Shell News - 2007

News summaries from company press releases and from unaffiliated news agencies are provided below. The summaries are sorted by month and are further categorized as upstream news, downstream news, and business/finance news.

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January

• Upstream news:

• Downstream news:

­- As part of an ongoing strategy of active investment and portfolio management, Royal Dutch Shell has announced a strategic review of a number of refining and petrochemicals feedstock assets. This review will include, amongst other assets, Petit-Couronne and Reichstett-Vendenheim refineries and the Berre-l'Etang refinery site complex in France, with a combined capacity of around 300,000 barrels per day (Shell share 100%), and the Yabucoa petrochemical feedstock plant in Puerto Rico, which has a capacity of 79,000 barrels per day of fuels and ethylene feedstock (Shell share 100%). Shell has previously announced that is also reviewing its portfolio in the Dominican Republic, where the Company has an interest in the 30,000 barrels per day Refidomsa refinery and storage terminal. ­

- Shell Oil Products US announced that it has signed agreements to sell its Los Angeles Refinery, Wilmington Products Terminal and approximately 250 retail sites and supply agreements in and around Los Angeles and San Diego to Tesoro Corporation. The proposed sale is part of Shell’s previously announced ongoing strategy to streamline and concentrate its Downstream portfolio. The transaction is expected to close in mid-year 2007, assuming all regulatory approvals are obtained and other conditions to closing are satisfied. The Los Angeles Refinery, which began operations in 1923 as California Petroleum Corp, has a crude throughput capacity of approximately 97,500 barrels per day. Shell acquired an ownership interest through a joint venture in 1998 and became sole owner in 2002. ­

- Royal Dutch Shell said on Monday that it would sell its Los Angeles refinery and related assets to the Tesoro Corporation. Separately, Tesoro said the purchase price was $1.63 billion, plus the value of oil inventory at closing. The chief executive, Bruce A. Smith, said the purchase would give Tesoro earnings growth even as it faces flatter gasoline margins. The deal includes 250 service stations in and around Los Angeles and San Diego as well as supply agreements. Tesoro expects to complete the deal in the second quarter of 2007. The agreement follows Shell’s decision to sell its three French refineries and a refinery in the Dominican Republic. The market for refineries has been strong in the last two years — after two tough decades for the industry — as refining margins improved. Other major oil companies, including BP and Chevron, are also shedding refineries, a move that analysts interpret as a sign they think the “golden age of refining” of the last two years is coming to an end.

• Business/Finance news: ­

- President Nursultan A. Nazarbayev appointed another loyalist, Karim Masimov, as prime minister, to replace Daniyal Akhmetov, who resigned. Mr. Masimov, a deputy prime minister and economist who has studied in the United States, promised continuity for his former Soviet state, where world powers are competing for access to huge energy reserves. His moves will also be closely watched by Western oil giants like Chevron, Eni and Shell, which have invested billions of dollars in Kazakh energy projects. ­

- On Thursday 18th January, Shell is holding a webcast on the announcement of the Shell Technology Report featuring Jan van der Eijk Group Chief Technology Officer, Shell International B.V. The report gives an overview of 27 advanced technologies, some delivering benefits today and others, in advanced R&D, that will shape the future of the energy industry. A question and answer session will follow an introductory presentation. ­

- Royal Dutch Shell plc (‘Shell’) issues its first Technology Report: an overview of 27 advanced technologies, some delivering benefits today and others that will shape the future of the energy industry. The Shell Technology Report shows how the company is developing and applying technology to meet the tremendous challenge of securing the world’s growing energy needs in an environmentally responsible way. Shell has been at the forefront of innovation for over 100 years. The launch of the Murex, the world’s first seagoing tanker, revolutionised oil product transport in 1892 and helped establish Shell as a major force in the industry. A succession of advances has followed – right up to the present day. The Shell Technology Report provides clear descriptions of some of the company’s most innovative and promising technologies such as Smart Fields® technology - integrating the latest digital technology to boost production – which will play a key role in Shell’s future plans. The report shows how Shell is working to provide clean, secure energy, highlighting our expertise in liquefied natural gas (LNG), clean coal technology, Gas to Liquids (GTL) Fuel and deep water drilling. It also explores new horizons including offshore wind, cleaner diesel and other biofuels, and our projects to capture and store carbon dioxide. ­

- Royal Dutch Shell plc (the 'Group') announced that it has reached agreement with and obtained the unanimous recommendation of the Special Committee and Board of Directors of Shell Canada Limited on a revised offer (the 'Offer') to acquire all of the outstanding common shares of Shell Canada Limited (Toronto Stock Exchange, ticker symbol SHC) not owned by the Group at a cash price of C$45 per share. This Offer would value Shell Canada Limited's fully diluted minority share capital at approximately C$8.7 billion. The Group owns a 78% stake in Shell Canada Limited. The Group intends to proceed with the Offer by way of a take-over bid by Shell Investments Limited, a wholly owned subsidiary of the Group. A copy of the take-over bid circular will be mailed to all shareholders of Shell Canada Limited early next month. The circular will contain the formal valuation of the common shares carried out by the independent valuator. The Offer , once launched, will be open for a minimum bid period of not less than 35 days. The Offer will be conditional on more than 50 (fifty) percent of the outstanding shares (calculated on a fully diluted basis) held by the minority shareholders of Shell Canada Limited being tendered as well as other customary conditions, including the absence of any material adverse change, the obtaining of any relevant regulatory approvals and the absence of any adverse litigation, proceeding or legal prohibition in respect of the Offer. ­

- After an earlier offer received a cool reception from minority shareholders, Royal Dutch Shell increased its bid for the portion of Shell Canada it does not own to 45 Canadian dollars ($38.10) a share from 40 Canadian dollars. The new offer values the 22 percent of Shell Canada not held by the parent company at 8.7 billion Canadian dollars ($7.4 billion). About 150,000 barrels of Shell Canada's daily production of 230,000 barrels comes from oil sands projects in Alberta rather than conventional sources. When it made its opening bid in October, Royal Dutch Shell said that full control of Shell Canada would allow it to increase its reported reserves. An accounting problem forced the parent company to lower its reserve levels in 2004. The higher bid still may face difficulty since some Canadian fund managers have said recently that they are looking for a price near 50 Canadian dollars a share.

February

• Upstream news:

• Downstream news: ­

- Sakhalin Energy Investment Company Ltd. yesterday signed a binding Heads of Agreement (HoA) for long term supply of liquefied natural gas (LNG) to Japan. This deal with Japan’s fourth largest LNG buyer - Osaka Gas - represents the latest and last agreement for term sales of LNG from Trains 1 and 2 of Russia’s first LNG plant. Sales of 98% of the combined future capacity of these two trains are now formalised, effectively selling-out the entire capacity of the foundation project. ­

- One worker was critically burned on his hands and face and three others were injured in a flash electrical fire at the Shell refinery in Wilmington. The incident occurred about 2:30 p.m. while the four were working on a 2,300-volt electrical panel. Firefighters called to the scene at 2101 E. Pacific Coast Highway. were initially told that one of the men had been electrocuted. Melissa Kelley, a spokeswoman for the Los Angeles Fire Department, said there was no actual fire but rather a flash of light and heat. Besides the critically burned employee, another was seriously hurt in the electrical fire. Two others were treated for minor injuries, Kelley said. ­

- A malfunctioning microwave ignited a fire at a gas station over the weekend that caused more than $1 million in damage, authorities said Monday. The fire at a Shell station in the 1200 block of North Rose Drive erupted about 11:20 p.m. Sunday and had consumed most of the building before firefighters arrived, said Capt. Stephen Miller of the Orange County Fire Authority. The station's underground gas tanks were not harmed in the blaze and no injuries were reported, Miller said. ­

- His Highness Sheikh Tamim Bin Hamad Al-Thani, Heir Apparent of the State of Qatar, laid the foundation stone for the Pearl Gas to Liquids (GTL) project, a world-scale integrated project that will make Qatar the GTL capital of the world. Pearl GTL is not only the world’s largest integrated GTL project, but also the largest energy project ever launched within the borders of Qatar. The ceremony at Ras Laffan Industrial City was attended by dignitaries including His Royal Highness The Prince of Wales, the Chief Executive of Royal Dutch Shell plc, Jeroen van der Veer, and visitors from Qatar and abroad. The Pearl GTL project is being developed under a Development and Production Sharing Agreement with the government of the State of Qatar. The agreement covers offshore and onshore project development and operations, with Shell providing 100 per cent of project funding. Upstream some 1.6 billion cubic feet of wellhead gas will be produced, transported and processed per day to produce 120,000 barrels of oil equivalent per day of condensate, liquefied petroleum gas and ethane. Downstream dry gas will be used as feedstock to produce 140,000 barrels per day of clean, high quality GTL fuels and products. The Pearl GTL project is expected to produce some 3 billion barrels of oil equivalent wellhead gas over the period of the Development and Production Sharing Agreement. A total of $10 billion of contracts have already been awarded for the project, including all major engineering, procurement and construction contracts. Construction began in the third quarter of 2006.

• Business/Finance news: ­

- Royal Dutch Shell plc released its 4th quarter and full year results and 4th quarter interim dividend announcement for 2006 at 07:00 GMT (08:00 CET and 02:00 EST) on Thursday February 1st, 2007. • Royal Dutch Shell’s fourth quarter 2006 CCS earnings were $6.0 billion, compared to $5.4 billion a year ago. CCS earnings per share increased by 14% versus the same quarter a year ago. • Full year 2006 CCS earnings were $25.4 billion. Excluding the 2005 gain of $1.7 billion related to the divestment of pipeline assets held through Gasunie NV in the Netherlands, full year 2006 CCS earnings per share increased by 25% versus a year ago. • Fourth quarter 2006 dividend has been announced of €0.25 per share, an increase of 9% from year-ago levels. • From 2007 onwards the Group will declare its dividends in US dollars rather than in euros. The first quarter 2007 dividend is expected to be declared at $0.36 per share, an increase of 14% compared to the first quarter dividend of 2006. • $1.4 billion or 0.6% of Royal Dutch Shell shares were bought back for cancellation during the quarter bringing the total for 2006 to $8.2 billion or 3.7% of the shares. ­

- In charting the oil market, profits are up but outrage is flat. Exxon Mobil Corp. posted 2006 profit of $39.5 billion — the largest ever recorded by a public company. Oil giant Royal Dutch Shell and U.S. refining heavyweight Valero Energy Corp. also registered record-high profits for the year, part of a string of superlative results that is expected to continue when Chevron Corp. releases its earnings today. The hefty profits got a predictable rise out of U.S. politicians and the industry's most-devoted critics. But lower gasoline prices seem to have sapped the anger that kept lawmakers and consumers worked up for much of the last two years. Albert Garcia, filling up Thursday at an Exxon station on Olympic Boulevard in Los Angeles, shrugged when he heard about the latest run of oil company profits. Knowing that the earnings would spark a fresh round of criticism, Exxon spokesman Ken Cohen urged reporters to keep things in perspective. Crude closed at $57.30 a barrel, a decline of 6% since the end of 2006 and 14% from a year ago. Gasoline prices have been ebbing in the wake of oil's slide. Consumer advocates stressed that although motorists appeared to be protesting with less vigor, they weren't indifferent to today's prices, which remain well above recent norms. A little more than a year ago, after hurricane-related disruptions sent gasoline prices soaring above $3 a gallon for the first time, the public outcry culminated in a series of congressional hearings, including a November session in which the chief executives of Exxon and its brethren were grilled under oath about what legislators saw as a connection between high pump prices and record profits. There are no plans for a similar hearing in the new Congress. But Rep. Edward J. Markey (D-Mass.) lashed out at Exxon, calling the company's profit "outlandish" and vowing to promote legislation that would "put helping American consumers ahead of further lining Big Oil's pockets." Already, federal lawmakers have advanced bills that would roll back recent oil industry tax breaks and close a loophole that allowed oil companies to pay the government unusually low royalties on some offshore leases. The lofty cost of oil and fuel boosted the fortunes of Exxon and other oil companies in the first nine months of 2006, and those profits were strong enough to offset a fourth-quarter dip when prices reversed course. Irving, Texas-based Exxon's net income for the fourth quarter fell to $10.25 billion, or $1.76 a share, down 4% from profit of $10.7 billion, or $1.71, in the year-ago quarter. During the final three months of the year, income fell nearly 12% at Exxon's flagship business of exploring for and selling oil and natural gas, and earnings dropped 18% at the company's refining and marketing operations. Revenue for the three months that ended Dec. 31 totaled $90 billion, down more than 9%. The company's full-year profit of $39.5 billion easily surpassed Exxon's 2005 net income of $36.1 billion, a record at the time. Sales rose nearly 2% to a record $377.6 billion in 2006. Total production for the year increased 4%. ­

- As part of his annual strategy update, Chief Executive Jeroen van der Veer said "We have made solid progress with our strategy and portfolio development in 2006. I expect reserves replacement including oil sands to be some 150%*. In addition, our exploration and business development activities upstream have added well over 2 billion barrels oil equivalent of new conventional resources, for the second successive year. In Downstream, we have added to our growth portfolio, especially in China.” ­

- Oil prices have fallen, but Exxon Mobil and Royal Dutch Shell left their smaller competitors in the dust and reported record annual profits. By making $180 million a day between them, the two largest publicly traded oil companies displayed their ability to ramp up production worldwide. ­

- Royal Dutch Shell plc (the "Group") announced that it has filed its formal offer to acquire all the issued and outstanding common shares of Shell Canada Limited ("Shell Canada") other than common shares already held by the Group or its affiliates, with securities regulators in Canada, and has mailed its offering circular and related documents to Shell Canada shareholders. ­

- With dwindling oil supplies, pollution concerns and the ever-present threat of gas prices soaring again, talk of new and better ways to fuel our cars, heat and cool our homes and power our factories has never been greater. What's more, the conversation is emanating increasingly from a source that's been surprisingly quiet until recently — the oil companies themselves. When some of the industry's top executives gather in Houston this week to discuss global energy challenges, finding new and more effective ways to produce oil and gas — as well as alternatives to fossil fuels — will dominate the discussion. And, as the year progresses, expect to see industry leaders speaking in cities across America in an unprecedented campaign to educate the public on energy-related issues and discuss such topics as ethanol and renewable fuels. It's also an opportunity for the companies to polish their images. Why now? The reasons are varied, but increased public and congressional scrutiny of oil companies because of up-and-down gasoline prices and record profits certainly is a factor. The companies' own bottom lines also play a key role: The cost of finding and tapping new oil and gas reserves is on the rise while the worldwide appetite for energy is only getting bigger. At CERA's annual weeklong conference that begins today, dozens of the industry's heaviest hitters — including the chairmen of Exxon Mobil Corp. and Chevron Corp. and a top official of the Organization of the Petroleum Exporting Countries — will discuss topics such as supply and demand and initiatives to develop new sources of energy. Already, the discourse is in full swing across the country, led by some unlikely figures. John Hofmeister, head of Royal Dutch Shell's U.S. arm, and James Mulva, ConocoPhillips' chairman and CEO, are taking part in separate speaking tours with other representatives of their companies, talking and listening at town hall meetings in such places as Edwardsville, Ill., and Little Rock, Ark. Outlining his company's 35-city tour recently, Mulva acknowledged that he and others have traditionally done a poor job of conveying to the public how their businesses operate, the challenges they face and the advances they're making. Often, the public's main connection with oil companies comes from filling up cars at the gas station or, recently, reading headlines of record profits. For example, Exxon Mobil this month shattered its own record for the largest annual profit by any public company, bringing in $39.5 billion. And ConocoPhillips reported its best-ever full-year earnings, $15.5 billion for 2006. But what is generally unknown, Mulva said, is that U.S. oil companies have invested $11 billion in North America on renewable and other forms of energy in the last five years. The task of weaning Americans and the rest of the world off fossil fuels will be monumental and lengthy. Renewable energy sources such as wind and solar supply only about 6% of the U.S.' energy needs, according to the U.S. Energy Information Administration. That figure is expected to grow only to about 7% in the next 20 years, the agency forecasts, meaning fossil fuels will still carry the bulk of the load. Mulva said all types of efficient energy sources are needed, but market forces and consumer preferences, not federal mandates, should determine how they're used. He called President Bush's proposal for expanding ethanol use to reduce gas consumption "very well motivated" but said industry leaders "want a seat at the table" when government officials set standards for the use and development of alternative energy sources. Oil companies already are investing heavily in alternatives and new ways to get oil and gas out of the ground. BP, which earned $22 billion in 2006, plans to spend $8 billion over the next decade developing alternative energy using wind, hydrogen and other means. Shell is testing technology that involves drilling holes in fields and inserting electric heaters to gradually heat rock, causing the trapped organic matter — kerogen, in this case — to be released as oil and gas. Yergin said another clear indication of the rising interest in cleaner and more efficient energy is growing investment by venture capitalists. Last year, venture capital investments in industrial and energy deals more than doubled from the year before to $1.8 billion, according to data from Thomson Financial, the National Venture Capital Assn. and PricewaterhouseCoopers. About 40% of that money was earmarked for alternative energy. ­

- On Wednesday 21st February, Shell is holding a webcast on the subject: “Carbon Management Technologies” featuring Graeme Sweeney, Executive Vice President, Shell Renewables, Hydrogen, CO2 and Power. A question and answer session will follow an introductory presentation. ­

- If gasoline prices have you muttering curses at OPEC during each fill-up, maybe you should just say nyet. With global oil output barely covering demand, Russia and other countries outside the Organization of the Petroleum Exporting Countries are wielding more sway. They're affecting the price of oil and everything made from it. Indeed, when world energy leaders gathered in Houston last week to dissect industry issues, their remarks were translated from English into only two other languages — Russian and Chinese. With substantial oil and the world's largest natural gas reserves, Russia has seen its significance grow on the world energy stage. Russia and Qatar, which together hold more than 40% of the world's natural gas reserves, recently agreed to discuss forming a natural gas producers' group akin to OPEC. The suggested gas cartel has picked up a nickname — "GasPEC" — and the displeasure of U.S. officials. The country's trading partners, particularly European nations, have grown increasingly wary amid moves by the Kremlin to use its supplies for political leverage. An Energy Department report described it as "an inclination to advance the state's influence in the energy sector, not to reduce it." Critics cite the Kremlin's efforts to gain more control over oil and natural gas projects that involve major outside oil companies, such as Exxon Mobil Corp. and Royal Dutch Shell. They also point to a January dispute between Russia and Belarus over oil taxes that led to a cutoff in the flow of crude oil through a pipeline serving European customers. And a year earlier, natural gas producer OAO Gazprom cut off supplies to Ukraine because the two nations couldn't agree on price — a disruption that also affected exports to Europe. Curtailing a large share of its massive oil and natural gas exports, however, is a threat Russia couldn't afford to carry out, Herold said. Tax receipts from oil and natural gas sales fund about half of Russia's annual budget, she added. In a speech during the Houston event, Bodman chided nations that have used their resource clout to radically change — or cancel — long-term deals with foreign oil companies. Although he did not name the countries, it was an apparent reference to actions by Russia, Venezuela, Ecuador and others. In a speech at the same event, Andrei Reus, Russia's deputy minister of industry and energy, decried the mood of distrust that has begun to color worldwide oil and gas markets. China has become a force in world energy markets because of the country's fast-growing demand for oil and natural gas. The country's rapid rise in energy consumption is closely watched by commodities traders, and other nations have begun to fret that China's drive to secure supplies will keep prices high and make imports harder to come by.

March

• Upstream news: ­

- PetroChina Company Ltd. (PetroChina) and Shell China Exploration and Production Ltd. (Shell) announced today the start of commercial production and gas delivery from the Changbei gas field. PetroChina and Shell are jointly developing the field under a Production Sharing Contract, with Shell currently being the field development operator. Located on the edge of the Maowusu desert in the Ordos Basin of Shaanxi Province and Inner Mongolia Autonomous Region, it is the largest onshore upstream cooperative development Shell has had in China. As Changbei goes into commercial production, it will provide natural gas to the markets of Beijing, Tianjin, Shandong and Hebei. It is expected that production will rise to the planned plateau rate of 3 billion cubic metres/yr during 2008. To attain these levels of production from the relatively difficult Changbei reservoir, Shell is applying its global technical expertise, most particularly through the use of the long multi-lateral horizontal wells.

- ­On Wednesday 28th March, Shell held a webcast on the subject “Smart Fields® technology – pushing for increased oil recovery” featuring Jaap van Ballegooijen, Smart Fields Programme Manager, and the inspiration behind the newly launched smart wells brand video. An introductory presentation was followed by a question and answer session. With the vast majority of easy oil now gone, technological advancement and leadership is key. Shell Smart Fields technology is a new way of applying several technologies in “real time” to enable the remote management and monitoring of fields and reservoirs. The application of Smart Fields technology has enabled Shell to unlock difficult resources in areas such as Brunei that were not previously economically viable. Jaap van Ballegooijen will discuss the company’s development of Smart Fields technology and draw upon examples of where Shell is utilising this to help extract oil from difficult geologies without damaging or disrupting the local environment and ecosystems.

• Downstream news:

­- Shell Gas (LPG) Holdings B.V. (Shell) announced that it had signed sale and purchase agreements with Rubis for the sale of its Liquefied Petroleum Gas (LPG) businesses in Bulgaria, the Czech Republic, Germany, Romania, Spain, and Switzerland. The deal in Romania is subject to the pre-emption and prior approval rights of Shell's existing partners in Romania. ­

- Shell International Petroleum Company Ltd (Shell) and OJSC Alliance Group (Alliance) announce a commitment to establishing a joint venture to operate a network of more than 150 Shell-branded retail sites in the Ukraine. This deal will provide Ukrainian customers with access to high quality fuels at competitive prices and with an emphasis on customer service.

• Business/Finance news: ­

- Royal Dutch Shell plc launched a new global marketing campaign featuring a series of long format dramatised films that show how Shell people contribute to a responsible energy future by solving complex technical challenges. The integrated campaign uses an innovative mix of media. The films will be shown in cinemas, online, via interactive TV and on DVDs distributed as inserts in print media. Eye-catching print advertising will highlight specific projects that demonstrate the Shell culture of innovation. ­

- The Board of Royal Dutch Shell plc announce the intended election of Mr Rijkman Groenink to replace Mr Aarnout Loudon, who will be retiring as a Non-Executive Director of the Company following the Annual General Meeting of Shareholders on 15 May 2007. The Board will propose to the Annual General Meeting that Mr Rijkman Groenink (57) be appointed as a Non-Executive Director with effect from 16 May 2007. Rijkman Groenink has been serving as the Chairman of the Managing Board of ABN AMRO Bank since May 2000. He joined AMRO Bank in 1974 and was appointed to the Managing Board in 1988. Following the merger of ABN and AMRO Bank in 1990, he was appointed to the Managing Board of ABN AMRO, where he led and was responsible for Global Clients in the Investment Banking division and later for the Netherlands division. ­

- Today, more than three-quarters of the world’s oil is owned and controlled by governments. It wasn’t always this way. Until about 35 years ago, the world’s oil was largely in the hands of seven corporations based in the United States and Europe. Those seven have since merged into four: ExxonMobil, Chevron, Shell and BP. They are among the world’s largest and most powerful financial empires. But ever since they lost their exclusive control of the oil to the governments, the companies have been trying to get it back. Iraq’s oil reserves — thought to be the second largest in the world — have always been high on the corporate wish list. In 1998, Kenneth Derr, then chief executive of Chevron, told a San Francisco audience, “Iraq possesses huge reserves of oil and gas — reserves I’d love Chevron to have access to.” A new oil law set to go before the Iraqi Parliament this month would, if passed, go a long way toward helping the oil companies achieve their goal. The Iraq hydrocarbon law would take the majority of Iraq’s oil out of the exclusive hands of the Iraqi government and open it to international oil companies for a generation or more. In March 2001, the National Energy Policy Development Group (better known as Vice President Dick Cheney’s energy task force), which included executives of America’s largest energy companies, recommended that the United States government support initiatives by Middle Eastern countries “to open up areas of their energy sectors to foreign investment.” One invasion and a great deal of political engineering by the Bush administration later, this is exactly what the proposed Iraq oil law would achieve. It does so to the benefit of the companies, but to the great detriment of Iraq’s economy, democracy and sovereignty. Since the invasion of Iraq, the Bush administration has been aggressive in shepherding the oil law toward passage. It is one of the president’s benchmarks for the government of Prime Minister Nuri Kamal al-Maliki, a fact that Mr. Bush, Secretary of State Condoleezza Rice, Gen. William Casey, Ambassador Zalmay Khalilzad and other administration officials are publicly emphasizing with increasing urgency. The administration has highlighted the law’s revenue sharing plan, under which the central government would distribute oil revenues throughout the nation on a per capita basis. But the benefits of this excellent proposal are radically undercut by the law’s many other provisions — these allow much (if not most) of Iraq’s oil revenues to flow out of the country and into the pockets of international oil companies. The law would transform Iraq’s oil industry from a nationalized model closed to American oil companies except for limited (although highly lucrative) marketing contracts, into a commercial industry, all-but-privatized, that is fully open to all international oil companies. The Iraq National Oil Company would have exclusive control of just 17 of Iraq’s 80 known oil fields, leaving two-thirds of known — and all of its as yet undiscovered — fields open to foreign control. The foreign companies would not have to invest their earnings in the Iraqi economy, partner with Iraqi companies, hire Iraqi workers or share new technologies. They could even ride out Iraq’s current “instability” by signing contracts now, while the Iraqi government is at its weakest, and then wait at least two years before even setting foot in the country. The vast majority of Iraq’s oil would then be left underground for at least two years rather than being used for the country’s economic development. The international oil companies could also be offered some of the most corporate-friendly contracts in the world, including what are called production sharing agreements. These agreements are the oil industry’s preferred model, but are roundly rejected by all the top oil producing countries in the Middle East because they grant long-term contracts (20 to 35 years in the case of Iraq’s draft law) and greater control, ownership and profits to the companies than other models. In fact, they are used for only approximately 12 percent of the world’s oil. Iraq’s neighbors Iran, Kuwait and Saudi Arabia maintain nationalized oil systems and have outlawed foreign control over oil development. They all hire international oil companies as contractors to provide specific services as needed, for a limited duration, and without giving the foreign company any direct interest in the oil produced. Iraqis may very well choose to use the expertise and experience of international oil companies. They are most likely to do so in a manner that best serves their own needs if they are freed from the tremendous external pressure being exercised by the Bush administration, the oil corporations — and the presence of 140,000 members of the American military. Iraq’s five trade union federations, representing hundreds of thousands of workers, released a statement opposing the law and rejecting “the handing of control over oil to foreign companies, which would undermine the sovereignty of the state and the dignity of the Iraqi people.” They ask for more time, less pressure and a chance at the democracy they have been promised. Antonia Juhasz, an analyst with Oil Change International, a watchdog group, is the author of “The Bush Agenda: Invading the World, One Economy at a Time.”

­- Shell Investments Limited (“SIL”), a wholly-owned subsidiary of Royal Dutch Shell plc, announced that as at 8:00 p.m. (Toronto time) on March 16, 2007 (the “Initial Expiry Time”) 96,985,322 common shares in the capital of Shell Canada Limited (“Shell Canada”) were validly deposited to SIL’s offer to acquire, at a price of C$45.00 cash per common share, all of the outstanding common shares of Shell Canada not already owned by SIL or its affiliates (the “Offer”). As the minimum deposit condition under the Offer has been met, SIL has taken up and accepted for payment all of the common shares validly deposited. The common shares taken up and accepted for payment represent approximately 53.1% of the outstanding common shares of Shell Canada not already owned by SIL or its affiliates. SIL or its affiliates now own 740,294,180 common shares of Shell Canada or approximately 89.6% of the outstanding common shares of Shell Canada. Payment will be made on or before Wednesday, March 21, 2007 to Shell Canada shareholders who have validly deposited their common shares under the Offer. ­

- Royal Dutch Shell plc announced that Jeroen van der Veer will continue as Chief Executive until 30 June 2009. Mr. Van der Veer became Royal Dutch Shell’s first Chief Executive, following the unification of the company in 2005.

April

• Upstream news:

­­ - Royal Dutch Shell reaches agreement with local communities allowing it to return safely to Niger Delta one year after being forced to shut more than half its oil operations in Nigeria; expects to resume full production within five to six months; Shell lost about 500,00 barrels per day in production from its fields in western part of delta after rebel group called Movement for Emancipation of Niger Delta attacked several production and export operations in early 2006, forcing their closings; continuing violence in region has curtailed up to a fifth of Nigeria's total oil production.

• Downstream news:

­ - Shell U.K. Limited (Shell) and Esso Exploration and Production UK Limited, (an ExxonMobil subsidiary) are pleased to announce the commencement of a £350 million Rejuvenation Project that will extend the life of three of their onshore installations (the St. Fergus Gas to Liquids Plant, Fife Natural Gas and Liquids Plant, and Braefoot Bay Loading Terminal) to the year 2021 and will sustain feedstock supply to the Fife Ethylene Plant. ­

- Royal Dutch Shell (Shell) announced the signing of an agreement with ConocoPhillips for the acquisition of 100% of shares in its wholly owned subsidiary, Conoco Jet (Malaysia) Sdn Bhd, which operates the ProJet retail marketing assets in Malaysia. ­

- The performance of the Egmond aan Zee Offshore Wind Farm, which has been in operation since the beginning of this year, has been excellent to date. Thanks in part to the stormy weather of the first three months of 2007, during which there has been a great deal of wind, more than 111 million kilowatt hours of electricity have been produced. This is equivalent to the annual electricity consumption of more than 33,000 households. The Egmond aan Zee Offshore Wind Farm was today officially inaugurated by HRH the Prince of Orange. ­

- HRH the Prince of Orange accompanied by fourteen schoolchildren from Egmond aan Zee officially inaugurated the Netherlands’s first wind farm in the North Sea. Blowing together into the special tube, the turbines started to turn, inaugurating the Netherlands’ cleanest power plant. The Egmond aan Zee Offshore Wind Farm was constructed by Nuon and Shell on the initiative of the Dutch Ministry of Economic Affairs. ­

- The shareholders of Sakhalin Energy Investment Company Ltd. (Sakhalin Energy), operator of the Sakhalin II project, signed a Sale and Purchase Agreement with OAO Gazprom (Gazprom) to trigger the transfer of shares in Sakhalin Energy. This transaction implements a protocol signed on December 21, 2006 in Moscow. Under its terms Gazprom acquires a 50% plus one share stake in Sakhalin Energy for $7.45 billion in cash. The other three shareholders, Royal Dutch Shell plc (Shell), Mitsui & Co. Ltd (Mitsui) and Mitsubishi Corporation (Mitsubishi), each dilute their stakes by 50%, to receive a proportionate share of the purchase price. Gazprom will now hold 50% plus one share, Shell 27.5%, Mitsui 12.5%, and Mitsubishi 10%. With LNG capacity effectively sold, Sakhalin II is moving to firmly establish its position on the global energy map as a reliable new energy source for customers. Through the Area of Mutual Interest (AMI) arrangement with Gazprom, the prospects for expansion of Sakhalin II through further LNG processing trains are enhanced. In addition, the Ministry of Natural Resources of the Russian Federation has announced its approval of the revised Environmental Action Plan (EAP). ­

- Shell Energy Europe and the Port of Marseille Authorities have agreed to initiate the development of a potential LNG regasification terminal in Fos-sur-mer. The project would have in its first phase a typical capacity of around 8 billion cubic meters of gas per year.

• Business/Finance news:

­ - Shell Investments Limited (“SIL”), a wholly-owned subsidiary of Royal Dutch Shell plc, announced that as at the expiry time of the extended offer period on March 30, 2007, an additional 75,711,093 common shares in the capital of Shell Canada Limited (“Shell Canada”) were validly deposited to SIL’s offer to acquire, at a price of C$45.00 cash per common share, all of the outstanding common shares of Shell Canada not already owned by SIL or its affiliates. SIL has taken up all such common shares deposited to the offer during such period and payment has been or will be made for such common shares on or before Wednesday, April 4, 2007. ­

- Without admitting any wrongdoing, Shell agreed to pay $352.6 million, plus administrative costs, to investors covered by the settlement. They include non-US investors who purchased their shares outside the United States. The parties to the settlement agreement include certain institutional investors including ABP, PGGM, the Vereniging van Effectenbezitters (VEB) an organization representing individual shareholders in The Netherlands and similar organisations, and the Shell Reserves Compensation Foundation, a settlement foundation representing all shareholders covered by the settlement agreement. The agreement depends on the Amsterdam Court of Appeals declaring the settlement binding for all of the shareholders that it covers and is subject to agreed opt-out provisions. Shell intends to offer the same proportional settlement to investors in the US, provided the US court overseeing the case approves. ­

- Royal Dutch Shell agreed Wednesday to pay European and other non-American shareholders about $450 million in a settlement to help resolve legal disputes stemming from its overstatement of oil reserves. The money will compensate shareholders for losses incurred when the company's stock dropped after it disclosed in early 2004. ­

- At 07:00 BST (08:00 CEST and 02:00 EDT) on Thursday May 3, 2007 Royal Dutch Shell plc will release its first quarter 2007 unaudited results and its first quarter 2007 interim dividend announcement.

May

• Upstream news:

­­ - The Bush administration proposed on leasing out millions of acres along the coasts of Alaska and Virginia to oil and gas drillers, a move that would end a longstanding ban on drilling in those environmentally sensitive areas. Both areas have been closed to new drilling for many years.

• Downstream news:

­ - Shell announced that it has signed an agreement to sell its interests in certain hydrocarbon transportation and power generation assets in Bolivia and Brazil to Ashmore Energy International (AEI). The transaction is pending all regulatory approvals and consents.

• Business/Finance news:

­ - Royal Dutch Shell plc released its first quarter 2007 unaudited results and its first quarter 2007 interim dividend announcement at 07:00 BST (08:00 CEST and 02:00 EDT) on Thursday May 3, 2007. ­

- Royal Dutch Shell says its first-quarter earnings rose 5.7 percent, despite falling oil prices and declining profit at its production and refining arms; net income rose to $7.28 billion, from $6.89 billion year earlier; sales fell 3.3 percent, to $73.5 billion; production of oil and equivalents fell 6.4 percent, to 3.5 million barrels per day. ­

- Royal Dutch Shell plc released its tenth Sustainability Report on its environmental and social performance. The report underlines the company's commitment to help meet the world's current and future energy needs in environmentally and socially responsible ways. ­

- Royal Dutch Shell plc ("RDS") hereby announces that Mr Rijkman Groenink, Chairman of the Managing Board of ABN AMRO, who has been nominated for the position of Non-Executive Director of RDS, has requested the withdrawal of his nomination at this time. The reason for his decision is that he wants to fully dedicate his attention to ABN AMRO, given the current corporate activities around the company. ­

- Russian government continues to press its strategy of securing for Gazprom monopoly on exports to Asia; it is threatening important investment by BP with methods similar to those used last fall to force Royal Dutch Shell to sell controlling stake in another energy development in Russian Far East, Sakhalin II project; Gazprom was also beneficiary in that case; BP, which operates through Russian joint venture TNK-BP slips closer to losing its license to Kovykta gas field when Siberian court declines to hear its arguments; Kovykta is BP's largest natural gas project in Russia and is valuable because of its proximity to China.

June

• Upstream news:

­­ - Shell U.K. Limited (Shell) announced that the company, along with Esso Exploration and Production UK Limited, an ExxonMobil subsidiary, intends to market their equity interests in a number of Northern North Sea assets, which include operated interests in Cormorant Alpha, Cormorant North, Tern, Eider, Kestrel and Pelican and non-operated interests in Otter and Hudson, as well as an operated interest in the associated oil evacuation system. Interests will include acreage, production licences and associated infrastructure in Quadrants 210 and 211. The assets will be offered to the market on an open, competitive basis. Both companies can also confirm that they are in negotiation with Fairfield Energy for the sale of their interests in the Dunlin cluster (Dunlin, Dunlin South West, Osprey and Merlin). Interests will include production licences and associated infrastructure in Quadrant 211. The deal is subject to completion of a final Sales and Purchase Agreement and the fulfillment of a number of conditions, including Government consent and co-venturer approval. Shell has also initiated the marketing of its interest in the Strathspey field (block 4/4a), a non-operated sub-sea oil and gas development tied back to the Ninian platform in the Northern North Sea.

• Downstream news:

­ - Shell (China) Limited is planning to build a world-scale lubricants blending plant in South China to meet growing demand in the region. The plant will have a capacity of 200 million litres per year initially, increasing to 400 million litres, making it one of the top three lubricants blending plants in the Shell lubricants network worldwide. Official ground-breaking for the plant is taking place (22 June, 2007) near the city of Zhuhai, in Guangdong Province, and commercial operation is expected to begin in 2009. The plant’s South China location means it will be ideally placed to supply consumer, transport, industrial and marine lubricants to one of the major growth regions in the country.

• Business/Finance news:

- Britain advised all its citizens to leave three states in Nigeria's southern Niger Delta, Africa's top oil-producing region, where violence against foreigners has become commonplace. Kidnappings and armed robberies have risen in Bayelsa, Delta and Rivers States, home to the bulk of Nigerian oil output and the local base of Royal Dutch Shell, the Foreign Office said. ''We therefore advise British nationals to leave,'' it said on its Web site. ''If you stay, you do so at your own risk.'' Since January 2006, more than 180 foreigners have been abducted in the Delta, including 31 Britons, it added. Most have been released unharmed, often after the payment of a ransom.

- Senate Democrats are seeking a major reversal of energy tax policies that would take billions of dollars in tax breaks and other benefits from the oil industry to underwrite renewable fuels.

- A British toddler kidnapped in Nigeria's volatile oil region may be freed imminently, police said. Three-year-old Margaret Hill was kidnapped on her way to school in the oil industry center of Port Harcourt. Port Harcourt police commissioner Felix Ogbaudu said police have received information on her whereabouts from sources he did not name. He gave no further details about the source of the information or police rescue plans. Nembe district is on Nigeria's Atlantic coast, some 95 miles southwest of Port Harcourt. President Umaru Yar'Adua has instructed security forces to ensure the girl's safe release. Police say they will not use force to free the girl, seized by unknown gunmen while the car taking her to school idled in traffic. It was the first abduction of a foreign child in the increasingly lawless oil region of Africa's biggest oil producer. Oluchi Hill, the Nigerian mother of the girl, said Saturday the gunmen who kidnapped her daughter have demanded a ransom but refused to say how much cash was sought or who contacted her. Oluchi Hill had previously said her daughter was being fed only bread and water and that the gunmen said they would kill the girl if the parents did not meet their demands -- including one that the father take his daughter's place. The child's British father, Mike Hill, has lived in Nigeria for years and works in the energy industry. He also runs a popular nightspot in Port Harcourt. The British Broadcasting Corp. reported that he was ill and had been due to fly to Britain for unspecified treatment. The region's main militant group, the Movement for the Emancipation of the Niger Delta, said its fighters would help search for the missing child, and echoed the revulsion many Nigerians feel about the kidnapping of children. The group has carried out kidnappings to press its demands for a greater political voice and for the region that produces Nigeria's oil to see more of the wealth it generates. But other kidnappings are purely criminal, aimed only at extracting ransom. There was no indication that politics played a part in the girl's seizure. Kidnappings in the region have focused mostly on foreign, male workers of international companies presumed to have the resources for ransom payments. More than 200 foreigners have been kidnapped since militants stepped up their activities against the oil industry in late 2005 and more than 100 expatriates have been seized this year alone as criminal gangs took up the practice. Two hostages, one British and one Nigerian, died last year when military patrols crossed the hostage takers' paths and a gunbattle ensued. Hostage takers routinely issue threats over the welfare of their captives, but no hostage has ever been seriously injured by kidnappers while in captivity. More than a dozen foreigners are currently in captivity, including five seized Wednesday from a Royal Dutch Shell oil rig. Two children of wealthy Nigerians have been seized in the restive Niger Delta in recent weeks. Both were released within days without injury.

July

• Upstream news:

­

­- On July 6 2007 Rosneft Open Joint Stock Company (Rosneft) and Royal Dutch Shell plc (Shell) concluded an Agreement on Strategic Cooperation. The agreement was signed in Moscow by Rosneft President Sergey Bogdanchikov and Shell Chief Executive Jeroen van der Veer. The Agreement provides the opportunity for joint implementation of upstream and downstream oil and gas projects. It sets the basic principles of strategic cooperation between the two major international energy companies and lays the foundation for a long-term cooperation between Shell and Rosneft both in Russia and elsewhere.

• Downstream news:

­ - Qatar Petroleum (QP) and Royal Dutch Shell plc (Shell) announced the incorporation of Qatar Liquefied Gas Company Limited (4), a joint venture between an affiliate of QP (70%) and an affiliate of Shell (30%), which will own the Qatargas 4 project’s onshore and offshore assets. At the same event, this newly formed joint venture company signed a sale and purchase agreement (SPA) with a Shell affiliate as buyer of all the LNG volume produced by this large-scale project. The Qatargas 4 project comprises upstream gas production facilities to produce approximately 1.4 billion cubic feet per day of natural gas, including an average of approximately 24,000 bbl/d of LPG and 46,000 bbl/d of condensate from Qatar's North Field over the 25-year life of the project. The integrated project also includes a 7.8 million tonnes-per-annum liquefaction plant and the required LNG shipping capability. The main engineering, procurement and construction contract for onshore facilities was awarded in December 2005 and construction activities are progressing well in Ras Laffan. First LNG cargoes are scheduled for delivery around the end of the decade. Qatargas 4 LNG volumes are intended to flow primarily into natural gas markets in the eastern United States. Shell has arranged for capacity at the Elba Island LNG import terminal as well as in the new Elba Express natural gas pipeline to receive and regasify the LNG exported to the United States.

• Business/Finance news:

­ - Royal Dutch Shell and Rosneft, the Russian state oil company, agreed to explore possibilities to work together to develop oil fields and market gasoline and other petroleum products worldwide. The deal was presented as a framework to discuss future deals. While short on specifics, it suggested Shell was still seeking opportunities in Russia despite being forced last fall to sell a controlling stake in its Sakhalin II development to Gazprom, another Russian state company, at a low price. ­

- Coalition of pension funds from New York, California, North Carolina and Illinois are pressuring European and Asian oil companies to reconsider their investments in Iran; these pensions hold $3.7 billion worth of shares in energy companies involved in Iran, out of total $570 billion in assets; letters are sent to chief executives of Royal Dutch Shell, Total of France, Repsol of Spain, Eni of Italy and Gazprom of Russia; letters are sent to Asian companies, including China National Petroleum Corp, Oil and Natural Gas Corp of India and Inpex Corp of Japan; Iran is world's second-largest holder of oil and natural gas reserves; American companies are barred from doing business there. ­

- At 07:00 BST (08:00 CEST and 02:00 EDT) on Thursday July 26, 2007 Royal Dutch Shell plc will release its second quarter 2007 unaudited results and its second quarter 2007 interim dividend announcement. All related materials will be posted on http://www.shell.com/investor on July 26, 2007. ­

- Royal Dutch Shell released its second quarter 2007 unaudited results and its second quarter 2007 interim dividend announcement at 7:00 BST (08:00 CEST and 02:00 EDT) on Thursday July 26, 2007. The Board of Royal Dutch Shell plc announced an interim dividend in respect of the second quarter of 2007 of US$0.36 per A and B share, an increase of 14% over the US dollar dividend for the same period in 2006. ­

- Royal Dutch Shell says net income rose 18 percent, to $8.67 billion; oil and gas production fell 2 percent, to 3.18 million barrels per day; Shell's chief executive Jeroen van der Veer says he is still debating whether to develop major natural gas field in Iran, given pressure European oil companies are facing from US government not to do business there. ­

- The owner of Russneft, one of Russia's largest private oil companies, confirmed that he would sell the business to an investor loyal to the Kremlin, but he added in an open letter that the sale was not voluntary. Mikhail S. Gutseriev was once in the tight coterie. ­

- Russia said that it would expel four British diplomats and suspend counterterrorism cooperation with London in the latest step of a confrontation linked to the radiation poisoning death of a former KGB agent turned Kremlin critic. Britain had announced Monday that it was expelling four Russian diplomats over Moscow's refusal to extradite Andrei Lugovoy, a Russian businessman accused of using polonium-210 to poison Alexander Litvinenko last year in London. The British government also said it would place restrictions on visas issued to Russian officials. There has been considerable speculation that Moscow could retaliate further against London by taking steps against British economic interests in Russia. British Petroleum and Royal Dutch Shell, which is incorporated in Britain, are potential targets.

August

• Upstream news:

­

- A/S Norske Shell (‘Shell’) announced that the company has entered into an agreement with E.ON Ruhrgas Norge AS to sell its 28% equity interests in the undeveloped Skarv and Idun fields for US$ 893 million. The agreement covers the licenses PL-159, PL-212, PL-212B and PL-262 in the Norwegian Sea.

• Downstream news:

- As part of an ongoing strategy of portfolio management, Shell International Petroleum Company Limited (Shell) has signed a Letter of Intent with Petroplus Holdings AG relating to the possible sale of two of its French refineries. Shell and Petroplus will discuss detailed terms, including developing a processing arrangement for the production of speciality products such as lubricants, with a view to agreeing and concluding a potential sale during 2008. The sale, which would be part of an ongoing strategic review of a number of Shell’s refining and petrochemicals assets, would include the Petit Couronne and Reichstett Vendenheim refineries and associated infrastructure and businesses. The sale would be subject to staff consultation and regulatory approval. Shell will be working closely with the appropriate trade unions and staff representatives as it has been doing since the announcement to review the ownership of the assets was made in January 2007. A purchase price of $875 million, including working capital which is expected to be approximately $400 million, has been agreed. The two refineries have a combined capacity of 220,000 barrels per day. Shell will continue to serve its customers in France in a range of businesses including retail, commercial road transport, lubricants, LPG, aviation and bitumen.

- As part of an ongoing strategy of portfolio management, Société des Pétroles Shell (Shell) has received an offer for the sale of its Berre-l'Etang refinery site complex and associated infrastructure and businesses to Basell. A purchase price of $700 million has been agreed. The sale is subject to staff consultation and regulatory approval. Shell will be working closely with the appropriate trade unions and staff representatives as it has been doing since the announcement to review the ownership of the assets was made in January 2007. It is anticipated that any deal would be concluded in early 2008. Shell will continue to serve its customers in France in a range of businesses including retail, commercial road transport, lubricants (including Marine Lubricants), LPG, aviation and bitumen.

- Shell Petroleum N.V and Shell Petroleum Company (‘Shell’) have signed a Share Purchase Agreement with EESU Holding GmbH, a company wholly owned by EVN AG, E.ON Ruhrgas E&P GmbH, Salzburg AG and Steirische Gas-Wärme GmbH, for the sale of EP Holding GmBH (EPH), its sole asset being Shell's 25% equity holding in RAG. Rohöl-Aufsuchungs AG (RAG) is an Austrian company, which is 25% owned by together Shell Petroleum N.V (99%) and Shell Petroleum Company (1%) through the wholly owned affiliate EP Holding GmbH.

- Shell International Petroleum Company Ltd (Shell) and OJSC Alliance Group (Alliance) have completed the establishment of a joint venture to operate a network of approximately 150 Shell-branded retail sites in Ukraine. This is an important milestone reached by Shell and Alliance after they announced their commitment to set up a joint venture in March 2007. The formal approval from the government was the final step for completion of the deal and the establishment of the joint venture. The joint venture officially starts its operations on 21 August. Shell has operational control with 51% share and Alliance a 49% share in the newly established joint venture. Start of operations assumes a gradual take over of retail sites under joint venture operational control, a process that will start with immediate effect and is expected to be completed over a period of two months. All retail sites will be upgraded to meet Shell worldwide operational standards for safety and environmental protection.

- Royal Dutch Shell (Shell) and Reitan Group (Reitan), owner of the 7-Eleven brand in Scandinavia, signed an agreement to rebrand a planned 269 service stations across Norway, Sweden and Denmark. The agreement means these service stations will provide both Shell’s premium fuels and 7-Eleven convenience stores. The agreement covers a planned 91 YX service stations in Norway, 66 YX service stations in Denmark and 112 Shell service stations in Sweden. Approximately 157 YX stations that come under this agreement are owned by Reitan and will be rebranded as Shell stations. The convenience shops at all the service stations will be branded as 7-Eleven stores. This arrangement will give both Shell and Reitan the opportunity to focus on and expand their core business areas across the region.

• Business/Finance news:

- A federal appeals court ruled that Royal Dutch Shell must further postpone plans for exploratory drilling off the northern coast of Alaska. The United States Court of Appeals for the Ninth Circuit, in San Francisco, also indicated that environmental and Alaska Native groups have a good chance of prevailing in their effort to keep Shell out of the Beaufort Sea. Petitioners, including the Alaska Eskimo Whaling Commission and the Center for Biological Diversity, have “raised serious questions and demonstrated that the balance of hardships tips sharply in their favor,” the ruling said. The decision bans Shell from exploration activities pending a review of antidrilling petitions.

- The government of Kazakhstan threatened to suspend work performed by a consortium of foreign oil companies at the Kashagan offshore field, one of the world’s largest oil projects, because of an assertion of environmental damage in the Caspian Sea. The warning came amid official anger over lengthy delays and large cost overruns at the field, discovered in 2000. Kazakhstan, which like other oil-producing countries has been seeking a larger share of the revenue from output, said this week that it had begun talks with Eni, the project’s Italian operator, about the future of Kashagan. But the threat is unlikely to halt the development of the Kashagan field, the biggest oil discovery of the last three decades. The warning is seen as a way for the Kazakh government to increase pressure on the foreign companies during negotiations, according to a person familiar with the situation who asked to remain anonymous, given the delicacy of the talks. The group developing Kashagan is made up of Eni, Exxon Mobil, Royal Dutch Shell, ConocoPhillips, Total of France and Inpex Holdings of Japan. The principal Kazakh state oil company, KazMunaiGas, also has a stake in the project. Nurlan Iskakov, environment minister of Kazakhstan, the largest former Soviet republic in Central Asia, told a government meeting that his office had evidence that the consortium had breached the country’s environmental laws. There were no details of the asserted damage. The contention recalled a tactic successfully used by the Russian government against Shell in the Sakhalin II project. After a lengthy and highly publicized campaign charging environmental damage from that project, Shell eventually agreed to cede control to Gazprom, Russia’s state-owned energy company. Production from Kashagan, which was originally supposed to begin in 2005, has been delayed until 2010 at the earliest, and costs have more than tripled, according to Kazakh officials. Eni expects the Kashagan field to produce at least 1.5 million barrels of oil a day, making it one of the largest projects outside the Middle East.

- The government of Kazakhstan suspended environmental permits for a consortium of foreign energy companies developing a potentially huge oil field in the Caspian Sea, threatening to slow development of the largest oil find in the world since the discovery of Prudhoe Bay off Alaska three decades ago. The suspension came as Kazakh officials and the consortium, led by the Italian oil company Eni, were negotiating new terms for a $20 billion development contract for the Kashagan field, arousing speculation that the move was an effort to press the companies into ceding a larger share of future profits to the Kazakh government. The stakes are high because of the field’s vast reserves. The Kashagan field is a centerpiece of Western and Japanese efforts to diversify oil supplies away from the Middle East to other regions like the Caspian Sea basin. The suspension of the environmental permits was not considered to be a significant threat to the project in the long term. Still, the suspension of environmental permits seemed to raise the stakes in a dispute that began this month when Eni announced cost overruns and a delay in bringing the Kashagan field online. Kazakhstan’s prime minister, Karim K. Masimov, responded by demanding a sweeping renegotiation of the contract with the consortium, which besides Eni is composed of Exxon Mobil, Royal Dutch Shell, ConocoPhillips, Total of France and Inpex Holdings of Japan. The state oil company, KazMunaiGaz, is also a member of the consortium. Kazakh officials announced `that they would suspend the permits on the same day that Eni executives opened talks with the government on their disagreement over cost overruns and delays. Also Kazakh fire inspectors said they had uncovered safety violations at an oil-processing plant near the field. And the finance ministry said it had opened a criminal investigation into a contractor, Agip, an Eni unit, on suspicion of violating customs rules while importing two helicopters. President Nursultan Nazarbayev fired the energy minister who had overseen the project. The regulatory barrage recalled methods used by the Russian government against Shell in the Sakhalin II project last autumn. After a lengthy campaign charging environmental damage, Shell eventually agreed to cede control to Gazprom, the Russian state-owned energy company. Eni released a subdued statement saying only that it had "received a letter in the last few days with an offer for friendly rediscussion of the contract."

September

• Upstream news:

­- Shell Development (Australia) Pty Ltd (SDA) announced that it has signed a strategic agreement with Malaysia’s national oil corporation PETRONAS that will strengthen Shell’s and PETRONAS’ gas asset positions in Malaysia and Australia, respectively. Under the agreement, PETRONAS’ subsidiary PETRONAS Carigali (Australia) Pty Ltd seeks to secure a 25% interest in Australia’s NT/P48 Permit, which includes the Evans Shoal Joint Venture (JV) in the Timor Sea offshore Australia's Northern Territory.

- JSC Tatneft (Tatneft) and Shell Exploration Company (RF) B.V. (Shell) concluded Agreement on Principles of Strategic Partnership. The agreement was signed by General Director of Tatneft Shafagat F. Takhautdinov and Shell Country Chairman in Russia Chris Finlayson in the presence of R.N. Minnikhanov, Prime Minister of Tatarstan and Chairman of the Board of Directors of Tatneft. Under the terms of the agreement, the two companies will devise a program for heavy oil development in Tatarstan. They will conduct a feasibility study and assess technologies for extraction and processing (upgrading) of heavy oil, which is part of existing exploration and production licenses held by Tatneft. This agreement opens the door to other potential joint activities, including the acquisition of new licenses for hydrocarbon exploration in Tatarstan and elsewhere in Russia. As part of the agreement, Tatneft and Shell will consider establishing a joint venture or using other forms of cooperation.

• Downstream news:

- Shell Eastern LNG (Shell) and PetroChina International Company Limited (PetroChina) have concluded a binding Heads of Agreement (HOA) for the long-term supply of liquefied natural gas (LNG) with the primary source being the Gorgon project in Western Australia. The HoA constitutes a milestone in the development of LNG supplies to China. The HOA covers the key terms of the transaction and provides that Shell and PetroChina will work together to conclude and execute a detailed LNG Sale and Purchase Agreement before December 2008. During the 20-year contract term, Shell will sell one million tonnes per annum of LNG to PetroChina. The Shell-PetroChina agreement is conditional upon a Final Investment Decision being taken by the Gorgon Joint Venture Partners.

- Shell Oil Company announced final investment decision to begin construction on a 325,000 barrel-per-day (b/d) capacity expansion project at its joint venture Motiva’s refinery in Port Arthur, Texas. The expansion project will increase the refinery’s crude oil throughput capacity to 600,000 b/d, making it the largest refinery in the U.S. and one of the largest in the world. The 325,000 b/d expansion at Port Arthur is equivalent to building the first new refinery in the U.S. in more than 30 years. The new production capacity will increase Motiva’s supply of Shell-branded fuels to the company’s wholesale and direct supply markets. Motiva’s expansion will lower most types of emissions from refinery operations on a per barrel basis by utilizing advanced technology in all new system installations and replacing existing systems. The expansion of the refinery will decrease emissions from present day levels for ozone precursors, specifically nitrogen oxides and volatile organic compounds. Shell is re-investing a significant part of its profits to meet both short and long-term needs. This includes new technology, new production and environmental and product quality improvements.

- MOTIVA TO EXPAND IN TEXAS Motiva Enterprises is placing a $7 billion bet on America's growing thirst for fuel with its expansion of its oil refinery in Port Arthur, Tex., the head of the company said yesterday. The project to double the Port Arthur plant will create one of the biggest refineries in the world, processing about 600,000 barrels of oil a day into gasoline and other fuels. Motiva is co-owned by the Saudi Refining Company and the Shell Oil Company, the United States unit of Royal Dutch Shell.

• Business/Finance news:

- American officials, striving to weaken the grip of Gazprom, Russia's state-owned energy monopoly, in Central Asia, are courting the president of Turkmenistan on his first visit to the United States. The visit by Gurbanguly Berdymukhammedov, the first by a Turkmen president since 1998, included a meeting Tuesday with Secretary of State Condoleezza Rice at the United Nations and on Wednesday will revolve around the opening of the General Assembly. American officials said they wanted Mr. Berdymukhammedov to understand that he had other options for developing his country's extensive natural gas deposits and for shipping the fuel to market. The United States wants to encourage the development of hydrocarbon sources outside the Middle East while offering Europeans an alternative to Gazprom, which provides nearly a quarter of the Continent's gas supply. Russia and more recently China have received the bulk of natural gas exports from Turkmenistan, a former Soviet republic. Russia buys 50 billion cubic meters of gas a year at below-market prices. China has signed a development agreement for one of Turkmenistan's most promising gas fields and will get 30 billion cubic meters, or 1.1 trillion cubic feet of gas, annually over 30 years. Russia controls all export routes for Turkmen natural gas and plans to expand its main northern pipeline to double its purchases. Mr. Berdymukhammedov, a former health minister and the dentist of the country's previous ruler, Saparmurat Niyazov, was an unexpected choice to lead Turkmenistan, a land of some 5.4 million, after Mr. Niyazov died last year. Under Mr. Niyazov, Turkmenistan was among the world's most insular countries. Mr. Berdymukhammedov, since taking over in February, has begun to open it to outside influences. His political actions have raised hopes among Western oil companies and officials that a move toward market economics may not be far behind. Representatives of ConocoPhillips, Chevron, Royal Dutch Shell and BP, among others, have met with the Turkmen leader in the capital, Ashgabat, hoping to bolster their reserves and to tap non-OPEC energy sources.

- The Kazakhstan Parliament took steps to grant the government the right to alter or cancel international energy contracts unilaterally should they run counter to the country’s interests. The lower house of Parliament — in which all elected seats belong to the Nur Otan Party of President Nursultan A. Nazarbayev — voted unanimously to amend an existing law on subsoil use, spelling out the steps the government could take if a contract failed to live up to its economic promise. The upper house is also dominated by the president’s party and is expected to follow suit. The legislation foresees cases in which actions “lead to a significant change to the economic interests of the Republic of Kazakhstan, causing a national security threat, and it gives the government the right to ask to change the contract conditions,” said Valery Kotovich, one of the legislation’s authors, according to the Kazakhstan Today press agency. The law does not spell out what constitutes a national security threat and, if applied liberally, could be used to exact concessions from several natural resources contracts, particularly the one with the foreign oil consortium that is developing Kashagan, the country’s huge offshore oil field in the Caspian Sea. Kashagan — which is being developed by the Italian oil company Eni and Western multinational companies like Exxon Mobil and Royal Dutch Shell — has had cost overruns and delays, extending the projected start-up date by five years, to late 2010. Kazakh officials have already suspended the project on environmental grounds. They have threatened to impose fines of more than $10 billion and to take over operating duties with Eni. Negotiations are scheduled to end Oct. 22. The new legislation adds to investors’ worries, given previous Kazakh demands that existing contracts be altered.

October

• Upstream news:

­- Nederlandse Aardolie Maatschappij (NAM) intends to market a number of its offshore licences, consisting of producing fields in the NOGAT area on the Dutch continental shelf. The producing fields are L2-FA, L2-FB, L5-FA, L12-FC and L15-FA, and the combined oil and gas producing F3-FB field. The fields and facilities to be divested are located in an area of the North Sea to the northwest of Den Helder and are interconnected by the NOGAT pipeline, through which natural gas is transported to the NAM operated processing plant at Den Helder. NAM also intends to divest its share in NOGAT. The intended transfer of ownership is part of NAM’s long-term strategy. This step will not lead to a reduction in overall employment, due to the fact that this will occur within the framework of the Netherlands Transfer of Undertakings Act (Wet Overgang Ondernemingen, WOO), safeguarding the employment of the 20-30 staff involved. Consultations regarding the sale are presently ongoing with the NAM Staff Council. The intended sale does not imply that NAM will discontinue its North Sea operations, as is evidenced by the fact that NAM continues to make substantial investments in its offshore activities. An example is the current further development of the L9 block, involving a total investment of several hundred million Euros. Established in 1947, NAM (the Nederlandse Aardolie Maatschappij B.V.) is active in the exploration and production of crude oil and natural gas in the Netherlands and the Dutch part of the Continental Shelf. Equally owned by Shell and ExxonMobil, NAM is by far the largest producer of natural gas in the Netherlands, with an annual production amounting to nearly three-quarters of all natural gas produced from Dutch soil. In 2006, NAM produced over 53 billion cubic metres of natural gas and 430,000 cubic metres of oil. About half of the natural gas produced by NAM each year comes from the large Groningen gas field (‘Slochteren’). The other half is produced from small gas fields located onshore and in the North Sea. NAM also has underground gas storage facilities in Grijpskerk, in the Province of Groningen, and Langelo (Norg field) in the Province of Drenthe.

• Downstream news:

- Shell Nederland Chemie B.V. announced that it would make a significant investment to strengthen the integration of the Pernis-Moerdijk refinery and chemicals complex in The Netherlands. The investment forms part of an ongoing programme to secure the long-term potential and competitiveness of Shell chemical assets in Western Europe and will concentrate on supplying hydrowax from the Pernis refinery, and other Shell chemical refineries in Europe, to Moerdijk to create an advantaged feedstock position. The project will focus on the modification of a number of furnaces at Moerdijk to crack hydrowax and modifications to the associated logistics infrastructure at Pernis and Moerdijk. Hydrowax, a by-product from refining hydrocrackers is available from the Pernis refinery and can offer significant economic advantages compared to conventional ethylene feedstocks. The project is expected to be complete and onstream during the first quarter of 2009.

• Business/Finance news:

- At 07:00 BST (08:00 CEST and 02:00 EDT) on Thursday October 25, 2007 Royal Dutch Shell plc will release its third quarter 2007 unaudited results and its third quarter 2007 interim dividend announcement. All related materials will be posted on www.shell.com/investor on October 25, 2007.

- Royal Dutch Shell released its third quarter 2007 unaudited results and its third quarter 2007 interim dividend announcement at 7:00 BST (08:00 CEST and 02:00 EDT) on Thursday October 25, 2007. Royal Dutch Shell’s third quarter 2007 earnings, on a current cost of supply (CCS) basis, were $6.4 billion compared to $6.9 billion a year ago. Basic CCS earnings per share decreased by 6% versus the same quarter a year ago. From 2007 onwards the Group is declaring its dividends in US dollars rather than in euros. A third quarter 2007 dividend has been announced of $0.36 per share, an increase of 14% over the US dollar dividend for the same period in 2006. $1.5 billion or 0.6% of Royal Dutch Shell shares were bought back for cancellation during the quarter.

- A WARNING FROM SHELL Royal Dutch Shell said that third-quarter net profit rose 16 percent, but it said that numbers looked better than the reality because the underlying performance of its refining operations was weaker than it appeared.

- Royal Dutch Shell said that third-quarter net profit rose 16 percent despite a drop in production, but it warned that the underlying performance of its refining operations was weaker than it appeared. Net profit at Shell, Europe’s largest oil company, came to $6.92 billion, up from $5.94 billion, primarily because of a rise in the reported refining earnings. Sales rose to $90.7 billion in the quarter from $84.3 billion. The company had net gains in the third quarter of $265 million from asset sales and a windfall from a tax change in Germany, versus charges of $77 million a year ago. Refining earnings were $2.15 billion, up more than 70 percent from a year ago. However, Shell said that numbers this year looked better than the reality. The company said oil prices had risen between the time the oil was pumped out and when it was refined, inflating refining earnings — and the opposite was true a year ago. Adjusting for the price shift, refining earnings on a comparable basis fell 24 percent, to $1.65 billion, Shell said. Using those numbers, which are not permitted under official accounting but are preferred by industry analysts, Shell’s earnings would have fallen around 6 percent. Still, that was better than the performance of some of Shell’s major rivals. BP reported a 29 percent drop in earnings, to $4.4 billion, on Tuesday, mostly because of problems at refineries. ConocoPhillips reported a 5 percent drop in profits, to $3.67 billion. Shell’s shares fell 1.45 percent, to close at 29.45 euros ($41.95) in Amsterdam. The company’s production of oil and gas fell 3.4 percent from 3.25 million barrels of oil or equivalents per day to 3.14 million. Production earnings were still near record highs because of the price of crude oil. Shell’s selling prices were above $70 a barrel in the quarter, up from around $65. Brent crude was trading above $85 a barrel.

November

• Upstream news:

­- Shell Petroleum Development Company of Nigeria Ltd. (SPDC), Shell Exploration and Production Africa Limited (SEPA) and Shell Nigeria Exploration and Production Company Limited (SNEPCO) (together hereinafter referred to as "Shell") announced the intent to improve efficiency and reduce costs, taking advantage of synergies between companies and eliminating duplication, under a project called 'One Shell'. Under One Shell, there will, for example, be one Production organization, one Development organization, one Projects organization, in addition to the sharing of support services. SEPA, SPDC and SNEPCO will continue to discharge all of their respective corporate and contractual obligations as fully functioning separate legal entities. Management of the business affairs of the companies will remain vested in their respective Boards. Shell remains committed to Nigerianization at all levels. Details of the reorganization are yet to be finalized and will be discussed with partners and all relevant stakeholders, including staff and unions, before final decisions and official announcements are made.

- Shell Exploration & Production Ukraine Investments (I) B.V. has signed a non-binding memorandum of understanding (MOU) with Regal Petroleum plc, to acquire a 51% interest in Regal Petroleum (Jersey) Limited, a wholly owned subsidiary of Regal Petroleum plc indirectly holding the licences for the Mekhediviska-Golotvschinska and Svyrydivske gas fields in Ukraine. Under the terms of the MOU, Shell would become the operator of the gas fields which are in the Dniepr Donetsk sedimentary basin where most of Ukraine's gas and condensate production is located.

- Shell has decided not to proceed with the recently signed MOU for exclusive negotiations with Regal Petroleum plc regarding Ukraine assets. Shell recently signed an memorandum of understanding (MOU) for exclusive negotiations with Regal Petroleum plc regarding Ukraine assets. The MOU with Regal was agreed with the previous management team. The management change of 22nd November at Regal was not expected by Shell, and we see from the new management's comments that they may have changed their thinking on this transaction. Regal have indicated that they would like to review options. Therefore we have decided not to proceed with the MOU with Regal. In light of the publicity surrounding the MOU Shell will make public its decision.

- On 1 December 2007 A/S Norske Shell (Shell) will assume responsibility for operations on the recently opened Ormen Lange gas field off the coast of Norway. Until the handover Norsk Hydro led the Ormen Lange development while Shell was responsible for well delivery, subsurface and operations readiness. As field operator, Shell will manage the second phase of the field development, where additional subsea templates will be installed, more gas wells drilled and a concept for field compression developed. Shell was awarded the operatorship of Ormen Lange by the Norwegian Ministry of Petroleum and Energy in December 1999. The gas field was officially opened on 6 October 2007. Production will increase gradually, reaching a peak of 70 million standard cubic metres per day - enough to meet as much as 20% of Britain’s gas needs. Deliveries will probably continue for some 40 years.

• Downstream news:

- The development of sustainable biofuel took a step forward today as Royal Dutch Shell plc expanded its collaboration with Codexis Inc. to develop new super enzymes to convert biomass to fuel. The new agreement covers five years of research collaboration and includes Shell making an equity investment in Codexis and taking a seat on the company’s board. Research will focus on adapting enzymes to improve the conversion of a range of raw materials into high-performance fuels. It will assist Shell in developing the next generation of biofuels as it explores a number of non-food bio materials, new conversion processes and alternative fuel products. Codexis scientists create super enzymes capable of outperforming naturally occurring varieties. The company has successfully applied this pioneering technology to improve manufacturing processes

- The consortium developing London Array, one of the world’s largest offshore wind farms in the Thames estuary, has welcomed the announcement from the UK Government that electricity transmission works associated with the project can go ahead. The 1,000MW London Array would consist of up to 341 wind turbines and be able to generate enough electricity to cater for the power needs of a quarter of London homes or every home in Kent and East Sussex. It would also avoid the emission of millions of tonnes of carbon dioxide over its life. The project would be built in phases and when complete would generate electricity equivalent to almost 10% of the Government’s target for 10% of the UK’s electricity to come from renewable sources by 2010. London Array received planning permission for the offshore works in December 2006 and the Government, in August this year, supported the Planning Inspector’s recommendation for permission to be given for the construction of an onshore substation.

- The delivery of Shell Marine Fuel Oil (MFO) 180 at the Port of Shanghai to its customer Wan Hai, is the result of a Marine Fuels Supply Agreement signed between China Marine Bunker PetroChina Co. Ltd (Chimbusco) and Shell Marine Products Limited (Shell). The two companies have cooperated extensively over the recent months to ensure that operations match Shell’s standards for safety and operations. Shell and Chimbusco have been working together since 1980 and this agreement demonstrates another key development in the close relationship between the two companies. Operations for the bulk supply of fuel oil will initially commence at the Port of Shanghai and include other Chinese ports in due course.

- Qatar Airways, Qatar Petroleum, Qatar Fuel Company (WOQOD), Airbus, Rolls-Royce, Shell International Petroleum Company limited and the Qatar Science and Technology Park sign agreement to study benefits of Synthetic Jet Fuel. The objective of this study is to address the feasibility and potential benefits of using Gas to Liquid (GTL) synthetic jet fuels. GTL is a technology that takes natural gas and converts it to liquid kerosene. The properties of GTL Kerosene are largely similar to conventional jet fuel making it a 'drop in' replacement for today's kerosene, capable of being used in today's aero engines, aircraft and airports without any modifications. The focus of the research will be on evaluating potential improvements in local air quality, fuel economy and overall reduction in CO2 and other emissions. Specific studies will also look at operational benefits for airlines, such as enhanced payload-range, reduced fuel-burn and increased engine durability. GTL synthetic jet fuels are currently being developed to meet international standards required for use in aviation under the auspices of the industry-wide Commercial Alternative Aviation Fuels Initiative (CAAFI) of which Airbus, Rolls-Royce and Shell are all members. The synthetic fuels will initially be mixed with standard kerosene to enable the group to model aircraft and engine performance, with a view to exploring the potential of fully synthetic fuels. Shell, Rolls Royce and Airbus parent EADS are strategic partners of the Qatar Science and Technology Park (QSTP). Some of the activity will be carried out at the state-of-the-art QSTP facility in Doha.

- China Ministry of Science and Technology, Shanghai government, Tongji University and Shell Hydrogen announced the opening of the first hydrogen refueling station in Shanghai for fuel cell vehicles. The Anting Hydrogen refueling station, located at the International Automotive City in Anting, Shanghai, will dispense compressed gaseous hydrogen for a fleet of fuel cell cars and buses operating in the Shanghai region. The Shanghai government has already helped to deliver dozens of fuel cell vehicles operating in Shanghai, and this is planned to grow exponentially by 2010, including fuel cell buses sponsored by the Global Environmental Facility (GEF) through the United Nations Development Programme. Tongji University is responsible for the development and operation of the new hydrogen station, with Shell contributing technical advice and part of the funding. The station also features an information centre on the hydrogen economy.

- Shell reaffirmed its commitment to achieve sustainable mobility through the development of various alternative sources of energy at the Michelin Challenge Bibendum conference held in Shanghai, China. Speaking to more than 3,000 delegates at the Michelin Challenge Bibendum conference, Mr. Pirret outlined the Shell strategy to enable more sustainable transport through three avenues: partnership with Original Equipment Manufacturers (OEM); developing fuels, lubricants and other products that can deliver cleaner, more energy-efficient transport; and working with consumers to help them improve their vehicle fuel efficiency.

- Shell Verwaltungsgesellschaft fuer Erdgasbeteiligungen mbH (Shell) and ExxonMobil Central Europe Holding (ExxonMobil) have agreed to sell the transport business of their German joint venture BEB Erdgas und Erdoel GmbH (BEB) including the technical operations currently provided by ExxonMobil Production Deutschland GmbH to NV Nederlandse Gasunie (Gasunie). Subject to regulatory approvals it is expected that the transaction will be closed in 2008. The agreement is subject to the approval by the relevant authorities. BEB's exploration and production and storage activities remain unaffected by this transaction. ExxonMobil Production will continue to handle exploration and production activities for BEB on the basis of service agreements.

• Business/Finance news:

- A federal judge in Louisiana handed the oil industry a major legal victory this week, saying the government had no authority to suspend billions of dollars’ worth of drilling incentives when energy prices were high. If upheld, the ruling could free companies from paying the government up to $60 billion in royalties for oil and gas produced in publicly owned waters of the Gulf of Mexico. The ruling, in a lawsuit brought by Kerr-McGee Oil and Gas Corporation, is not a final verdict. But the judge flatly rejected all of the government’s arguments, not only refusing to throw out the case but also agreeing with the oil company that the government had overstepped its authority. Royalties on oil and gas have become one of the government’s bigger sources of revenue after income and payroll taxes. Last year, such royalties totaled more than $10 billion, and high oil prices are likely to drive those numbers to a new peak this year. The Government Accountability Office, the investigative arm of Congress, estimated last year that an industry victory in the case could cost the government $60 billion over the next 20 years. But with oil prices now approaching $100 a barrel, and companies investing billions to develop new gulf fields, the losses to taxpayers could be considerably higher. At issue in the court battle is a 1995 law aimed at increasing oil and gas production in the Gulf of Mexico. Under that law, the Interior Department allows companies that drill in deep water to avoid paying a standard royalty on oil and gas from publicly owned waters — usually 12 percent to 16 percent of sales. But the government has also insisted that companies are not entitled to the incentive, known as royalty relief, if the market price of oil climbs above about $34 a barrel. Kerr-McGee sued the government last year, saying that Congress never authorized the Interior Department to impose the high-price restriction, even though lawmakers who drafted the law have often said that was their specific intent. The judge in Louisiana, Patricia H. Minaldi, rejected the government’s motion to throw out the case. In the ruling, Judge Minaldi wrote that Kerr-McGee, which Anadarko acquired last year for $21 billion, was correct and that the Interior Department had overstepped its authority. The judge also rejected all of the government’s technical justifications for the rules in the event that it lost the argument over its Congressional mandate. A victory for Kerr-McGee would apply to more than 50 companies, including industry giants like Exxon Mobil, Chevron, BP and Royal Dutch Shell. Chevron and its partners discovered a mammoth oil field last year that would be protected, but the court battle affects thousands of leases signed from 1995 through 2000. Because it takes so long for companies to explore and then develop a deepwater oil field, the oil and gas from those leases is just beginning to flow. Democratic lawmakers in Congress have been trying to address the oil and gas royalties as part of a broader energy bill, but the House and Senate have been stalled for months by differences on royalties and other issues. The House energy bill, passed early this summer, would prohibit companies from acquiring additional offshore leases if they did not agree to pay royalties during times of high prices. In the Senate, Republican lawmakers blocked Democrats this summer from including any provisions to raise taxes on oil companies.

December

• Upstream news:

­- Libya awarded permits to energy companies from Russia, Algeria, Poland and the Netherlands in its first gas-focused exploration licensing round, its state energy company said. Shokri Ghanem, chairman of the state-owned National Oil Corporation, said at a brief ceremony in Tripoli that the companies had been awarded a total of 10 blocks of territory. A results sheet posted on a notice board at the ceremony showed that blocks had been awarded to the Russian gas export monopoly Gazprom, the Algerian state company Sonatrach, the Polish gas monopoly Polskie Gornictwo Naftowe i Gazownictwo, and Royal Dutch Shell. Mr. Ghanem said more awards from the round could be announced in a week. Libya had offered a total of 41 onshore and offshore blocks. The country wants to increase production to three billion cubic feet a day by 2010.

- Royal Dutch Shell wants to exploit vast reserves thought to lie off the coast of Alaska, a move that threatens the traditional way of life of the Inupiat, natives of Alaska's north coast. A court hearing is scheduled to consider whether the company can move forward, though a ruling is not expected for months.

- Each summer and fall, the Inupiat, natives of Alaska’s arid north coast, take their sealskin boats and gun-fired harpoons and go whale hunting. Kills are celebrated throughout villages as whaling captains share their catch with relatives and neighbors. Muktuk, or raw whale skin and blubber, is a prized delicacy. But now, that traditional way of life is coming into conflict with one of the modern world’s most urgent priorities: finding more oil. Royal Dutch Shell is determined to exploit vast reserves believed to lie off Alaska’s coast. The Bush administration backs the idea and has issued offshore leases in recent years totaling an area nearly the size of Maryland. Those leases have received far less attention than failed efforts to drill in the Arctic National Wildlife Refuge, but they may prove to be far more important. By some estimates, the oil under the Alaskan seabed could exceed the reserves remaining in the rest of the United States, though how much might ultimately be recoverable is uncertain. Shell is eager to find out. It tried to make headway this summer, only to be stopped by an unusual alliance of Inupiat whalers and environmental groups who filed a suit in federal court. They argue that noisy drilling off the Alaska coast could disrupt migration routes for the bowhead whales, making it impossible for the Inupiat to capture their allotted share of about 60 animals per year. A court hearing is scheduled for today to consider whether the company can move forward, though a ruling is not expected for months. Native communities are not unalterably opposed to oil production — on the contrary, many rely on oil for their livelihoods. The North Slope Borough, a countylike governmental unit the size of Minnesota where most of Alaska’s 10,000 Inupiat live, gets the bulk of its $98 million budget each year from taxing onshore oil operations. Native corporations also derive a large part of their business from serving the oil industry in Prudhoe Bay. Community leaders are caught between a desire to preserve traditional whaling and the economic necessity of permitting the oil industry to move into new areas. The oil resources off Alaska’s coast amount to some 27 billion barrels, according to government estimates, about the same as the original reserves of the giant Prudhoe Bay field discovered in 1968. That would be enough to satisfy America’s total oil consumption for three years if every last drop could be pumped, which is unlikely. It is a tantalizing bonanza for the Bush administration, which has strongly backed exploration to make up for a decline in domestic oil production; for oil companies, which are scouring the world to find new supplies; and for Alaskan authorities, who need to keep the trans-Alaska pipeline flowing. Oil off Alaska’s coast is hardly a new discovery. Soon after petroleum was found under the North Slope 40 years ago, companies began to suspect there might be oil under the Beaufort Sea and beyond. Shell was one of the early pioneers of Arctic exploration in the following decades but it abandoned the region along with other companies after the oil price collapse of the mid-1980s. Five years ago, as the company sought new places to drill, Shell geologists dusted off their old seismic surveys. They identified a spot called Hammerhead, where the company had first drilled in 1985. They renamed it Sivulliq, meaning “the first one” in Inupiat, and decided to drill there. The area, about 15 miles offshore in 110 feet of water, is just opposite the western coast of the Arctic National Wildlife Refuge. Shell moved aggressively to secure offshore holdings after 2005. The company paid about $80 million for leases in the Beaufort Sea, outspending its competitors.

• Downstream news:

- Royal Dutch Shell plc and HR Biopetroleum announced the construction of a pilot facility in Hawaii to grow marine algae and produce vegetable oil for conversion into biofuel. The announcement is a further step in Shell’s ongoing effort to develop a new generation of biofuels using sustainable, non-food raw materials. Algae hold great promise because they grow very rapidly, are rich in vegetable oil and can be cultivated in ponds of seawater, minimising the use of fertile land and fresh water. Shell and HR Biopetroleum have formed a joint venture company, called Cellana, to develop this project, with Shell taking the majority share. Construction of the demonstration facility on the Kona coast of Hawaii Island will begin immediately. The site, leased from the Natural Energy Laboratory of Hawaii Authority (NELHA), is near existing commercial algae enterprises, primarily serving the pharmaceutical and nutrition industries. The facility will grow only non-modified, marine microalgae species in open-air ponds using proprietary technology. Algae strains used will be indigenous to Hawaii or approved by the Hawaii Department of Agriculture. Protection of the local environment and marine ecosystem has been central to facility design. Once the algae are harvested, the vegetable oil will be extracted. The facility’s small production volumes will be used for testing.

• Business/Finance news:

- Kazakhstan wants to raise its stake or receive compensation for cost overruns and delays in the gigantic Kashagan offshore field, the largest oil find in more than three decades, the country’s president said. The president, Nursultan A. Nazarbayev, speaking after a meeting with foreign investors in the capital, Astana, also said that he was not seeking to replace Eni of Italy as project operator — deflating speculation that Kazakhstan wanted to assign the role to its state company, KazMunaiGaz, or to another company, possibly Exxon Mobil. The Kazakh authorities initially raised objections in July after Kashagan’s start-up expenses and overall costs nearly doubled, to a reported $137 billion from $57 billion, and the date for first production was pushed back to 2010, from 2005.Since then, the government and the companies involved have been negotiating a possible settlement.The Reuters news agency quoted Mr. Nazarbayev as saying that there are different ways to settle the matter — by giving Kazakhstan either a sum of money or a bigger stake in the project. The Kazakh president struck a conciliatory note, in a possible attempt to dispel fears that his country is exhibiting a growing nationalism. The talks have been extended twice and are now in a fifth month. A new deadline is now Dec. 20. The Kashagan consortium includes Royal Dutch Shell, ConocoPhillips, Total of France and Inpex Holdings of Japan. With some 13 billion barrels of estimated recoverable reserves, it is crucial to the West’s aspirations to develop oil suppliers beyond OPEC. Kazakh officials announced that all consortium members except Exxon Mobil had agreed to reduce their stake so that the share controlled by KazMunaiGaz could rise to 18.52 percent, from 8.3 percent, giving it the same share as the main consortium partners — Eni, Exxon Mobil, Shell and Total. Industry experts say that Eni was originally chosen to lead the project as a compromise between Exxon and Shell, which both lobbied heavily to become the operator. Reports from within the consortium now indicate that the partners are dissatisfied with Eni. The Kashagan field is considered one of the world’s most logistically and environmentally challenging projects. It is in a remote, shallow-water corner of the Caspian Sea, and contains high amounts of hydrogen sulfide, a deadly gas.



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