Home' Trinidad and Tobago Guardian : June 26th 2014 Contents JUNE 2014 • WEEK FOUR www.guardian.co.tt BUSINESS GUARDIAN
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The tar sands of Alberta already account
for 54 per cent of Canada s daily production
of 3.5 million barrels of oil. By 2030 that will
rise to 75 per cent of a total daily output of
6.4 million barrels, according to the Canadian
Association of Petroleum Producers.
It will do so, however, only if the industry
invests billions of dollars in new projects and
adds another 13,000 to its 25,000-strong
industry work force. It also will need new
The boom in shale oil south of the border
has reduced demand from the United States.
Transcanada s planned Keystone XL pipeline
would ship oil to refiners on the Gulf Coast,
but that project is stuck as President Barack
Obama hems and haws over approval. Prime
Minister Stephen Harper s Conservative gov-
ernment has made no bones about its frus-
tration with Keystone XL, so it came as little
surprise when, on June 17, the Canadian gov-
ernment approved the US$6 billion, 730-mile
Northern Gateway pipeline to take 525,000
barrels a day of bitumen to Kitimat, on the
Pacific coast of British Columbia, for shipment
Less expected was the tone and format of
the announcement, a lukewarm, five-paragraph
news release. There was no talk of jobs, access
to markets or other economic benefits.
"I expected a strong, resounding endorse-
ment of Northern Gateway with the might of
the federal government behind it," Andrew
Leach of the University of Alberta says.
The diffidence may be because the project
still faces huge obstacles. In April Kitimat res-
idents thumbed their noses at Enbridge, the
oil-transportation company that is planning
Northern Gateway, and they voted against the
project in a nonbinding referendum. The British
Columbian government is also dubious.
The fiercest opposition, however, comes
from the First Nations, the many aboriginal
groups worried about the risk of sticky bitumen
spills on their traditional lands and waters.
Past Supreme Court decisions require the
Canadian government to consult and in some
cases to accommodate First Nations concerns
when they are affected by natural-resource
projects. The prospect of years of court battles
There are other ways to get bitumen to mar-
kets, however, ones that do not require new
rights of way. The amount of oil transported
by rail is expected to increase to 700,000 bar-
rels a day by 2016, from 200,000 at the end
of 2013. Kinder Morgan, another energy firm,
has a US$5 billion plan to more than double
the capacity of its Trans Mountain oil pipeline
to Vancouver, although it faces a battle over
more tanker traffic in the harbour. As for Tran-
scanada itself, it wants to spend US$11 billion
on its Energy East project to convert a cross-
country natural-gas pipeline to oil, shipping
tar-sands output to eastern refineries or on
to the Gulf of Mexico and Europe.
Harper s government has promoted Keystone
XL and Northern Gateway for years, but other
routes will flow faster.
@2014 The Economist Newspaper Ltd. Distrib-
uted by the New York Times Syndicatek
Canada's Northern Gateway Project:
A go or a no? Canadian Prime
Royal Dutch Shell launched a long-anticipated sale of most
of its stake in Australia s Woodside Petroleum Ltd on June 17,
looking to reap about US$5.7 billion as it moves to focus on
developing its own gas assets in Australia.
The share disposal brings the Anglo-Dutch oil major closer
to its goal of shedding US$15 billion of assets as part of a drive
to cut spending and streamline operations following a profit
warning in late 2013.
The selldown, which reduces Shell s holding to 4.5 per cent
from 23.1 per cent, removes uncertainty that has weighed on
Woodside s share price since Shell sold a third of its stake in
2010 and flagged it was not a long-term holder.
As part of the deal, Woodside will buy back and cancel half
the shares that Shell is selling, which Australia s top petroleum
producer said would effectively boost its earnings per share by
6.0 per cent.
"It s probably good. It removes the overhang and gets rid
of a lazy balance sheet and they can get on with life," Pengana
Capital portfolio manager Tim Schroeders said.
The reduction in Shell s stake marks a milestone in a long
retreat from a company that it had tried to take over in 2001.
That deal was ultimately blocked by the Australian government
after Woodside argued that Shell may focus on offshore devel-
opments at the expense of Australian projects.
The sale, which came the week Woodside s stock hit a three-
year high, had been expected this year after Shell chief executive
Ben van Beurden took the helm in January, outlining plans to
sell US$15 billion of assets in 2014-15.
So far, Shell has sold or put on the block around US$12 billion
of assets in Australia, Europe, Nigeria and North America.
Like other oil majors, Shell is under pressure from investors
to cut soaring costs and increase profit distribution via dividends
and share buy-backs. Some investors have predicted the asset
sales target will rise as it looks unambitious compared to BP s
asset sales of around US$50 billion.
Shell said it would focus efforts in Australia on its 25 per
cent stake in the massive Gorgon liquefied natural gas project
and its Prelude floating LNG project, and had options for
further LNG growth in Australia, Indonesia and North Amer-
"It doesn t change our view of Australia as an important
player on the global energy stage, or Shell s central role in the
country s energy industry," van Beurden said in a statement.
Under the deal, Woodside will spend A$2.86 billion (US$2.69
billion) to buy back 78.3 million of its shares from Shell for
A$36.49 a share, which it was able to fund easily after pulling
out of a planned investment in Israel s Leviathan gas project.
Shell will also sell a further 78.3 million shares to institutional
investors for A$3.24 billion, or A$41.35 a share, a 3.5 per cent
discount to Woodside s last traded share price.
Woodside s shares were on a trading halt on June 17, pending
the completion of the share sale to institutions.
Goldman Sachs and Citi won the coveted role of running
the sale. Woodside was advised by Gresham Partners.
While welcoming Shell s selldown, investors remained con-
cerned about Woodside s lack of near-term growth options,
as the company is about a year away from signing off on any
new LNG projects, and potential acquisitions are seen as too
"On balance it s a pretty good deal, but it doesn t create
value or change the value of the company longer-term," said
an analyst, who declined to be identified as he is not authorised
to speak to the media.
Woodside chief executive officer Peter Coleman said the
company was continuing to look for ways to expand its explo-
ration work while also evaluating potential acquisitions, and
would have a strong enough balance sheet to pursue growth
even after the buyback.
"This doesn t in any way affect our capacity to pursue any
of those or complete a transaction if one was attractive," he
told analysts and reporters on a conference call. (Reuters)
Shell to sell most of stake in Australia's Woodside for US$5.7bn
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