined effect of several different factors would move the market,” said David Thomas, an independent adviser and former head of LNG at Vitol.To be sure, LNG traded on a spot basis is only a fraction of the overall market. Most of the fuel is supplied under long-term contracts that are often tied to crude oil prices. And no one expects current spot levels for LNG to last indefinitely: fuel for March delivery is trading already at half the rate for February.“We believe as the market navigates through these challenges, prices will return to normal,” said Kalpesh Patel, co-head of LNG at Gunvor.For now, the tightness in the market is welcome news for producers with extra volumes at hand, such as the Yamal LNG project in the Russian Arctic and the Gazprom PJSC-led Sakhalin-2 plant, according to traders. Yamal, a partnership between Novatek PJSC, Total and Chinese partners, is sending two cargoes to China via the Arctic Ocean this month, the first time the polar route has been used so late in the winter season.Other likely beneficiaries include Qatar, the biggest and cheapest LNG producer, and Australian producers Woodside Petroleum Ltd. and Oil Search Ltd., which are located even closer to Asian consumers. Shell, the world’s biggest LNG trader, has spot volumes to play with outside its oil-linked long-term contracted cargoes, “as long as they are positioning correctly,” said Oswald Clint, an analyst at Sanford C. Bernstein.Cheniere, the largest U.S. exporter, is another producer with spare capacity. Its Sabine Pass facility in Louisiana agreed last month to sell up to 30 spot cargoes during 2021.For commodity trading houses without their own LNG production facilities, the calculus is different, since they must buy and sell. Volatility is generally good for them, not only in terms of price movement but regional differences that allow them to move cargoes to the most attractive market.“The world is not short LNG,” Richard Holtum, global head of LNG and gas for Trafigura, said in an interview from Geneva. “There is LNG available. The ships are simply in the wrong place.”Shipping has emerged as one of the biggest constraints in LNG. BP last week paid $350,000 a day to charter a tanker taking a U.S. cargo. Trafigura recently offered to pay the same rate but without success, an indication of the shortage of available vessels. Trafigura, Gunvor and Vitol have all chartered more ships than they need and are benefiting from that, but scheduling is a challenge now, according to Per Christian Fett, global head of LNG at shipbroker Fearnleys.“It’s a market slightly driven by fear,” Vitol chief executive officer Russell Hardy said. “We’ve reached a point where we’ve got largely an illiquid market. There are not a lot of buyers and sellers around.”Even as spot prices eventually subside, the rally may be a boon for companies seeking to develop the next wave of LNG export facilities. For Charif Souki, a co-founder of Cheniere who’s now trying to secure support for a $29 billion project in Louisiana, current market conditions favor deal making between U.S. developers and overseas utilities seeking to secure long-term energy supplies.“What I’ve been saying for the past six months is that the system is tight, the oversupply is gone and we’re now in the danger zone,” Souki, the chairman of developer Tellurian Inc., said in an interview. “There’s only 50 million tons of LNG that are going to be built over the next five years. That’s not enough.”(Updates with comments from Vitol CEO in 18th paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- Elk and pronghorn antelope migrate each fall through southern Wyoming, where the sparsely vegetated landscape slowly gives way to the foothills of the Rocky Mountains. Interrupting this serene vista is a dense web of steel pipes, tanks, and pumps owned by Exxon Mobil Corp.The industrial complex provides a clue about what lies beneath: an ancient sea of coral and marine life, petrified by time and pressure into a thick layer of rock. Known as the Madison formation, this geologic structure is miles wide and reaches more than 10 Empire State Buildings below the ground. It contains natural gas, helium, and carbon dioxide. Two of these gases are consistently valuable to Exxon’s business. The third is not—and that’s a problem for everyone on the planet.For three decades, the American oil titan has been pumping up these gases, separating them, selling some, and dumping the remainder into the atmosphere. Exxon produces more CO₂ than it can sell or use, so the company lets a lot float away—as much as 300,000 cars’ worth of emissions a year.Exxon was set to embark on a project to do the reverse: pump the unwanted gas back down where it came from. The plan was technically and strategically straightforward. By capturing CO₂, transporting it to an injection site, and burying it, Exxon would have locked away enough of the planet-warming gas to almost eliminate the climate harm caused by the facility. The captured carbon may not have made much money for Exxon on its own, but a recent change to the U.S. tax code would help overcome that hurdle with lucrative credits for safe storage. The company put the total cost of construction at about $260 million, 1% of its capital budget for 2020.LaBarge, as the gas operation is known, would have become one of the world’s foremost examples of carbon capture and sequestration (CCS), a technology most climate-modeling experts view as essential to slowing down global warming and, eventually, reversing it. The project would also help Exxon clean up its image as one of the foremost corporate climate polluters.Construction was set to begin over the summer. But in April, Exxon told Wyoming officials that the project would be delayed indefinitely, because of fallout from Covid-19. The company’s share price at one point during the pandemic dropped to an 18-year low, as oil prices cratered, throwing many plans across the industry for this year and beyond into turmoil.Some traditional oil and gas projects are continuing. In September, for example, Exxon announced plans to expand crude operations off the coast of Guyana at a cost of $9 billion—35 times the cost of implementing CCS at LaBarge. Guyana is just one of the growth projects that would have fueled a sharp increase in the company’s carbon emissions, according to internal projections from before the pandemic reviewed by Bloomberg Green. If LaBarge had gone ahead, on the other hand, it would have been one of the largest carbon-capture projects operated solely by Exxon, making up almost 20% of the company’s new emission-reduction efforts out to 2025, according to the documents.LaBarge “remains in our capital plans, and the permitting process and necessary design work continue,” says Exxon spokesman Casey Norton. Spending cuts “have impacted projects across all business lines.” Exxon has said estimates in the planning documents are preliminary and do not include additional measures to cut emissions.The decision to pause things in Wyoming won’t stop development of CCS, but it will slow down worldwide deployment. There are now 26 large-scale carbon-capture projects, according to the Global CCS Institute. Exxon also has a stake in a large facility in Australia as well as others in Qatar and the Netherlands, and Norton says the company has “expanded our interest in carbon capture significantly” over the past two years.Taken together, all the world’s existing capture facilities can zero out more than 38 million metric tons of CO₂ a year. That number, about 0.1% of all global emissions, would have to rise 100-fold to 200-fold by 2050 to meet climate goals, according to the International Energy Agency.Most of these carbon-capture projects are run by fossil fuel companies. Big Oil likes to celebrate the technology: By putting carbon back in the ground, the industry can provide consumers with the benefits of fossil fuel without the full climate impact.“If you’re going to ask somebody to actually do carbon capture, oil companies have all the experience,” says David Use, a former Chevron Corp. engineer who purchased some of the gases from LaBarge for use at the Rangely oil field, about 200 miles south, in Colorado. “They’ve got the pocketbooks and the credentials to do the big projects.”And therein lies the paradox. As Exxon and its peers look into a carbon-constrained future, CCS seems to offer a golden opportunity. Oil companies could develop a tool considered crucial by no less than the scientists with the United Nations-backed Intergovernmental Panel on Climate Change. But in the absence of strong government support or regulation, the oil industry might not have the will to invest enough. Even if Exxon one day completes its plans in Wyoming, the current delay shows that urgent climate projects can sometimes become expendable in a crunch.Carbon capture wasn’t created to tackle climate change. Oil and gas deposits typically contain large amounts of carbon dioxide, which must be separated out before the fuel can be sold. In its early days, that’s all the technology was used for—catch and release.As a result, carbon capture didn’t follow the typical clean-energy pathway. Many technologies move from laboratory to mass scale with help from taxpayer money. Research grants support the early phases, followed by subsidies to encourage deployment. A rule of thumb holds that when a new technology doubles its presence in the wider market, the process becomes more efficient and costs fall. Solar panels, wind turbines, and lithium-ion batteries have all followed this trajectory over the past two decades.Carbon capture took a more market-oriented route, even though its earnings potential was always slight. The first real commercial application, in the 1930s, came in equipment maintenance. Then the technology became useful in submarines, to collect the breath exhaled by crewmen and keep it from building up to toxic levels.By the 1970s, petroleum geologists figured out that injecting CO₂ into oil reservoirs did something miraculous: produce more oil. Compressed CO₂ acts like soap, pulling crude from the tiny sedimentary pores of large underground reservoirs. The industry calls the process enhanced oil recovery, or EOR. “Even today the overwhelming majority of capture and storage projects are associated with EOR,” says Julio Friedmann, senior research scholar at Columbia University’s Center on Global Energy Policy.Fossil fuels were first discovered in the LaBarge field in 1920, but it was only in the 1980s that Exxon first began selling gases from the site. Once separated from carbon dioxide, natural gas is used for heating and cooking in homes and sold to power plants to generate electricity. Helium is prized for research and medical applications, such as operating MRI machines; it’s also useful in producing fiber-optic cables and semiconductors.But there was more CO₂ coming out of LaBarge than Exxon could sell. After oil prices plunged below $100 per barrel in 2014, enhanced oil recovery lost its allure. The shale boom also sent prices for natural gas into free fall. That left Exxon relying on helium, a relatively rare commodity, to shore up profits.Meanwhile, the demands on Exxon to reduce its emissions got louder, and the company began to think about a long-term solution for its excess CO₂. LaBarge also produced small amounts of toxic hydrogen sulfide, which the company learned to bury back in the field along with some CO₂. What about injecting all of it back into the Earth on a much larger scale? The Madison formation is capped by a thick layer of impermeable rock, so the CO₂ wouldn’t be able to escape. The move could deliver a public-relations boost. Most important, LaBarge offered an almost painless way to lower emissions without hurting any moneymaking assets.The big sticking point, according to people familiar with carbon capture at Exxon, is that the LaBarge expansion would have to be profitable enough for the company to take it seriously. A tool that would benefit the planet needed to first show it could drive revenue for Exxon. Would capturing carbon be worth it?The prospect of building one of the world’s biggest carbon-capture facilities generated excitement within Exxon.LaBarge had the attention of senior management, and there was even a proposal for Chief Executive Officer Darren Woods himself to reveal the project to Wall Street by the end of 2019, according to people familiar with Exxon’s carbon-capture projects. But the big announcement never came. During an investor presentation on March 5, Woods made only a general statement. “ExxonMobil has cumulatively captured more carbon dioxide than any other company, accounting for more than 40% of all carbon dioxide captured in the world,” he said. “We agree with independent experts. Carbon capture is absolutely necessary if society is going to achieve its aspiration of eliminating carbon dioxide emissions.”He didn’t mention LaBarge. A few weeks later, faced with global cutbacks due to the pandemic, Exxon notified state regulators in Wyoming that the project would be delayed indefinitely.The decision to put the project on hold came as a blow to those inside the company who wanted carbon capture to succeed. People familiar with Exxon’s CCS projects described it as a significant setback, because LaBarge was in an advanced state, used proven technology, and would have made money. It gave these people the sense that carbon capture wasn’t a serious focus and that the technology’s climate potential had been treated like an unwanted addendum at a corporation devoted to oil and gas.Alex Doukas of the environmental group Oil Change International sees three motivations shaping the approach fossil fuel companies take to carbon capture. First, they want to use CO₂ to increase their overall production. Second, they want to prove they can produce “lower-carbon oil” and thus look more responsible. Third, they want CCS projects to help justify ongoing operations and persuade regulators not to intervene. In the industry this is called the social license to operate, and it’s something Exxon clearly considers.The company keeps careful internal accounts of its current and future emissions, including what it terms “self-help measures” to lower the total, according to planning documents reviewed by Bloomberg Green. Its self-help projects, which include reducing methane leaks and improving energy efficiency, would have amounted to a reduction of 11 million metric tons per year—less than 10% of Exxon’s current direct emissions. If the climate impact of customers burning Exxon’s fuels is considered, the company’s emissions-lowering measures appear far smaller.“Exxon is employing a CCS strategy that is focused on using it as a public-relations tool and as a narrative tool to allow them to continue polluting,” Doukas says. Exxon says, to the contrary, that it takes carbon capture seriously.The company spends large sums of money on all advertising—more than $800 million from 2005 through 2015, according to one estimate from Robert Brulle, a professor of environment and society at Brown University. One of Exxon’s more recent Twitter ads was a 36-second video discussing the potential use of fuel cells in carbon capture. The clip ends by celebrating cooperation between an Italian researcher and Tim Barckholtz, a senior scientific adviser at Exxon.It’s not the only ad to feature Barckholtz’s interest in fuel cells—another ran on Facebook as recently as 2018. Exxon says a pilot project is advancing, but large-scale use of the technology remains years away. Unlike the tried and tested methods proposed at LaBarge.The sluggish pace of carbon capture’s development is a sign that it’s not yet a strategic fit for the energy industry, especially with oil and gas prices at historic lows. “Most companies see CCS as a dead-weight economic cost,” says Columbia’s Friedmann. “Market adoption will require either large incentives or serious regulations limiting emissions.”That’s what did the trick in Norway. Starting in 1991, the government adopted a steep carbon tax. The state-owned oil company, now called Equinor ASA, bore the brunt and found it cheaper to bury carbon dioxide than pay taxes on emissions. Norwegian CCS projects built in the 1990s are continuing to pump down, mitigating some of the climate damage from the country’s large oil and gas sector.It may seem ironic that President Trump, famous for boosting coal and doubting climate change, supported something similar. A tax program meant to encourage carbon capture had been on the books since 2008, but the credits amounted to less than a fifth of the typical cost of the process. In 2017 a bipartisan group of lawmakers more than doubled the value of the tax credit, known as 45Q, to as much as $50 per metric ton. Trump signed it into law.That likely helped persuade Exxon to be more ambitious about LaBarge. The planning documents show that a first phase of the project was estimated to capture a million metric tons of CO₂ annually; a second phase would have doubled that. All that carbon could have been buried in exchange for tax credits, guaranteeing revenue even if there were no other buyers.Use, the former Chevron employee who bought CO₂ from LaBarge, blames the delay on a lack of desire among industry leaders to grab climate opportunities. “There are individuals that truly believe that we need to get on with carbon capture,” Use says of the oil sector. “There’s no leadership that seems to have really taken the baton.”The pandemic has caught Exxon wrong-footed. The company had begun a $210 billion plan to build a new suite of oil, gas, refining, and chemical operations by 2025. This attempt to upgrade its asset base and maintain the dividend has largely been funded by new debt. Given that spending, Wall Street fell out of love with its stock, which was the largest single component of the S&P 500 as recently as 2012. The carnage of Covid, which has wrecked demand for oil, saw Exxon removed from the Dow Jones Industrial Average.Like many oil CEOs, Woods has been forced to reverse course on his plans. He cut Exxon’s capital budget by a third, and spending will remain $10 billion a year below prior forecasts through 2025. The moves were necessary to save the company’s fabled dividend, which remains the third-highest in the S&P 500 at a cost of about $15 billion a year.Woods also shed staff. Exxon will lose 14,000 employees and contractors by 2022, joining Chevron and European peers Royal Dutch Shell Plc and BP Plc in enacting deep layoffs. Unlike Exxon and Chevron, which have said they will stick to their oil and gas expertise, the European majors have used the current crisis to cut dividends and pivot toward renewables.Whether or not oil companies invest enough in carbon capture, demand for the technology is set to grow. The European Union, China, Japan, South Korea, and the U.K. are all among the major economies that have set firm dates to reach net-zero emissions. By 2050, carbon-reduction projects around the world—including nature-based solutions such as reforestation—could bring in as much as $1.4 trillion annually, according to Vivid Economics Ltd., a strategy consultancy. At that level, the total revenue from sucking carbon out of the air would match those generated by the oil and gas industry today.Decisions such as Exxon’s have prompted carbon-capture advocates to focus on the cement and steel industries, which require immense amounts of energy that so far can’t be supplied by cheap, clean alternatives. Some are focusing outside the U.S. A Norwegian project to capture carbon from a cement plant is backed by Equinor, Shell, and Total. British Prime Minister Boris Johnson announced in November government support for CCS. Exxon and Shell are among companies supporting the Netherlands’ Porthos project to bury CO₂ in empty gas fields beneath the North Sea.There’s also a crop of startups developing a new kind of CCS technology: direct-air capture. Rather than collecting emissions from a power plant or refinery’s chimney, these experimental machines would pull the gas from the air. If direct-air-capture technology is run on renewable energy, it’s capable of delivering “negative emissions.”Swiss company Climeworks AG already has at least three pilot plants demonstrating that direct-air capture works. Carbon Engineering Ltd., based in Canada, is working with Occidental Petroleum Corp. to build its first large-scale plant. And Exxon is partnering in an effort to deploy direct-air capture with Global Thermostat LLC, a U.S. company founded by a former employee. Exxon says it’s expanded research in the field, but so far the joint project has generated advertising without significant deployment.No one expects carbon capture to sweep the world overnight, least of all Exxon’s CEO. Back in March, as the pandemic spread, Woods warned investors to be patient. “Transitioning a large, complex, capital-intensive global system—that, by the way, plays an incredibly important role in people’s lives—is going to take time,” he said.Read next:Exxon’s Plan for Surging Emissions Revealed in Leaked Documents Oil Giants Shield Their Carbon Forecasts From InvestorsBig Oil Goes Looking for a Career ChangeThe Peak Oil Era Is Suddenly Upon Us For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
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