Energy Transition: Shell to Slash Oil and Gas Production Cost by Up to 40 Percent

Speaking on the company’s decision, President of Total Refining & Chemicals, Bernard Pinatel said:

“With the industrial repurposing of the Grandpuits refinery into a zero-crude platform focused on energies of the future connected with biomass and the circular economy, Total is demonstrating its commitment to the energy transition and reaffirming its ambition to achieve carbon neutrality in Europe by 2050.”

“Grandpuits will remain a major industrial site drawing on the knowhow and expertise of its teams, and our partner firms will be playing a key role as well.”

The company noted that it “…will carry out this industrial redeployment with no layoffs, with early retirements and internal mobility within the Group’ sites, providing each employee with an appropriate solution.”

Of the 400 jobs at the Grandpuits platform and its associated Gargenville (Yvelines) depot today, 250 will be maintained after the conversion. Furthermore, 15 additional jobs will be created on the Grandpuits site in a packaging unit connected to the bioplastics unit.

“In addition, the work projects generated by this industrial investment of more than €500 million will create up to 1,000 jobs over the three-year period for construction of the new units.

“Total has also carried out a thorough review of the partner companies working on the platform, which amount to the equivalent of 300 full-time jobs. The Group is committed to supporting each partner company during the industrial repurposing of the site. In its new configuration, the Grandpuits platform will continue to prioritize its partner businesses, which will represent the equivalent of 200 full-time jobs.

“Total will, of course, comply with all of its contractual commitments to its customers.

“Total and the Ile-de-France region intend to launch a campaign to attract other industries to the property made available at the Grandpuits site and on industrial estates near the Grandpuits and Gargenville sites,” it added.

In its drive to save cash so it can overhaul its business and focus more on renewable energy and power markets, Royal Dutch Shell is looking to slash the cost of oil and gas production by up to 40 percent, Reuters reports.

According to Reuters, the company’s new cost-cutting review, known internally as Project Reshape and expected to be completed this year, will affect its three main divisions and any savings will come on top of a $4 billion target set in the wake of the COVID-19 crisis. Reducing costs is vital for Shell’s plans to move into the power sector and renewables where margins are relatively low. Competition is also likely to intensify with utilities and rival oil firms including BP and Total all battling for market share as economies around the world go green.

“We had a great model but is it right for the future? There will be differences, this is not just about structure but culture and about the type of company we want to be,” said a senior Shell source, who declined to be named.

Last year, Shell’s overall operating costs came to $38 billion and capital spending totalled $24 billion. Shell is exploring ways to reduce spending on oil and gas production, its largest division known as upstream, by 30% to 40% through cuts in operating costs and capital spending on new projects, two sources involved with the review told Reuters.

Shell now wants to focus its oil and gas production on a few key hubs, including the Gulf of Mexico, Nigeria and the North Sea, the sources said. The company’s integrated gas division, which runs Shell’s liquefied natural gas (LNG) operations as well as some gas production,

is also looking at deep cuts, the sources said.

For downstream, the review is focusing on cutting costs from Shell’s network of 45,000 service stations - the world’s biggest - which is seen as one its “most high-value activities” and is expected to play a pivotal role in the transition, two more sources involved with the review told Reuters.

“We are undergoing a strategic review of the organisation, which intends to ensure we are set up to thrive throughout the energy transition and be a simpler organisation, which is also cost competitive. We are looking at a range of options and scenarios at this time, which are being carefully evaluated,” a spokeswoman for Shell said in a statement.

Shell’s restructuring drive mirrors moves in recent months by European rivals BP and Eni which both plan to reduce their focus on oil and gas in the coming decade and build new low-carbon businesses.

The review, which company sources say is the largest in Shell’s modern history, is expected to be completed by the end of 2020 when Shell wants to announce a major restructuring. It will hold an investor day in February 2021.

Speaking to analysts on July 30, Shell Chief Executive Ben van Beurden said Shell had launched a programme to “redesign” the AngloDutch company.

Low-carbon fuel

Teams in Shell’s three main divisions are also studying how to reshape the business by cutting thousands of jobs and removing management layers both to save money and create a nimbler company as it prepares to restructure, the sources said.

Shell, which had 83,000 employees at the end of 2019, carried out a major cost-cutting drive after its $54 billion acquisition of BG Group 2016, which has helped boost its cash generation significantly in recent years.

Shell’s operating costs, which include production, manufacturing, sales, distribution, administration and research and development expenses, fell by 15%, or roughly $7 billion, between 2014 and 2017.

But the sharp global economic slowdown in the wake of the COVID-19 epidemic coupled with Shell’s plans to slash its carbon emissions to net zero by 2050 have led to the new push.

Shell cut its 2020 capital expenditure plans by $5 billion to $20 billion in the wake of the collapse in oil and gas prices due to the pandemic amid warnings it could have lasting effects on global energy demand.

Van Beurden said in July that Shell was on track to deliver $3 billion to $4 billion in cost savings by the end of March 2021, including through job cuts and suspending bonuses.

He said travel restrictions during the pandemic had accelerated the digitalisation of Shell while machine learning was being rolled out to minimise outages and shorten maintenance time at refineries, oil and gas platforms and LNG plants.

Besides cutting costs at its downstream retail business, Shell is pressing ahead with plans to reduce the number of its oil refineries to 10 from 17 last year. It has already agreed to sell three.

The review of refining operations also includes finding ways to sharply increase the production of lowcarbon fuels such biofuels, chemicals and lubricants. That could be done by using low-carbon raw materials such as cooking oil, one source said.

United Nations Initiative Confirms Eni as Global Compact LEAD Participant By Ikenna Omeje

The United Nations Initiative, on Monday, confirmed Italian energy giant, Eni, as Global Compact LEAD participant for the third year, in a sign of the company’s ongoing commitment to the United Nations Principles for responsible business.

Eni was identified among the most engaged companies to lead a new era of sustainability, at the UN Global Compact special event to mark the opening of the 75th session of the UN General Assembly,

A release by the company recently said: “Eni was identified as being among the most highly-engaged participants of the world’s largest corporate sustainability initiative.”

LEAD is a platform for highlyengaged participants in the UN Global Compact, which is a global movement that supports companies in aligning their strategies and operations with ten universal principles on human rights, labour, environment and anti-corruption; and in taking strategic actions to achieve broader UN goals, such as the UN Sustainable Development Goals.

Speaking on the recognition, the release quoted Eni’s Chief Executive Officer, Claudio Descalzi as saying: “This recognition confirms our efforts on sustainability and further reinforces our long-term vision, strongly oriented towards creating value for and in partnership with our stakeholders – from international organisations to the civil society, from investors to the communities where we operate – combining environment, social, and economic sustainability. Our commitment must be even stronger today, at a time of global transformation, as only through international and multilateral cooperation, can we build a sustainable future.”

The release explained: “Eni has demonstrated its commitment to the UN Global Compact this year by participating in Action Platforms on Reporting on the SDGs and Financial Innovation for the SDGs. Each UN Global Compact Action Platform convenes business, Global Compact Local Networks, leading experts, civil society, Governments and UN partners to solve complex and interconnected issues and innovate around the Sustainable Development Goals.

“In line with these commitments, Claudio Descalzi has also signed the UN Statement from Business Leaders for Renewed Global Cooperation, committing to invest in addressing systemic inequalities and injustices through inclusive, participatory and representative decision-making at all levels of the business, as well as to strengthen access to justice, ensure transparency and respect for human rights. The statement

P&ID: UK Court Orders Release of $200m Guarantee to Nigeria

also calls on Governments to enhance multilateralism and global governance to fight corruption, build resilience and achieve the SDGs.

“Finally, Eni is among the signatories of the CFO Principles on Integrated SDG Investments and Finance. The principles, announced on the margins of the UN General Assembly and signed by Eni’s Chief Financial Officer Francesco Gattei, aim to emphasize the role that businesses and CFOs can play in contributing towards financing the SDGs.

The principles, developed in the framework of the CFO Taskforce for the SDGs created by the UN Global Compact, seek to guide companies in aligning their sustainability commitments with credible corporate finance strategies to create real-world impact on the SDGs. The goal is to work with the investment value chain, including investors, banks, development finance institutions, credit ratings agencies and sustainability assessment firms to create a broad, liquid and efficient market for SDG investments and capital flows.”

ALondon Commercial Court Tuesday, September 29, 2020, ordered the release of the $200million guarantee put in place as security for the stay of execution granted Nigeria for the appeal filed against the judgment of Justice Christopher Butcher for the execution of the Arbitral award of $10 billion in favour of Process & Industrial Development (P&ID), a firm based in the British Virgin Islands.

P&ID had sought to increase the security to $400 million, but the court presided over by Sir Ross Cranston rejected the request and ordered cost of £70,000 against P&ID. The court had earlier in the month of September granted another cost of £1.5million against P&ID. Commenting on the outcome, the Governor of the Central Bank of Nigeria, Godwin Emefiele, said:

“Due to the substantial evidence of prima facie fraud established before the Court, we are pleased that the Judge has agreed to release the guarantee. We are also pleased that the Court has rejected P&ID’s application to increase the guarantee, which was clearly intended to be a diversionary tactic and entirely misconceived. This release which is an accretion into the reserves will further enhance the nation’s management of the exchange rate of its domestic currency, the Naira.

“This is a further and significant victory for Nigeria in our ongoing fight to overturn the US$10 billion award procured through fraud and corruption by P&ID and former government officials.

“P&ID and its backers, Lismore Capital and VR Advisory, are increasingly seeing their case slip between their fingers. They continue to resort to employing delay tactics, disseminating

By Ikenna Omeje

The Department of Petroleum Resources (DPR) has affirmed the suitability of the 5,000 barrels per day (bpd) Waltersmith Modular Refinery project for refining operations, after paying UK regarding the case in an effort

misleading claims, and taking every step to obstruct our investigations across multiple jurisdictions.

“The FRN will not rest until we secure justice for the people of which would make it easier for P&ID

Nigeria – no matter how long it takes. Investigations are ongoing, and we are confident that more of the truth will be revealed over the coming months.”

On January 31, 2017, an arbitration tribunal had ruled that Nigeria should pay P&ID, the sum of $6.6 billion as damages and breach of contract after a 2010 deal for a gas project in the Niger Delta part of Nigeria collapsed. The pre and post judgement accrued interest of 7 percent has seen the amount standing against Nigeria, rise the extension of time to challenge the

to almost $10 billion, an amount that will be a serious dent on the country’s external reserve.

Nigeria has moved to upturn the judgement, alleging corruption in the said was awarded on illegal terms. In September 2019, a high power delegation from Nigeria was in the to present a proper case for Nigeria.

The country in September successfully sought the right to appeal an August ruling that would have converted the arbitration award to a judgment, to seize its assets.

Justice Cranston J. of United Kingdom High Court had on September 10, 2020 ordered P&ID to make an interim payment of more than £1.5 million to the federal government within 21 days.

The £1.5 million was to cover legal costs the federal government incurred as part of its successful application for arbitration award and procedural hearing earlier in the year.

DPR Pays Pre-Commissioning Visit to Waltersmith, Confirms Suitability of Refinery to Commence Operations

award of the contract, which it also

“We can confirm that the refinery is very much ready to commence operations. We have seen all the preparations. To us, the plant is alive. The commissioning is just symbolic. Everywhere is ready to start off. My overall assessment is

excellent.”

a pre-commissioning visit to the project site located at Ibigwe, Imo State. The Director of DPR, Sarki Auwalu, who said that the purpose of the visit was to make sure that the refinery is ready to start operations said: “We have been to other modular refineries but we have not seen anything like this: the space, the way it is arranged and the way it will work”, Auwalu added.

Explaining the role the agency is playing to promote businesses, the DPR director said that people should start seeing the department as an enabler and not a regulator as their focus is on how to create opportunities on how Nigeria’s vast oil and gas resources are managed for the betterment of Nigerians. “The role we play is to enable businesses and create opportunities. When DPR issues you a license, it enables you to invest and as a result, that opportunity we create, that business is enabled”, Auwalu said.

According to Auwalu, “Waltersmith is one of our success stories. We consider the project as ours. We have been tracking their growth and we are happy to see that our child is growing. It is our plan that they expand and they have the potential”.

In his remarks, Chairman of Waltersmith Refining and Petrochemical Company Abdulrasaq Isah, said: “What you see here is have in our country. We want to demonstrate that it is practically a waste of resources to produce crude oil and just sell it. It is more impactful to add value and make more significant impact on the GDP of our nation”,

“This is the first phase of a series of refinery development which will culminate in the delivery of up to 50,000bpd refining capacity that will expand the product slate to include PMS, LPG and Aviation fuel”, Isah said adding that the expansion plan consists of 20,000bpd crude oil refinery and a standalone 25,000bpd condensate refinery both of which are at early stages of project development.”

Speaking on the sustainability of the refinery project, Managing Director/ a proof of the absolute faith we Arbitration Cost

Daniel Terungwa

government from any liability, maintaining that Nigeria did not breach any of its obligations in the contract agreement with Interocean Development Company and Interocean Oil Exploration Company. In a statement by Dr Umar Gwandu, the media aide to the Attorney General of the Federation (AGF) and Minister of Justice, Mr Abubakar through their legal team, led these arbitral proceedings which According to the statement, the Chief Executive of Waltersmith, Chikezie Nwosu said that domestic consumption is more sustainable that crude export.

“With export, there are things you do not have control over and for every dollar you gain by exporting crude oil as a commodity, you gain multiples of those dollars in terms of GDP growth by consuming the energy within the economy”, Nwosu said.

The 5,000bpd modular refinery, scheduled for official commissioning on October 26, 2020, has a crude oil storage capacity of 60,000 barrels and is projected to deliver over 271 million liters per year of refined petroleum products comprising of Diesel, Kerosene, Naphtha and Heavy Fuel Oils to the domestic market. The bulk of the crude supply for this phase will come from Waltersmith’s upstream business with backup from nearby third-party crude.

Waltersmith Refining and Petrochemical Company obtained License to Establish from DPR in June 2015 and obtained Authority to construct in March 2017.

The company partnered with Nigerian Content Development and Monitoring Board (NCDMB) who are 30 per cent equity holders while the Africa Finance Corporation (AFC) committed significant financing to the project.

The company signed an EPC contract in June 2018 with a consortium of

US Tribunal Orders Inter Ocean Oil to pay FG $660,000

Abubakar Malami,

The United States-based International Centre for Settlement of Investment Dispute has ordered Inter Ocean Oil Company to pay the federal government of Nigeria the sum of $660,129.87 as reimbursement of its share of the arbitration costs incurred in the proceedings.

The tribunal, headed by Prof. William Park, also absolved the federal Malami, the oil companies by Mr Olasupo Shasore (SAN), had requested, among others, relief from the tribunal directing the Federal Government of Nigeria, its relevant privies and instrumentalities to pay aggravated damages in an amount to be proven during the claimants estimate at being in excess of $ 1.5 billion.

Vfuels and Lambert Electromec. tribunal in its judgment delivered

Wednesday, held that the federal government has not breached its obligations towards the claimants under Nigerian law or under international law.

“The tribunal finds no liability on the part of respondent in connection with claimants’ loss of control over their investment, Pan Ocean,” the judgment reads in part.

Malami, in a remark, described the judgment as an addition to the multiple success stories recorded in international litigations by the Federal Ministry of Justice.

“Gone was such an era of connivance to deprive the nation of its resources for gratifying ulterior motives of vested interest at the expense of the Nigeria populace,” he said.