57.63 +0.32 (0.56%)
Pre-market: 6:16AM EST
|Bid||57.79 x 1100|
|Ask||57.88 x 1000|
|Day's range||57.08 - 57.50|
|52-week range||54.64 - 67.45|
|Beta (3Y monthly)||0.84|
|PE ratio (TTM)||11.41|
|Forward dividend & yield||3.76 (6.56%)|
|1y target est||79.00|
Transaction in Own Shares 11 December 2019 • • • • • • • • • • • • • • • • Royal Dutch Shell plc (the ‘Company’) announces that on 11 December 2019 it purchased the following.
(Bloomberg Opinion) -- Along with never invading Russia or getting into a Twitter argument, we can add another golden rule — this one specifically for U.S. oil majors: Never buy a shale-gas business.Chevron Corp.’s $10-11 billion impairment, announced late Tuesday, relates mostly to the Appalachian gas assets it picked up in 2011’s $4.9 billion acquisition of Atlas Energy Inc. Back then, the Permian basin was not a regular topic on the business channels, nor was it a central pillar of Chevron’s spending plans. But now it is, and simultaneously plowing billions into a Permian oil business that spits out gas essentially for free while running a dry-gas business in the Marcellus shale is like flooring it with the parking brake on.Chevron joins the ranks of Exxon Mobil Corp. — which paid $35 billion for XTO Energy Inc. less than a year before the Atlas deal and has been haunted by it ever since — and ConocoPhillips, which bought Rockies gas producer Burlington Resources Inc. way back in 2006 for $36 billion and then wrote most of that off in 2008.But there is far more to this than just mistimed forays into the graveyard of optimism that is the U.S. natural gas market — and not just for Chevron.Big Oil just had a forgettable earnings season. Chevron announced cost overruns on the giant Tengiz expansion project in Kazakhstan. Exxon continued borrowing to cover its dividend. Across the pond, BP Plc and Royal Dutch Shell Plc flubbed resetting expectations on dividends and buybacks. What ties all of these together are weak returns on capital. Chevron’s problems in Kazakhstan are echoed in its impairment of another asset, the Big Foot field in the Gulf of Mexico. This is another mega-project that went awry and, in an era when producers can no longer count on an oil upswing to save the economics, is found wanting. Chevron is also ditching the Kitimat LNG project in Canada that it bought into in 2013.All this is a particularly sore spot for Chevron given its problems with Australian liquefied natural gas mega-projects earlier this decade. CEO Mike Wirth’s decision to clear the decks seems intended in part to signal that, unlike the experience of his predecessor with Australian LNG development, he will drop big assets that don’t make the cut financially.Discovering, financing and developing mega-projects is why the supermajors were created at the end of the 1990s. Today, when investors are interested at all, they’re leery of capital outlays, aware the outlook for oil and gas markets is challenged in fundamental ways. So tying up money in big, risky, multi-year ventures is a good way to crush your stock price.Wirth isn’t abandoning conventional development; Big Foot aside, the Gulf Of Mexico has several new projects in the pipeline, for example. But to offset the drag on returns from the extra spending at Tengiz, he must streamline the rest of the portfolio. This is the story of the sector writ large. “Too much capital is chasing too few opportunities,” as Doug Terreson of Evercore ISI puts it. Conoco, which remade itself radically after the Burlington debacle, set the tone with its recent analyst day, emphasizing the need to get the industry’s long-standing spending habits under control and focus on returns to win back investors who are free to put their money into other sectors. Chevron’s write-offs and shareholder payouts (38% of cash from operations over the past 12 months) are of a piece with this. While the company has laid out guidance for production to grow by 3% to 4% a year, that is very much subject to the returns on offer. Capital intensity — as in, shrinking it — is what counts.Chevron’s move throws the spotlight especially on big rival Exxon. While Exxon has taken some impairment against its U.S. gas assets, that represented a small fraction of the XTO purchase. Exxon also sticks out right now for its giant capex budget (bigger than Chevron’s by more than half), leaving no room for buybacks or even to fully cover its dividend.In the first decade of the supermajors, when peak oil supply was a thing, big projects with big budgets to match were something to boast about. As the second decade draws to an end, only the leanest operators will survive. Chevron won’t be the last oil major to rip off the band-aid, just as we haven’t yet seen the full extent of the inevitable restructurings and consolidation among the smaller E&P companies. On this front, there’s another golden rule: Better to get it done sooner rather than later. To contact the author of this story: Liam Denning at email@example.comTo contact the editor responsible for this story: Mark Gongloff at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
2019 has been a tough year for oil companies, but some of the oil majors have fared surprisingly well due to their economies of scale advantage and low breakeven prices per barrel
The Board of Royal Dutch Shell plc (“RDS”) today announced the pounds sterling and euro equivalent dividend payments in respect of the third quarter 2019 interim dividend, which was announced on October 31, 2019 at US$0.47 per A ordinary share (“A Share”) and B ordinary share (“B Share”).
(Bloomberg) -- The European Union is gearing up for the world’s most ambitious push against climate change with a radical overhaul of its economy.At a summit in Brussels next week, EU leaders will commit to cutting net greenhouse-gas emissions to zero by 2050, according to a draft of their joint statement for the Dec. 12-13 meeting. To meet this target, the EU will promise more green investment and adjust all of its policy making accordingly.“If our common goal is to be a climate-neutral continent in 2050, we have to act now,” Ursula von der Leyen, president of the European Commission, told a United Nations climate conference on Monday. “It’s a generational transition we have to go through.”The commission, the EU’s regulatory arm, will have the job of drafting the rules that would transform the European economy once national leaders have signed off on the climate goals for 2050. The wording of the first draft summit communique, which may still change, reflects an initial set of ideas to be floated by the commission on the eve of the leaders’ gathering.The EU plan, set to be approved as the high-profile United Nations summit in Madrid winds up, would put the bloc ahead of other major emitters. Countries including China, India and Japan have yet to translate voluntary pledges under the 2015 Paris climate accord into binding national measures. U.S. President Donald Trump has said he’ll pull the U.S. out of the Paris agreement.In a pitch of her Green Deal to member states and the European Parliament on Dec. 11, von der Leyen is set to promise a set of measures to reach the net-zero emissions target, affecting sectors from agriculture to energy production. It will include a thorough analysis on how to toughen the current 40% goal to reduce emissions by 2030 to 50% or even 55%, according to an EU document obtained by Bloomberg News.Make It IrreversibleIn the next step, the commission will propose an EU law in March that would “make the transition to climate neutrality irreversible,” von der Leyen told the UN meeting. She said the measure will include “a farm-to-fork strategy and a biodiversity strategy” and will extend the scope of emissions trading.The EU Emissions Trading System is the world’s largest cap-and-trade market for greenhouse gases. It imposes pollution caps on around 12,000 facilities in sectors from refining to cement production, including Royal Dutch Shell Plc and BASF SE. Von der Leyen eyes the inclusion of road transport into the market and cutting the number of free emission permits for airlines.Some of the transportation industry’s biggest polluters have already stepped up efforts to reduce their environmental impact. In June, France’s Airbus SE, its U.S. rival Boeing Co. and other aviation companies pledged to reduce net CO2 emissions by half in 2050 compared with 2005 levels. EasyJet Plc, the U.K.-based discount airline, has promised to offset all of its carbon emissions by planting trees and supporting solar-energy projects, while Air France will take similar steps on its domestic routes.Germany’s Volkswagen AG, the world’s largest automaker, aims to become CO2 neutral by 2050, while Daimler AG plans to reach that target for its Mercedes-Benz luxury car lineup by 2039.To ensure that coal-reliant Poland doesn’t veto the climate goals next week, EU leaders will pledge an “enabling framework” that will include financial support, according to the document, dated Dec. 2. The commission has estimated that additional investment on energy and infrastructure of as much as 290 billion euros a year may be required after 2030 to meet the targets.The EU leaders will also debate the bloc’s next long-term budget next week. The current proposal would commit at least $300 billion in public funds for climate initiatives, or at least a quarter of the bloc’s entire budget for the period between 2021 and 2027.(Updates with details on draft sumit communique from fourth paragraph.)\--With assistance from Ania Nussbaum, Siddharth Philip and Christoph Rauwald.To contact the reporters on this story: Ewa Krukowska in Brussels at email@example.com;Nikos Chrysoloras in Brussels at firstname.lastname@example.orgTo contact the editors responsible for this story: Chad Thomas at email@example.com, Chris ReiterFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Since 1980, the year Saudi Aramco was fully nationalized, the world’s largest oil producer has pumped about 116 billion barrels of crude oil from giant fields below the kingdom’s desert and the waters of the Persian Gulf.At today’s rate of consumption that crude would keep the world going for more than three years without using a single drop from any other oil-producing country. Put it through a refinery and you’d get enough gasoline to fill the tanks of more than 70 billion Chevy Suburban SUVs.And then there’s the carbon. All that oil has released more than 30 billion tons of carbon dioxide into the atmosphere in the last four decades, more than double China’s annual emissions. An analysis published in the Guardian newspaper last month reckoned Aramco’s oil was responsible for more emissions than any other single company.On one level that’s not surprising -- the modern global economy runs on petroleum and Aramco has been the prime supplier. But as Aramco makes the transition to becoming a publicly listed company, environmental concerns are one reason global investors have proved reluctant to embrace the world’s largest oil producer.Exxon Mobil Corp., Royal Dutch Shell Plc and other large oil and gas producers are already being pressed by a cohort of fund managers moving environmental, social and governance concerns up the agenda. Before Saudi Arabia decided to concentrate the IPO on local investors, one of the world’s largest sovereign wealth funds, Singapore’s Temasek, had decided to pass on Aramco because of environmental concerns.Big Oil is already under pressure “due to excessive carbon emissions, environmental footprint, social and community disruption, corruption exposure, health and safety and the now ubiquitous ‘stranded asset risk,”’ said Oswald Clint, an analyst at Sanford C. Bernstein Ltd. “Clearly then, the undisputed No.1 oil producer globally, Saudi Aramco, will come under a lot of scrutiny from investors as it embarks upon the public chapter of its life.”But Aramco is convinced it has a good story to tell on emissions. It goes like this: as the energy transition freezes and then shrinks demand for oil the complex, expensive, high-carbon supply sources like the Canadian oil sands will be increasingly abandoned. At the end of the story, only fields that are profitable in a world with strict emissions laws and depressed prices will remain, and from there this world will draw its last drop of oil.In Aramco’s 658-page IPO prospectus, the company explains why it possesses that last drop. There’s a table showing drilling a ton of Saudi oil takes half the energy of producing a barrel in the U.S. It shows that last year its lifting costs, expenses associated with bringing crude to market, were far lower than at each of the five oil majors -- Exxon, Shell, BP Plc, Chevron Corp. and Total SA -- even after those competitors worked vigorously for years to eliminate bloat.Aramco “is uniquely positioned as the lowest cost producer globally,” according to the prospectus. That’s “due to the unique nature of the kingdom’s geological formations, favorable onshore and shallow water offshore environments in which the company’s reservoirs are located.”An analysis from the influential consultant Carbon Tracker backed that up, saying the company was probably going to be “one of the last oil producers standing” in a carbon-constrained future.Mixed ObjectivesBut it isn’t likely to be that simple.While each individual barrel of Aramco oil was produced at a competitively low volume of CO2, much of the company’s value is derived from the sheer number of barrels at its disposal. The company has five times the amount of proved liquids reserves than the five largest oil majors combined, according to the Aramco prospectus.It has so much crude that even in a case where Saudi Aramco is the last oil company on earth, it still can’t produce all its barrels in a world that limits global warming to less than 2 degrees Celsius, according to an analysis from Rob Barnett at Bloomberg Intelligence.Under that scenario, a good chunk of Aramco’s reserves -- set to last more than 50 years -- may well end up as stranded assets.Governance is also likely to be a concern for potential investors. Just 1.5% of Aramco shares will be listed, leaving the Saudi state in a totally dominant position. Aramco will remain the main source of revenue for the kingdom, already running a larget fiscal deficit.“Governance issues will be a concern for investors,” analysts at Jefferies wrote in a research note. “The kingdom controls the board, is the resource owner and dictates production objectives.”Saudi Aramco has implemented some programs to cut its net carbon footprint, such as pledging to plant 1 million trees by 2025. It also is a founding member of the Oil and Gas Climate Initiative, which funds carbon-reduction technology and has made pledges to cut flaring. However, its oil major competitors have been listening to environmental complaints for decades also do that, and have gone further.An analysis from Bernstein showed the full-cycle emissions of Exxon, Shell and BP have trended downwards since about 2000. They are expected to keep falling as they implement measures suggested to them by eco-conscious shareholders, the report showed. Aramco’s full-cycle emissions have meanwhile increased sharply, reaching about double the volume of the three largest oil majors combined in 2015.Other oil companies are starting to take more radical action as pressure from governments, investors and customers to tackle the climate crisis builds. On Monday, Spain’s Repsol decided to promise zero net carbon emissions by 2050, while writing down the value of the business to reflect lower long-term oil prices Ben van Beurden, chief executive officer of Shell, said in an interview at the sidelines of the Oil & Money Conference in London in October that if he had any advice for Aramco at its IPO, it’s to learn to work with the oil industry’s climate critics. After all, they aren’t going anywhere.“When you get out in the market, you will get a lot of advice, a lot of conflicting advice, a lot of opinions and everything else,” van Beurden said. I think the IPO “is the opportunity for Aramco to plug into much more of the opinions of the world. To have their thinking shaped by that as well, rather than by events in the kingdom.”To contact the reporters on this story: Will Kennedy in London at firstname.lastname@example.org;Kelly Gilblom in London at email@example.comTo contact the editors responsible for this story: Will Kennedy at firstname.lastname@example.org, Rakteem KatakeyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Markets) -- In a small office at the run-down hotel his family owns in Poza Rica, Mexico, Guillermo Salinas recalls how his country’s oil dreams imploded, along with many of his own hopes for a brighter future. A light flickers overhead. The air smells of chlorine, though hardly anyone uses the hotel’s blue-tiled pool anymore.On this muggy day in September, some of the few guests at the once-thriving Hotel Salinas are a dozen or so federal police sent to the area to protect pipelines from thieves who siphon off gasoline to sell on the black market. Having federales as paying customers is a mixed blessing: The sight of a bunch of guys in the lobby with rifles slung over their shoulders doesn’t exactly help lure tourists.Nowadays any paying customer is welcome here. Poza Rica, a city in the Gulf Coast state of Veracruz, lies on the edge of the vast onshore Chicontepec oil basin. About a decade ago, Petróleos Mexicanos, the state-owned oil giant that has iconic status in Mexico, was investing billions of dollars in Chicontepec. Salinas and other entrepreneurs rushed here to open restaurants, hotels, and oil service businesses.It looked like Poza Rica was going to be a boomtown. But the boom has become a bust. Joblessness is rampant—even some drug cartels that once terrorized the town have gone elsewhere because there’s not enough money to be made.So, like a lot of Mexicans, Salinas, who manages the hotel day to day, feels let down. “The government told businesses to prepare ourselves by creating new infrastructure and services for Pemex,” he says. “That didn’t last, and now a lot of investment has stopped. Many of us in the hotel business are fighting to survive.”The same could be said of Pemex. Ratings companies are sounding the alarm over the world’s most indebted oil company, with one already cutting its bonds to high-yield, high-risk junk. The biggest risk of all is that the state company’s distress will drag down the Mexican economy.Any hope of preventing that and of revitalizing such places as Poza Rica now rests with President Andrés Manuel López Obrador. When he took office in December 2018, one of his signature promises was to return Pemex to its glory days. AMLO, as the president is known, has placed Pemex at the heart of his ambitions to upend three decades of neoliberal policies. So while he’s pledged much-needed investment to revive the company, he’s dialing back moves that had ended Pemex’s monopoly on crude production and provided a whiff of modern management practices where do-little jobs-for-life weren’t uncommon.Pemex is now saddled with a mandate that looks a lot like a job creation program, including the construction of a refinery in AMLO’s home state that most industry analysts say isn’t needed. This populist prescription for saving Pemex, whose debt load is more than $100 billion, is exactly what disturbs ratings companies. The press offices for Pemex and López Obrador didn’t respond to requests for comment.In retrospect it seems clear the president was always headed in this direction. Early in the López Obrador administration, Pemex added the motto “For the Recovery of Sovereignty” to its logo—lest anyone mistake it for a more typical energy producer focused simply on drilling for oil and gas.And that’s where AMLO’s troubles began.QuickTake: How AMLO’s Plans to Transform Mexico Ran Into Reality When he became president, López Obrador had at least appeared to have the bona fides for revitalizing Pemex. As mayor of Mexico City from December 2000 to July 2005, he successfully juggled wildly divergent constituencies. What’s more, he was a child of the oilpatch: He spent his early years in Tepetitán, an off-the-beaten-path village with a couple of wells sunk into the ground.But the Pemex of AMLO’s childhood was vastly more successful than it is today. In 1953, the year he was born, the oil industry was booming in his home state of Tabasco. Nationwide, production had almost doubled over the previous 15 years. By 1968 it had doubled again.There were always concerns that Mexicans at the bottom of society weren’t getting a fair share of oil wealth, however. López Obrador, who’d worked as a bureaucrat and a college professor, latched on to that anger as he began his political career. After losing a controversial 1994 election for the state governorship—his opponent’s campaign spending came under scrutiny—he joined activists who blockaded Pemex wells and rose to prominence when he appeared on television covered in blood following a clash with police.In 2000, when he won Mexico City’s mayoral election, López Obrador positioned himself as a pragmatic leftist. While he expanded social programs for senior citizens, single mothers, and the disabled, he was also willing to work with billionaire Carlos Slim on development projects and former New York Mayor Rudy Giuliani on crime-fighting initiatives.AMLO used the job as a launchpad, running for president in 2006 on a left-wing agenda that included protecting Pemex from what he saw as efforts to privatize the company. He lost to center-right candidate Felipe Calderón by less than 1 percentage point, according to the official count, but claimed fraud and didn’t accept the results. He and his supporters formed a symbolic shadow government and shut down the heart of the capital city with weeks of protests.In the following years, as Calderón took steps toward modernizing Pemex, López Obrador led the resistance, packing arenas with angry citizens for hourslong rallies. He told his followers to close down airports, oil facilities, and highways to publicize their objections to Calderón’s plans. “The country’s oil belongs to the people, even the most humble,” López Obrador told protesters outside Pemex’s Mexico City headquarters in 2008. “We must defend this historic conquest.”As Calderón’s single six-year term was ending in 2012, López Obrador ran again for president. This time he lost by a much wider margin to another center-right politician, Enrique Peña Nieto.Peña Nieto’s administration finally achieved the cherished goal of the Mexican right: opening Mexico’s energy industry to foreign investment. Although the timing wasn’t ideal—the ink on the reforms was barely dry before the 2014-15 oil price crash—Mexican fields were attractive to international players such as BP, Chevron, Exxon Mobil, and Royal Dutch Shell.In the end, Peña Nieto’s government got bogged down in corruption allegations and the public’s perception that the president and his wife, a former telenovela star, were disconnected from the realities of everyday life. That opened up space for López Obrador to run once again as a reformer in the July 2018 presidential election.AMLO’s National Regeneration Movement (Morena) promised something new: a government that would focus on fighting poverty and putting ordinary workers over the entrenched business interests that many believed were coddled by previous administrations. He pledged to revive Pemex, shield it from foreign interference, and make it a company of the people again.At home and abroad, business executives and investors blanched at what they heard; the peso, bonds, and stocks all suffered heavy losses in the lead-up to the vote. But much of the citizenry embraced it, sending AMLO to a resounding victory. In his ascent, pundits inevitably heard echoes of Donald Trump, Brazil’s Jair Bolsonaro, and other unconventional politicians gaining ground around the world.Now, more than a year after the election, the problems plaguing Pemex are coming to a head, and its investors are increasingly restless.Production plummeted to 1.68 million barrels a day on average in the first nine months of 2019, half what it was in 2004, and Mexico’s most lucrative fields are drying up quickly. Investment is desperately needed, but the cash-strapped company dedicated about $2.5 billion to capital expenditures in the first nine months of the year, just 28% of its $9 billion target for the full year. That target was already not even half of Pemex’s capital expenditures during some of Calderón’s years in power.While Pemex is profitable—earnings before interest, tax, depreciation, and amortization in the first nine months of the year reached $17 billion—most of that was wiped out by taxes and duties that totaled $13.9 billion in that span. “The issue is that the government takes all of that away,” says Lucas Aristizabal, Latin America senior director at Fitch Ratings Inc. in Chicago.AMLO’s critics say his government has no realistic strategy to fix what’s wrong. They dismiss the centerpiece of López Obrador’s investment plan for Pemex—an $8 billion refinery in his home state—as a boondoggle, or worse. They say Pemex has no need for it, the business of turning crude into fuels is best left to someone else, and the project will divert attention away from its core business of drilling.Construction hasn’t yet started on the 340,000-barrel-a-day plant, though bulldozers are preparing the land for what’s to come. It will siphon off more than 4 of every 5 pesos in additional funds the government allocated to Pemex from 2020 to 2022 as part of its five-year business plan.Never mind that existing refineries were operating at only 40% of their potential in September because of underinvestment and a lack of light crude for processing, or that the plants lose more money as they produce more, according to analysts. “It’s cheaper for Pemex to buy gasoline [from abroad] rather than refine it in the country,” says Ixchel Castro, an oil and refining markets manager for Latin America at Wood Mackenzie Ltd.Even so, López Obrador’s notion that another refinery will help curtail foreign involvement and influence in Mexico’s oil business resonates with large swaths of the population that have long equated Pemex with national sovereignty. PEMEX grew out of Mexico’s expropriation of foreign companies’ oil interests in 1938, a time when units of Royal Dutch Shell and Standard Oil Co. were dominant players. Mexican schoolchildren learn from their history books that citizens lined up outside the Palacio de Bellas Artes in Mexico City to donate silver, gold, and even chickens to pay for the takeovers. More than 80 years later, the Día de la Expropiación Petrolera is celebrated across the country on March 18, especially in oil regions.López Obrador’s detractors argue that his policies, rather than rescuing Pemex, could push it into insolvency. That would be devastating for the economy and for government revenue. Oil revenue accounted for about 18% of federal government income in the second quarter of 2019, whereas oil and gas contributed just 3.4% of Mexico’s gross domestic product last year, less than half the level of 25 years ago. López Obrador’s budget for next year depends in part on Pemex boosting production by about 16%, a rate of growth unseen in almost four decades.Mexico needs to ditch the “pipe dream” of building refineries and integrate its energy industry with its northern neighbor’s, says James Barrineau, a money manager at Schroders Plc, the third-largest holder of Pemex’s peso-denominated debt. The failure to do so, he says, “is really the core reason why people have been cautious about AMLO.”In June, Fitch Ratings downgraded Pemex’s bonds to junk, citing the company’s falling oil production and ballooning debt, and cut Mexico’s sovereign debt rating, because of the government’s close ties to the company. Moody’s Investors Service Inc. and S&P Global Ratings have raised similar concerns.Swaps traders are paying more to buy insurance against a default, with the cost of five-year contracts up more than 40% since the end of 2017. Bond buyers are demanding more than 4 percentage points of extra yield to hold Pemex’s 10-year notes instead of similar-maturity U.S. Treasuries, almost three times the premium investors get on Mexico sovereigns.López Obrador, meanwhile, has belittled the credit rating companies and ignored their recommendations to plow more funds into Pemex’s oil production and exploration business, sell off non-core assets, and welcome private investment. “As soon as we arrived they started talking about how they were going to lower the rating,” he said at a press conference in August. “I hope they are more careful in their analysis, more professional, more objective.”Recent government measures to shore up Pemex have helped keep the ratings companies at bay. In September the government pumped $5 billion into Pemex to help ease its debt burden, and the company sold $7.5 billion in bonds to refinance short-term debt. Pemex had already received $1.3 billion as part of the budget approved in December 2018. It’s also gotten $1.5 billion in tax breaks and $1.8 billion in assistance with its pension obligations. In the first nine months of 2019, Pemex says, it saved $1.22 billion by reducing fuel theft and an additional $375 million or so by trimming its payroll of 124,000 and interest payments on its debt.All that money isn’t nearly enough to fund Pemex’s needs, according to Andrés Moreno, chief investment officer of Afore Sura, Mexico’s third-largest pension fund, which holds Pemex bonds. He says the company needs $10 billion to $15 billion a year in cash flow to reverse oil production declines, so the government support is just “a plug-in.” “They are removing the emergency for the next two years, but it doesn’t solve anything,” Moreno says. “What is missing in Pemex’s case is awareness of the emergency and willingness to put ideology in a drawer.”As an example of how things could work better, analysts and money managers point to Brazil’s state-controlled oil company, Petróleo Brasileiro SA. To be sure, it’s had plenty of problems of its own, including corruption and an enormous debt load of about $83 billion. But it does some things right: For two decades it’s worked with foreign oil majors to develop vast reserves in deep-water fields off its coasts, allowing it to tap outside expertise as it gained experience in the highly technical drilling required there.López Obrador’s strategy to increase oil production by focusing on onshore and shallow-water fields is shortsighted, according to these analysts and money managers; it also fails to acknowledge the huge promise of Mexico’s deep-water and unconventional acreage, which have much higher production potential but require foreign expertise and private investment.“The current administration has made revamping Pemex—as we call it, ‘making Pemex great again’—a priority,” says Pablo Goldberg, a portfolio manager at BlackRock Inc., which owns Pemex debt. “Eventually, what we need to be seeing is the production capacity of Pemex going up. Some of this financial assistance [from the government] should give Pemex capital to invest. Now we have to see whether it’s well done.”On the outskirts of Poza Rica, dried-up wells stretch into the distance, pockmarking surrounding citrus plantations. Chicontepec is estimated to hold about one-fifth of Mexico’s oil and gas reserves. In the early 2000s—after the gigantic shallow-water field Cantarell, discovered in the 1970s, started to decline at an accelerated pace—government officials promised Chicontepec would be a boon to Mexico’s production.Pemex drilled thousands of wells over the following decade. In 2010 it contracted global firms, including Baker Hughes Co. and Halliburton Co., to develop top-of-the-line production-enhancing techniques at five new field laboratories. That attracted transport and logistics companies, equipment and service providers—all to meet the needs of Pemex and its contractors.The black-gold rush didn’t last long. The drilling proved far more complicated and expensive than Pemex anticipated. At its peak in 2012, Chicontepec contributed fewer than 70,000 of the nation’s 2.5 million barrels in average daily output. The failure cemented Pemex’s reputation for incompetence after executives squandered billions of dollars on it, financed mostly with debt.During Peña Nieto’s administration, Pemex officials acknowledged that Chicontepec was a failure, and the company drastically reduced its investment in the field. Poza Ricans, believing new oil investment was coming their way, supported López Obrador at the ballot box. Pemex’s 2020 budget does call for doubling annual investment in Chicontepec to $319 million. But for the time being, Pemex’s operations in the region have continued their steady decline.Building a refinery in his home state hasn’t helped AMLO’s cause in Poza Rica (population: about 200,000). “It’s disappointing that we voted for him and all the support in the energy sector has gone elsewhere,” says Paola Ostos, operations manager of Poza Rica-based Transervices Energy, which shuttles workers and equipment to oil installations. “As a businesswoman, I feel that we’ve been forgotten. We were the principal oil zone of Mexico for many years, and now all the activity is being concentrated in the south.”Every March 18, Poza Rica still celebrates the Día de la Expropiación Petrolera. But life in the oilpatch isn’t what it used to be. Residents say the festivities—which used to span several days and include a carnival—have lost much of their luster.On the outskirts of Poza Rica at 9:30 a.m. on a late summer’s day, the sun is already turning the sheet-metal homes in squatter communities into ovens. Overhead, plumes from a Pemex processing plant streak the sky. Day after day, the installation burns natural gas that seeps from Pemex’s oil wells.Salvador Reséndiz, president of the Business Coordinating Council for the northern region of Veracruz, says López Obrador promised Poza Rica a new plant during his presidential campaign. Although Pemex’s 2020 business plan includes rehabbing the facility, Reséndiz worries that Poza Rica will be forgotten—and that the refinery in the president’s home state will take precedence.“It’s very clear that in these first three years of the new government, all of the investment in Pemex is going south, south, south,” he says. “When will it come north? When are they going to put money in Poza Rica?” —With Sydney Maki, Eric Martin, and Nacha CattanStillman covers energy. Villamil covers emerging markets. They are based in Mexico City. To contact the authors of this story: Amy Stillman in Mexico City at email@example.comJustin Villamil in Mexico City at firstname.lastname@example.orgTo contact the editor responsible for this story: Stryker McGuire at email@example.com, Brendan WalshFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Oil prices fell on Wednesday and Thursday after Trump backed Hong Kong protesters and Saudi Arabia suggested that OPEC would refuse to deepen production cuts
(Bloomberg) -- President Donald Trump may be withdrawing from the Paris climate agreement, but the U.S. is still going to be a force at the negotiating table as international leaders gather in Madrid next week to map out rules for carbon trading as a way to limit greenhouse gas emissions.Despite Trump’s rejection of the global agreement to cut carbon emissions, U.S. officials have long advocated emissions-trading schemes on the world stage and the government wants a say in the structure of those carbon markets -- a key issue before delegates at the annual United Nations climate summit that begins Monday.The transparency and accountability of such markets is a top priority for the U.S. government and businesses such as airlines and oil companies that may have to offset their own emissions through carbon trading.“Even though one might not care about climate, you don’t want countries to be able to cheat,” said Brad Schallert, deputy director of international climate coordination for the World Wildlife Fund, which supports global action to thwart climate change. “That is something in the long-term interest of the U.S.”The U.S. government is dispatching a small team of career diplomats and officials to the climate talks, largely mirroring the delegation that attended last year’s summit in Poland. They will also be joined by representatives of some businesses and state and local governments.But unlike the past two years, where the Trump administration played a contrarian role and held discussions to promote clean coal, the U.S. is not planning a similar side event in Madrid. And, in another shift, political appointees from the Trump administration also won’t be attending, according to two people familiar with the matter who asked not to be named before a formal announcement.The U.S. team is set to be led by two career officials from the State Department: climate negotiator Kim Carnahan and Marcia Bernicat, a principal deputy assistant secretary, the people said.Secretary of State Michael Pompeo emphasized earlier this month that the U.S. will “continue to offer a realistic and pragmatic model” and highlight the role of innovation and open markets during international climate discussions.While Trump has begun exiting the Paris pact, that withdrawal won’t be official until Nov. 4, 2020 -- the day after the next U.S. presidential election. Other countries still welcome U.S. negotiators in the talks, according to longtime climate summit-goers, because the diplomats bring expertise to the discussions and their participation could help forge rules that would be palatable to the U.S. should a future president seek to change course. Democratic presidential contenders have widely vowed to rejoin the pact.Oil and gas companies that unsuccessfully lobbied the Trump administration to remain in the Paris agreement have a vested interest in the negotiations, said Alden Meyer, director of strategy and policy at the Union of Concerned Scientists. “They are supportive of emissions trading and other mechanisms because in the event there ever is a domestic binding climate regime in the United States, that would give them flexibility to reduce the costs on their own facilities of compliance,” he said.Official negotiations will focus on one of the thorniest aspects of the 2015 Paris agreement: how to use markets to help slash greenhouse gas emissions. In Article 6 of the 2015 pact, countries agreed to create a new system for trading allowances covering greenhouse gases, but negotiators are still haggling over the details.New carbon markets could allow countries to sell emissions credits generated from programs that curb greenhouse gases, such as upgrading the efficiency of industrial plants, paring pollution from air conditioning systems, developing renewable power installations and planting trees.About half of countries in the Paris agreement are counting on such emissions trading to help fulfill their carbon-cutting promises. But environmentalists want to make sure the system isn’t undermined by loopholes and double counting.Many environmental advocacy groups also want to limit credits to projects that wouldn’t have happened otherwise -- responding to a major criticism of an earlier carbon-trading regime that came out of the 1997 Kyoto Protocol. They are fighting a push by Brazil to allow unused credits from the older system to be grandfathered in to the new approach.“The U.S. has been fairly helpful on Article 6, in terms of pushing for robust accounting standards and safeguards against double counting and raising skepticism about the proposal from Brazil,” said Meyer, of the Union of Concerned Scientists. “If we get it right, it can facilitate higher ambition and get us closer to being on track for the Paris temperature goals. If we get it wrong, it can really blow a hole in the integrity of the Paris commitments, and that would be a disaster.”The U.S. government’s active role negotiating international carbon market rules is tethered to a related effort to curb emissions from airlines, said Elliot Diringer, executive vice president of the Center for Climate and Energy Solutions. Even though Trump is withdrawing from the Paris agreement, the U.S. remains part of the International Civil Aviation Organization and supports its plan to offset plane pollution by planting trees, investing in clean energy and taking other steps to curb emissions.The aviation program “is somewhat predicated on the Paris agreement accounting system to guard against double counting reduction units, so the U.S. has an interest in seeing that system put in place,” Diringer said.Continued U.S. involvement at climate talks also reflects the country’s longstanding connection to United Nations action on the issue. The U.S. will retain a seat at the Conference of Parties to the Framework Convention on Climate Change, the underlying 1992 environmental treaty.The official U.S. delegation will be buttressed by scores of other Americans representing local governments, corporations and advocacy groups arguing that the U.S. is still committed to fighting climate change and meeting its Paris agreement pledge to cut carbon dioxide emissions 26% to 28% from 2005 levels by 2025. Panel discussions and other events also are planned to highlight ways businesses and local governments are curbing emissions.Representatives from oil companies Royal Dutch Shell Plc and BP Plc and electric utilities PNM Resources and DTE Energy are set to attend alongside the lieutenant governor of Wisconsin, the mayor of Pittsburgh, Pennsylvania, and other elected officials.Some of the U.S. activities planned in Madrid are supported by Bloomberg Philanthropies and Michael Bloomberg, the founder and majority owner of Bloomberg LP, the parent of Bloomberg News.“Despite what our federal government’s position is on the Paris agreement and climate change more broadly, there’s quite a bit of action going on that is making an impact,” said Elan Strait, director of U.S. climate campaigns for the World Wildlife Fund. “If these actors work together and scale up what they are doing, the U.S. target under Paris is actually within striking distance, and that’s the message they can take to the climate talks.”To contact the reporter on this story: Jennifer A. Dlouhy in Washington at firstname.lastname@example.orgTo contact the editors responsible for this story: Jon Morgan at email@example.com, Elizabeth Wasserman, Justin BlumFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Fires were still burning at a Texas chemical plant after multiple explosions injured three workers and forced residents of Port Neches to evacuate.As of about 6 a.m. local time Thursday, the fire was still burning and the evacuation order remains in place, an officer at Port Neches police department said by phone.The first blast at TPC Group Inc.’s facility on Wednesday morning occurred in the site’s south processing unit at a tank with finished butadiene, the company said on its website. A second explosion about 12 hours later sent flames and debris high into the air. Jefferson County Judge Jeff Branick declared a state of disaster.“It is not clear at this time for how long the plant will be shut down,” TPC Group Inc. said on its website on Wednesday, adding that affected products included both raw materials and processed butadiene and raffinate. The facility about 100 miles (160 kilometers) east of Houston produces more than 16% of North America’s butadiene, and 12% of gasoline additive methyl tert-butyl ether, or MTBE, according to data provider ICIS. Butadiene is used to make synthetic rubber that is used for tires and automobile hoses, according to TPC.Bonds in closely held TPC, which is headquartered in Houston, fell as much as 8% on the news, making them the worst performer among junk-rated securities.The blasts at Port Neches follow a string of similar accidents in Texas this year. An explosion at a chemical plant northeast of Houston in March left one person dead, just two weeks after a blaze at an oil storage facility caused thousands of gallons of petrochemicals to flow into Houston’s shipping channel. Exxon Mobil Corp.’s suburban Houston refining and chemicals complex erupted in flames in July.The Jefferson County evacuation order issued late on Wednesday covered a radius of 4 miles that included parts of Port Neches, Groves, Nederland and Port Arthur.“I don’t think the focus is on putting the fire out, but letting the materials in there burn themselves out and keeping the surrounding tanks cooled with the water being sprayed,” Judge Branick said at a press conference.The Coast Guard said earlier that traffic was moving with restrictions on the Sabine-Neches channel, which links refineries and terminals in Beaumont and Port Arthur with the Gulf of Mexico.TPC said the initial blast injured two employees and one contractor. All three have since been treated and released from medical facilities, Troy Monk, director of health, safety and security at TPC, said at a press conference Wednesday.“You don’t want to be downwind of this,” Monk said. He couldn’t say when the fires would be extinguished, saying the main goal was “fire suppression.”Total SA’s Port Arthur refinery hasn’t been affected by the chemical plant fire, a company spokeswoman said in an email. BASF SE’s steam cracker in Port Arthur and Exxon’s Beaumont refinery also weren’t affected, according to representatives for the companies.Royal Dutch Shell Plc shut the Nederland station on its Zydeco oil pipeline, which pumps crude oil from the Houston area to refineries in Louisiana, a company spokesman said by email.TPC received 11 written notices of emissions violations from September 2014 to August 2019, according to Texas Commission on Environmental Quality records. Three of those were this year and were classified as “moderate” violations. The company also received several high-priority violation notices from the U.S. Environmental Protection Agency.TPC was taken private in a $706 million deal in 2012 by private equity firms First Reserve Corp. and SK Capital Partners, which staved off a rival bid from fuel additives maker Innospec Inc. that was backed by Blackstone Group. The company, formerly known as Texas Petrochemicals Inc., competes with LyondellBasell Industries NV in the butadiene market and is run by former Lyondell senior executive Ed Dineen.“Our hearts go out to them as well,” Port Neches Mayor Glenn Johnson said of TPC at a press conference Wednesday. “We appreciate TPC,” he said twice.Spot butadiene prices in the Gulf region are down 43% this year to 26 cents per pound, according to data from Polymerupdate.com. The decline is due to weak tire demand caused by the slump in global car sales, analysts at Tudor, Pickering, Holt & Co. said in a note Wednesday. Lyondell, which also makes butadiene, may benefit if a significant outage at the TPC plant leads to an increase in prices, the analysts said.Port Neches is a city of about 13,000, halfway between the refining centers of Beaumont and Port Arthur, Texas. Located on the Neches River, the city has long been associated with oil refining and petrochemicals.(Updates with police comment on status of fire in second paragraph, details on location of blast, affected products in third and fourth paragraphs. An earlier version of the story corrected the name of the company.)\--With assistance from Mike Jeffers, Adam Cataldo, Stephen Cunningham, Sheela Tobben, Kriti Gupta, Dan Murtaugh, Bill Lehane and Fred Pals.To contact the reporters on this story: Rachel Adams-Heard in Houston at firstname.lastname@example.org;Catherine Ngai in New York at email@example.comTo contact the editors responsible for this story: Simon Casey at firstname.lastname@example.org, Carlos Caminada, John DeaneFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
ROYAL DUTCH SHELL PLC Notice of Results The Hague, November 27 st - On Thursday January 30 st at 07.00 GMT (08.00 CET and 02.00 EST) Royal Dutch Shell.