Royal Dutch Shell News: Shell Switches Out US/Africa for South America

Royal Dutch Shell news: Many analysts expected Royal Dutch Shell plc (ADR) (NYSE:RDS.A) to leave Africa. Conclusions are well founded since the company’s presence in the continent declined progressively, and legal battles continued to produce bad publicity. Operations in Libya never returned to full production after Muammar Gadhafi’s deposition. Security issues and the country’s fragmentation further complicated production since no clear authority seemed to emerge, and the yellow oyster started to be associated with western imperialism by some native factions. In turn, employees and facilities were targeted interrupting normal production.

In Africa, Royal Dutch Shell also confronts important challenges. The firm has entered the fifth year of legal rumbling over an oil spill in the Niger delta. While responsibility has not been contested, the company continues to litigate over damages and compensation. Operations are further complicated by a troubled pipeline that requires the firm to continuously stopped activities. No announcements have been made concerning damages to the pipeline, but the reasons lie on poor maintenance and sabotage. Each day the pipeline is shut down and 150,000 BOE are deprived from reaching its destiny.

In the meantime, the company has divested four oil blocks in Nigeria, opposed proposed protective legislation, and continues to utilize the right of force majeures to avoid breaching contract quotas. Whether the actions represent a will to remain in the continent, or a mere smokescreen for its retrieval is yet to be known.

At the same time, Royal Dutch Shell made interesting moves in the Americas. While pulling out of the United States gas business, the company increased its presence in the South America. The argument for ending gas operations in the US was based in pure economics. The timeline indicates a late arrival, which translated into reduced profitability. Further south, the company has increased its stake in the Uruguayan basin, and made important announcements concerning deepwater operations in Brazil.

Disclosure: Jodor Jalit holds no position in any of the mentioned stocks.

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