Shell has offered 195 pence per share in cash, which Cove’s
directors said on Wednesday they would recommend to
shareholders.

On Tuesday, Cove’s shares closed at 154.5 pence, and
analysts at Citigroup said the “valuation looks stretched” in a
research note.

The price is an over 70 percent premium to Cove’s closing
share price on Jan. 4, when Cove announced plans to sell,
although investors were already betting on a bid at that point.

Cove’s main asset is an 8.5 percent stake in the Rovuma
Offshore Area 1, in Mozambique, where operator Anadarko
has found over 30 trillion cubic feet of natural gas.

Nearby, Italy’s Eni has also made major gas finds while,
north of the maritime border, Norway’s Statoil has made a find
in Tanzanian waters.

Shell is the industry leader in freezing natural gas into
liquefied natural gas (LNG) for export in tankers around the
world, and so a presence in what is expected to emerge as one of
the world’s major LNG provinces is a logical step.

However, some bankers had questioned whether Cove’s stake
alone would make sense for an oil major like Shell. Big oil
groups like to have material stakes of over 25 percent in
projects.

In addition to Anadarko, Japan’s Mitsui and Indian
groups Bharat Petroleum and Videocon own minority stakes in the
Rovuma license, and the values of these interests could now be
marked up.

Cove also has interests in Tanzania and Kenya.

Morgan Stanley advised Shell on the bid, while Standard
Chartered advised Cove.

Kevin Biddle, Exxon’s exploration director for Europe, also
downplayed the prospects for Poland — believed by many to have
the continent’s largest reserves — leading the shale gas
charge, saying on Monday that Germany was more likely to be the
first shale gas producer.

“Five years is possible for some areas — we have to be
working at a pretty good clip to get any significant production
online in that time,” he told the International Petroleum Week
conference in London.

Exxon, the largest oil company in the world by
market capitalisation, is one of the most active drillers for
shale gas on the continent, and is exploring in Poland and
Germany.

Yet it has tended to make less noise about its operations
than some smaller groups, which have boosted talk that Europe
could experience the “shale gale” that rocked the United States.

“The high resource numbers that some people quote are highly
speculative,” Biddle said.

Within half a decade, an explosion of shale gas production
has sent the U.S. market from shortage to glut and led to plans
to export gas as liquefied natural gas.

In the past year, some companies have spurred talk of a
European shale gale.

In September, Cuadrilla Resources said it had found 200
trillion cubic feet (tcf) of gas in Northern England — enough
to feed UK needs for many years — despite only drilling three
wells on its acreage.

Experts questioned how such a large find was ascertained on
such limited drilling.

Last month, Canada’s Tamboran Resources said it had found
4.4 tcf of shale gas in Northern Ireland, without drilling a
single exploration well.

Also speaking at the IP Week conference, John Manzoni, Chief
Executive of Talisman Energy, which is also exploring for shale
gas in Poland, echoed Biddle’s caution.

He said his company had completed two wells in the country
and planned to commence drilling on another soon.

The most recent had discovered gas and liquids — which are
even more valuable than gas — but said two wells were not
enough to determine whether the finds were commercial.

“People get very excited about it but this is early days,
it’s going to take a while,” Manzoni said.

The risks to the viability of shale gas are not only
geological.

Poland needs to develop a fiscal structure which will
encourage shale gas production, Manzoni said, while Biddle said
his prediction about Germany hinged on the country not banning
the controversial production process known as “fracking”.

Germany’s parliament has been holding hearings on hydraulic
fracturing, or fracking, which involves shooting water and
chemicals into rock to allow the gas inside to escape.

Environmentalists say the process risks contaminating ground
water, leaks methane into the atmosphere and can cause tremors.

Exxon last month said its two shale wells in Poland had not
found commercial quantities of gas, prompting Gazprom
Europe’s largest gas supplier, to say European shale was an
“illusion”.

The following are possible outcomes from the litigation.

BP SETTLES ALL CASES AGAINST IT

BP has said it is keen to settle the claims ahead of the start of hearings. This could prevent some of the dirty laundry associated with the spill from being aired in a courtroom as well as spare BP and its partners lengthy and costly litigation.

“The most likely scenario continues to be a settlement at least between BP and the federal and state governments,” said David Uhlmann, a professor at the University of Michigan Law School and former chief of the justice department’s environmental crimes section.

“It does not serve the company’s business interests to engage in a protracted legal battle over the Gulf oil spill.”

BP has set aside $13 billion (8 billion pounds) dollars to cover outstanding liabilities. However, uncertainty over the final cost is a much bigger drag on the oil company’s valuation, suggesting it could justify paying much more to make the cases go away.

Analysts at Societe Generale have estimated the gap between BP’s total provision and the hit to its market capitalisation as $33 billion (20 billion pounds).

Suggesting even more upside from settling the cases is the fact that Chevron Corp (CVX.N: Quote, Profile, Research), which pumps 23 percent less oil and gas than BP, is worth $60 billion (37 billion pounds) more.

But a settlement is complicated.

BP faces action from the government, individuals and businesses and is suing its contractors to make them contribute to the clean-up cost. It also believes its partners in the well, Anadarko Petroleum (APC.N: Quote, Profile, Research) and Japan’s Mitsui (8031.T: Quote, Profile, Research), should share the burden of any fines.

“The challenge right now is that there are so many issues, so many parties, and so many government agencies involved. Settlement talks could be derailed easily,” Uhlmann said.

BP SETTLES WITH THE U.S. GOVERNMENT

BP sources told Reuters last month the company was in talks with the U.S. justice department about a possible settlement. The company has taken a provision of $3.5 billion (2.2 billion pounds) to reflect amounts it expects to pay to cover civil penalties under the Clean Water Act.

It also faces liabilities for Natural Resources Damages but the company said it is unable to estimate these. BP has also said the Department of Justice (DoJ) is investigating possible criminal charges – 11 people died aboard the doomed Transocean rig – which could lead to additional penalties which the company has not assessed because it feels it is not guilty.

Most analysts and legal experts believe BP would have to pay much more than $3.5 billion (2.2 billion pounds) to appease the government. Plus, there is a probe into possible suspicious trading of BP stock during the crisis.

BP’s Clean Water Act provision assumes it is only liable for a fine of $1,100 (693.66 pounds) per barrel spilt, and not the $4,300 (2,711.57 pounds) per barrel it could face if found to be grossly negligent. The government has indicated it will push for the higher level of fine. With some 4.9 million barrels of oil estimated by the U.S. government to have gushed from the broken well, that could be between $5.4 billion (3.4 billion pounds) and $21 billion (13 billion pounds).

“Even if BP cannot settle with everybody, it makes sense to settle with the government,” said Uhlmann. “BP can negotiate with the government over the dollars per barrel and payment schedule, but the government will insist on using its estimate of how much oil was discharged from the well.”

Analysts have forecast, on average, that BP will have to pay around $10 billion (6 billion pounds) to settle the Clean Water Act fines. Plus, there is the ecological impact on endangered species and birds. Fines from that could be tens of millions of dollars, if not more.

Morgan Stanley estimates other liabilities will add $10-$15 billion onto the amount the company will have to pay the DoJ, although most other investment analysts have put the figure at under $5 billion (3 billion pounds).

With analysts predicting the government settlement will account for the lion’s share of BP’s remaining liabilities, the company could expect a meaningful share uplift from a $15 billion (9 billion pounds) settlement — especially if the amount was staggered over years, as was Exxon’s $900 million (567 million pounds) settlement with the justice department regarding the Valdez spill.

On the other hand, the government would likely be keen to calibrate any settlement to a level that it expected would not prompt too big a share rise – something that could make it seem the Obama Administration let BP off lightly – and in an election year there will likely be close scrutiny to ensure environmental groups, one of Obama’s key constituencies, are satisfied.

But BP will also be concerned about appearances and this may complicate a deal with the government.

BP’s communications strategy since the spill has been to try and spread blame onto its contractors.

The government probes into the rig blast have held BP to be mostly to blame but have also criticised the role of driller Transocean (RIGN.VX: Quote, Profile, Research) and well cementing specialist Halliburton

(HAL.N: Quote, Profile, Research).

Also, under the law, its partners Anadarko and Mitsui, are potentially liable for fines.

BP might resist a deal whereby it was the only party paying fines, as this could make it appear the only negligent party. Meanwhile the other parties may feel they have a strong enough case to fight the government.

“I just think open court generally is risky for a party that thinks it has considerable exposure,” said Carl Tobias, a professor at the University of Richmond Law School in Virginia. “So maybe it’s better just to get the best settlement you can and also avoid the adverse publicity of the court situation. To some extent you also can better shield the bad information.”

BP SETTLES WITH TRANSOCEAN, HALLIBURTON

BP has sued Transocean and Halliburton for up to the full cost of the spill, alleging negligence on their part. BP has not said how much it expects the companies to contribute and analysts do not predict it will receive much.

BP may be happy to accept a small payment from these companies, as this could at least be depicted as an admission of fault.

The contractors would be reluctant to agree any deal which appeared to make such an admission but eliminating uncertainty around the matter could also be a boost to their shares.

Also, a deal which BP could spin as an admission of shared blame on the part of its contractors, might make BP feel happier about being the only party that ends up paying fines to the DoJ.

SETTLEMENT WITH INDIVIDUALS AND BUSINESSES

BP faces large but unspecified claims from individuals and businesses which suffered losses due to the spill, and which feel they have not been adequately compensated by the $20 billion (12 billion pounds) fund BP established to cover economic losses.

A steering committee was formed to represent the interests of such parties and big disagreements remain between BP and the claimants.

BP has a $6.1 billion (3.8 billion pounds) provision to cover such claims but this excludes any amount for punitive damages, which some claimants are seeking and which BP says are not warranted.

The large number of claimants — BP said it faces 600 civil lawsuits from people in states as far away as South Carolina and Kentucky — may make a deal difficult to achieve.

On the other hand, BP has said it is prepared to litigate for the long haul in the face of what it considers unreasonable demands, and has pointed to the 20 years it took to wrap up lawsuits around the Exxon Valdez spill.

Plaintiffs could take the view that cash today is a lot more attractive than a larger potential payout in the distant future.

NO DEAL, CASE GOES TO COURT

The trial will be heard in three parts and, BP has told analysts, could run until late 2013, with actual fines and penalties not decided until 2014.

However, BP has made clear it will appeal any settlement it does not consider reasonable, and other parties are expected to do likewise. This suggests that a final decision by the courts on who has to pay, what, could be many years away.

A settlement could be achieved at any time. However, developments in the trial will influence the perceived strengths of either side, potentially pushing the sides further apart.

“February 27 is not a drop dead date, particularly since the government does not have to present its claims first when the trial begins,” said Uhlmann. “The challenge once trial begins is that positions tend to harden and compromise becomes more difficult, which is essential for any settlement to occur.”

(Editing by Mark Potter)

The move, announced along with a 40 percent rise in fourth
quarter profits on strong oil prices and a lower tax rate, will
mean its 2015 output will be some 110,000 barrels of oil
equivalent per day lower than earlier indicated.

UK-based BG reaffirmed its target of growing oil and gas
production by an average 7 percent per annum out to 2020 but
Chief Executive Frank Chapman, who is due to step down by the
end of next year, said output growth would be muted to 2015
because of the shale drilling decision.

Output would ramp up sharply between 2015 and 2020, he said
on Thursday.

BG’s U.S. shale gas assets are largely “dry gas” and so
yield little if any of the highly valuable natural gas liquids
(NGLs) on which the economics of shale now depends.

With gas prices unable to cover drilling costs, operators
make money by selling the liquids they produce in conjunction
with the gas. While oversupply has killed gas prices, NGLs can
be sold at prices that often exceed still-buoyant crude prices.

U.S. gas prices have been under pressure for the past couple
of years because a production glut, caused in large part by
shale development, and reached a 10-year low in January.

LNG BULLS

BG remained bullish about its liquefied natural gas (LNG)
sales business, lifting its profit and production outlook for
the division.

Strong demand for the fuel in Asia, as economies expand
rapidly and the Japanese nuclear accident at Fukishima last year
prompts a shift to gas-fired power generation, has lifted prices
for LNG, natural gas which is cooled until it liquefies for
easier shipping in special tankers.

BG said fourth-quarter earnings, which exclude one-offs and
non-cash charges, were $1.48 billion against a consensus
forecast of $1.11 billion from a company survey of analysts.
Analysts at JP Morgan said that even stripping out the impacts
of the low tax rate, BG outperformed expectations by 8 percent.

The company’s shares traded 2.8 percent higher at 1,486
pence at 0917 GMT, outperforming a 0.9 percent rise in the STOXX
Europe 600 Oil and Gas index.

Larger rival BP reported a 14 percent rise in underlying
fourth-quarter earnings compared with the same period in 2010,
while Royal Dutch Shell reported an 18 percent
increase.

BG, which is based in Reading, outside London, reported a 1
percent drop in production in the quarter, due to technical
problems in the North Sea.

It added that appraisal work showed its new discoveries
offshore Tanzania contained 3 trillion cubic feet of resources,
supporting hopes that the East African region could emerge as a
major LNG hub, after other companies announced big finds in
Mozambique.

BG lifted its full year dividend 10 percent and
said it would sell around $5 billion of largely downstream, gas
distribution and power generation and transmission assets, in
the coming tow years.

It added capital investment would rise over the coming two
years. Analysts at Citigroup said the increase was related to
higher costs at its Queensland, Australia LNG project.

BG again raised the profit and production outlook for its
liquefied natural gas (LNG) sales division on Thursday, helped
by strong demand in Asia as economies expand rapidly and as the
Japanese nuclear accident at Fukishima last year prompts a shift
to gas-fired power generation.

BG also reaffirmed its target of growing oil and gas
production at 7 percent per year to 2020, even as weak U.S. gas
prices force it to scale back shale gas drilling activity by
almost 80 percent.

BG said fourth-quarter earnings, which exclude one-offs and
non-cash charges, were $1.48 billion against a consensus
forecast of $1.11 billion from a company survey of analysts.
Analysts at JP Morgan said that even stripping out the impacts
of the low tax rate, BG outperformed expectations by 8 percent.

The company’s shares traded 2.5 percent higher at 1480 pence
at 0803 GMT, outperforming a 1.0 percent rise in the STOXX
Europe 600 Oil and Gas index.

Larger rival BP reported a 14 percent rise in underlying
fourth-quarter earnings compared with the same period in 2010,
while Royal Dutch Shell reported an 18 percent
increase.

BG, which is based in Reading, outside London, reported a 1
percent drop in production in the quarter, due to technical
problems in the North Sea.

BG said appraisal work showed its new discoveries offshore
Tanzania contained 3 trillion cubic feet of resources,
supporting hopes that the East African region could emerge as a
major LNG hub, after other companies announced big finds in
Mozambique.

BG’s strong growth will come at a cost and the company
predicted capital expenditure will rise to around $11 billion
per year from $8 billion last year.

This could curb the company’s capacity for further dividend
hikes after increasing the full-year payout by 10 percent.

While reiterating BP’s “bias for settling” at hearings scheduled later this month, CEO Bob Dudley said he would only do so “on fair and reasonable terms.”

As he unveiled higher fourth quarter profit on Tuesday and a rise in the dividend, which he said showed BP was putting the spill behind it, Dudley acknowledged the lawsuits were the biggest uncertainty facing the British oil major.

“We have many people who do say, we are interested in investing in BP but not until all this is behind you,” he told a press conference.

BP faces 600 civil lawsuits from people in states as far away as South Carolina and Kentucky, as well as litigation from the U.S. government.

“We always have had this bias toward settling and moving on, and reducing uncertainty,” Dudley said.

But he added; “We are preparing vigorously for trial. We have confidence in our case.”

Analysts at Morgan Stanley have predicted BP will agree to pay the U.S. government $20-$25 billion in the coming weeks to settle fines and natural resources damages but Alastair Syme, oil analyst at Citigroup, said he expected the case to go to trial as planned on February 27.

BP, Europe’s second-largest oil company by market value, also lifted its estimate of the total cost of the United States’ worst-ever offshore oil spill by $1.8 billion to $43 billion due to higher costs for shoreline clean up, which BP said was now largely complete, and a new $500 million charge for legal fees.

By contrast, BP’s statement showed the company has valued the doomed Macondo prospect at just $400 million.

The disaster forced a major restructuring at London-based BP but Dudley said the group was returning to growth and that 2012 would be a “year of milestones,” after a “year of consolidation” in 2011.

Underscoring its confidence, BP increased its quarterly dividend to 8 cents a share from 7 cents, backed by strong cashflows due to higher oil price.

“It is a good sign of confidence in the improving operational performance,” said Tony Shepard, oil analyst at Charles Stanley.

BP’s 14 cents a share quarterly payout was cut at the height of the spill, and reintroduced at half that level in 2011.

OUTPUT FLAT, MORE CAPEX

BP said its replacement cost (RC) net profit rose 65 percent compared with the same period last year, to $7.61 billion in the quarter, boosted by a $4 billion contribution from Anadarko Petroleum, which had a stake in Macondo, towards clean up costs.

Stripping out one-offs, the result rose 14 percent to $4.99 billion, in line with an I/B/E/S consensus forecast of $4.89 billion.

Rival Royal Dutch Shell Plc reported an 18 percent rise in underlying profit in the quarter while industry leader Exxon Mobil only managed a 2 percent rise.

Replacement cost profit excludes gains or losses related to changes in the value of fuel inventories and so is comparable with net income under U.S. accounting rules.

BP’s muted increase was despite an unusually low tax rate, higher gas prices and a 26 percent rise in the Brent crude price in the quarter compared to the same period of 2010.

Lower production weighed on the fourth quarter result, with assets sales, in part to help pay for the oil spill, pushing output down 5.1 percent to 3.49 million barrels of oil equivalent per day in the quarter.

Dudley said he expected output to fall further in 2012, despite investor hopes that BP’s smaller asset base would facilitate higher growth.

Echoing a trend across the sector, BP said it was lifting its capital expenditure budget for 2012, as it invests more in exploration and production.

Some analysts have questioned whether the additional spending will generate the same returns oil giants like BP, Shell and Exxon have enjoyed in the past.

Dudley said that, over time, upstream oil and gas assets offered returns of around 15 percent, and that the expected this to continue going forward.

In the latest sign the British oil group is getting back to business in the Gulf of Mexico, BP said it had sanctioned a major new project in the area [ID:nL5E8D735D].

BP shares traded down 1.3 percent at 483 pence at 1040 GMT, lagging a 0.6 percent drop in the STOXX Europe 600 Oil and Gas index.

BP said over $5 billion of contributions from its partners in the blown-out well, Anadarko and Japan’s Mitsui, meant it would be able to end its own payments into a $20 billion compensation fund in 2012, a year earlier than expected.

(Editing by David Cowell)

Chief Executive Bob Dudley said on Tuesday BP was ready to
settle on “fair and reasonable terms” but added he was also
ready to fight.

The comments came as the company unveiled fourth-quarter
results which showed its estimate for the total cost of the
spill rose by $1.8 billion in 2011 to $43 billion. Some analysts
think the final figure could be much higher.

The increased estimate reflected higher costs of shoreline
clean up, which BP said was now largely complete, and a new $500
million charge related to legal costs beyond 2012.

BP had already set aside over $1 billion to pay its lawyers,
suggesting the disaster will end up a major boon for attorneys.

The London-based oil giant said it faced around 600 civil
lawsuits from people in states as far away as South Carolina and
Kentucky, as well as litigation from the government and Gulf
Coast states.

Europe’s second-largest oil group by market capitalisation
said contributions from its partners in the blown-out Macondo
well, Anadarko Petroleum and Japan’s Mitsui, would reduce the
final bill it faced.

The over $5 billion BP has received has contributed to the
$20 billion fund created to compensate those impacted by the
United States’ worst-ever offshore oil spill, and will allow BP
to end its own payments into the fund in 2012, a year earlier
than expected.

Progress in meeting the costs of the spill allowed BP to
announce an increase in its dividend, which had been cut at the
height of the spill in 2010.

BP lifted the quarterly payout to 8 cents a share from 7
cents, backed by strong cashflows due to higher oil price.

BP said its replacement cost (RC) net profit rose 65 percent
compared to the same period last year, to $7.61 billion in the
quarter, boosted by a $4 billion contribution from Anadarko.

Stripping out one-offs, the result rose 14 percent to $4.99
billion, in line with an I/B/E/S consensus forecast of $4.89
billion. Rival Royal Dutch Shell Plc reported an 18 percent rise
in underlying profits in the quarter while industry leader Exxon
Mobil only managed a 2 percent rise.

BP’s muted increase was despite a lower than expected tax
rate, and a 26 percent rise in the Brent crude price in the
quarter compared to the same period of 2010.

BP shares traded up 0.4 percent at 492 pence at 0840 GMT,
outstripping a 0.1 percent rise in the STOXX Europe 600 Oil and
Gas index.

However, weaker-than-expected results for the fourth
quarter, partly due to dismal industry-wide refining margins,
and an anaemic dividend hike, raised the question of whether
Shell was simply running faster to stand still, with investments
offering ever-dwindling returns.

Shell’s London-listed A shares traded down 2.2 percent at
0826 GMT, lagging a 0.8 percent drop in the STOXX Europe 600 Oil
and Gas index.

Hague-based Shell said it was eyeing a return to strong
production growth in the coming years, after nearly a decade.
Apart from a 5 percent rise in 2010, the group’s production has
fallen every year since 2002.

“Oil & gas production should average some 4 million boe/d
(barrels of oil equivalent per day) in 2017-18,” the company
said in a statement.

Production averaged 3.215 million boe/d in 2011, a 3 percent
drop on 2010.

This growth will be generated by higher capital investment
expenditure, which will rise to $32-$33 billion this year from
$31.5 billion last year, Shell said.

Analysts had previously predicted that capex would fall, as
Shell completed the big new projects such as the pearl
gas-to-liquids plant in Qatar, which will push output higher.

The high capital being invested is one reason that Shell’s
return on capital employed failed to sparkle, at 15.9 percent,
compared to levels above 20 percent a few years back when oil
prices were considerably lower.

Similarly, in spite of a record average Brent crude price of
$111/barrel in 2011, the full year current cost of supply (CCS)
net income of $28.6 billion still lagged the earnings high Shell
reported in 2008, of $31.4 billion.

FOURTH QUARTER DISAPPOINTS

Shell said its fourth quarter CCS net income was $6.46
billion, helped by one-off gains from the sale of assets.

Excluding one-offs, the result rose 18 percent to $4.85
billion, shy of an average forecast of $5.17 billion from a
Reuters poll of nine analysts.

The miss is despite the fact analysts had recently cut back
their forecasts in the light of weak trading statements from
Shell’s rivals.

CCS earnings strip out unrealised gains or losses related to
changes in the value of inventories, and as such are comparable
with net income under U.S. accounting rules.

The company also announced a weaker rise in its dividend
than some analysts expected, adding just 1 cent to its first
quarter dividend for 2012, to $0.43 per share.

The bullish outlook came as Europe’s largest oil company by
market capitalization unveiled weaker-than-forecast fourth
quarter profits, after dismal industry-wide refining margins
sent the crude processing division into a loss.

The company also announced a weaker rise in its dividend
than some analysts expected, adding just 1 cent to its first
quarter dividend for 2012, to $0.43 per share.

Hague-based Shell said it was eyeing a return to strong
production growth in the coming years, after nearly a decade.
Apart from a 5 percent rise in 2010, the group’s production has
fallen every year since 2002.

“Oil & gas production should average some 4 million boe/d
(barrels of oil equivalent per day) in 2017-18,” the company
said in a statement.

Production averaged 3.215 million boe/d in 2011, a 3 percent
drop on 2010.

However, a big rise in crude prices outweighed this drop,
and weak refining profits. Net profits for 2011 were $24.69
billion, up 37 percent on the year.

The company said its fourth quarter current cost of supply
(CCS) net income was $6.46 billion, helped by one-off gains from
the sale of assets.

Excluding one-offs, the result rose 18 percent to $4.85
billion, shy of an average forecast of $5.17 billion from a
Reuters poll of nine analysts.

Brent crude prices averaged $109 per barrel last
quarter, up from $88 a year before.

CCS earnings strip out unrealised gains or losses related to
changes in the value of inventories, and as such are comparable
with net income under U.S. accounting rules.

While politicians and green lobby groups insist the future of transport is electric, in the past two months BP and Exxon have released data which points to electric cars making up only 4-5 percent of all cars globally in 20-30 years.

Meanwhile some governments are targeting as much as a 60 percent market share for electric vehicles over a similar period.

The oil company forecasts may appear self-serving, but if they are widely accepted could provoke a policy shift that offers greater incentives for electric cars to end our addiction to oil.

And unlike more optimistic predictions from consultants like McKinsey, these forecast are backed by cash. They guide tens of billions of dollars in long-term investment in oil production and refining and it is oil that stands to lose if they get it wrong.

They don’t, of course, take into account a major breakthrough in battery technology that could give electric cars a cost and performance edge over the internal combustion engine.

In its Energy Outlook for 2030, released earlier this month, BP predicted that electric vehicles and plug-in hybrids, will make up only 4 percent of the global fleet of 1.6 billion commercial and passenger vehicles in 2030.

“Oil will remain the dominant transport fuel and we expect 87 percent of transport fuel in 2030 will still be petroleum based,” BP Chief Executive Bob Dudley said as he unveiled the BP statistics on January 18.

The balance is seen coming from biofuels, natural gas and electricity.

Plug-in hybrids can be powered from the mains and only rely on their small gasoline engines when the battery dies.

Standard hybrids are principally driven by an internal combustion engine whose efficiency is boosted by the recycling of energy generated from braking.

Exxon Mobil, the biggest oil and gas company in the world, says the continued high cost of electric vehicles compared to petroleum cars, means take-up won’t even increase much during the 2030s.

In its 2040 Energy Outlook, released in December, the Texas-based company said electric vehicles, plug-in hybrids and vehicles that run on natural gas would make up only 5 percent of the fleet by 2040.

Peter Voser, Chief Executive of Royal Dutch Shell, the industry number two, sees a rosier future for electric vehicles. He predicts they will account for up to 40 percent of the worldwide car fleet, although only by 2050.

A $50 BILLION-A-YEAR OPINION

The statistics published by Exxon and BP, Europe’s second-largest oil company by market value, are perhaps the most detailed long-term forecasts on electric vehicle take-up.

These Energy Outlooks guide how the oil groups allocate their annual investment budgets – among the biggest in the world, at over $50 billion combined for BP and Exxon.

The expected continued dominance of petroleum partly explains the scaling back in BP and Shell’s solar, hydrogen and wind power ambitions in recent years, and Exxon’s continued reluctance to get involved in renewable energy.

Insofar as the companies are active in green energy, it is mainly in the production and blending of biofuels. This is driven by U.S. and European governments’ insistence that a percentage of motor fuels sold must come from plant-based sources.

If the oil companies are wrong about electric cars they will find their investments in big and expensive new oil production projects, which increasingly need crude prices around $80 per barrel to be profitable, not paying off.

The companies do see an easing in the addiction to oil, though.

Despite increased car ownership in China and India, Exxon predicts “global demand for fuel for personal vehicles will soon peak” due to an increase in average fuel efficiency.

BP expects the efficiency of combustion engines to double by 2030, with a third of vehicles on the road being hybrids.

This trend will be driven by more stringent fuel economy standards in the U.S., CO2 reduction legislation in Europe and an end to oil subsidies in developing countries.

Increased airline and commercial vehicle traffic will counterbalance some of the efficiency gains from cars but BP predicts that, helped by increased use of biofuels, demand for oil for transport overall will plateau in the mid-2020s.

GREENS FUME, POLITICIANS SEE QUICKER ADOPTION

Green groups reacted with suspicion to the oil industry forecasts.

“Exxon would say that, wouldn’t they. A big take-up of electric cars is not something they would like to see,” said Jos Dings, director of Brussels-based sustainable transport campaign group, Transport and Environment.

“The future for petrol and diesel doesn’t look good,” he countered.

Nonetheless, environmentalists like Dings fear political complacency about improving vehicle efficiency could prompt governments to ease targets to cut vehicle emissions, which could in turn delay the electrification of transport.

Big Oil’s pessimistic outlook for electric cars is at odds with many governments’ plans.

Electric vehicles barely register on the statistics of car sales at the moment. Nonetheless, China is targeting 5 million electric vehicles on its roads by 2020, according to media reports. This would represent around 3 percent of its predicted fleet.

The Australian government’s main energy adviser, the Australian Energy Market Commission, has predicted electric vehicles will make up 20 per cent of new car sales in Australia by 2020 and 45 per cent by 2030.

The UK’s Committee on Climate, which advises the government, has predicted electric vehicles will reach around 60 percent of new cars and vans by 2030. And New Zealand hopes to get to 60 percent by 2040.

The U.S. has more muted ambitions. President Barack Obama said he wants to put 1 million electric vehicles on U.S. roads by 2015, a figure that would represent less than half of one percent of the total fleet.

Many U.S. experts and officials predict a tipping point in the uptake in electric vehicles in the latter part of this decade, as technology improves, economies of scale kick in and consumer fears about being stranded when their batteries run flat, or “range anxiety,” eases.

However, data compiled by the U.S. Energy Information Administration may explain the lack of an official U.S. target. Last week, the agency released an ‘abridged version’ of its Annual Energy Outlook 2012, due to be released in full in the Spring.

Tables used in formulating the outlook show electric vehicles and plug in hybrids are expected to account for only 1.3 percent of the U.S. fleet in 2030.

Furthermore, the agency predicts that neither consumers, nor carmakers, will get over ‘range anxiety’. By 2035, the agency sees few, if any, electric vehicles on U.S. roads that can travel for 200 miles without recharging.

CARMAKER ENTHUSIASM COOLS

Many of the headlines out of autoshows in the past couple of years have been captured by the launch of electric cars such as Nissan’s Leaf, the Tesla sports car, plug-ins like General Motors’ Chevrolet Volt, and the latest incarnation of the Toyota Prius.

Other manufacturers including BMW, Rolls-Royce and Porsche have presented electric-powered prototypes.

On the basis of this, one could be forgiven for thinking the auto industry is betting big on electric power.

Yet few auto executives share the optimism of Renault and Nissan chief executive Carlos Ghosn who has repeatedly said he sees electric vehicles making up 10 percent of all sales in 2020.

A survey of 200 auto industry executives conducted by KPMG released earlier this month gave an average forecast for electric vehicles to account for 6-10 percent of global auto sales in 2025 – more bullish than Exxon and BP but hardly a revolution.

“Certainly a year ago or so, you could have gotten the impression from reading the press that everyone is driving electric cars in two years time,” Daimler CEO Dieter Zetsche said at a roundtable at the sidelines of the Detroit auto show last month.

Zetsche said he did not see “an explosion of demand for this product.”

Echoing comments from the oil companies, Gerd Kleinert, CEO of KSPG, the automotive parts business belonging to German group Rheinmetall, says take-up of electric cars will be curtailed until batteries can store energy using as little weight as gasoline does, and can be recharged as quickly as refilling a fuel tank.

“When that world exists, then we will all be driving electric cars starting tomorrow. But I personally don’t see that happening, not even a hundred years from now.”

(Additional reporting by Christiaan Hetzner in Frankfurt; Editing by Chris Wickham)