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Shell International Upstream To Power Growth

INVESTOPEDIA

Posted: Apr 02, 2010 15:34 PM by Eric Fox

Royal Dutch Shell (NYSE: RDS.A, RDS.B) will utilize its large portfolio of international upstream projects to grow production, reaching 3.5 million barrels of oil equivalent per day (BOE/D) by 2012. This 11% production growth will be powered by the startup of large projects in its international portfolio, including ones in Qatar and the Canadian oil sands.

These and other international projects initiated by Royal Dutch Shell will add about 600,000 BOE/D to its production base over the next three to four years.

Canada

In the Canadian oil sands, Royal Dutch Shell operates the Athabasca oil sands project and has a 60% interest here. This project first came on line in 2002 and produced 130,000 barrels per day in 2009.

Royal Dutch Shell is currently mining only at the Muskeg River site, but it has a Phase I expansion under construction that will add 100,000 barrels per day to the project.

The Athabasca oil sands project works at a fairly low oil price with cash operating costs of just over $30 per barrel.

Chevron Corp. (NYSE: CVX) and Marathon Oil (NYSE: MRO) are also involved in the Athabasca oil sands project, each with 20% ownership.

Qatar

In Qatar, Royal Dutch Shell has two large projects under construction – the Pearl Gas To Liquids (GTL) project and Qatargas 4, a liquefied natural gas (LNG) facility.

The Pearl River GTL project will take natural gas from Qatar’s North Field, which contains 900 trillion cubic feet of natural gas reserves, and put it through a complex process to produce liquid transportation fuels and natural gas liquids. The project will have peak production of 260,000 barrels per day of various products.

Qatargas 4 is a single-train LNG facility, and it will also receive natural gas from the North Field. The LNG will be shipped to customers in the United States and China. Qatargas 4 will have peak production of 280,000 BOE/D.

Construction on both projects is set to be completed by the end of 2010, followed by startup production in 2011.

Australia

Royal Dutch Shell is also working on other LNG facilities. The company discovered natural gas at the Prelude and Concerto fields off the coast of Australia, and it is constructing a floating LNG facility to process this stranded gas. The natural gas will be processed entirely offshore, reducing the project’s footprint.

Brazil

Royal Dutch Shell is also developing heavy oil resources offshore from Brazil. The company has a 25% ownership of the Parque das Conchas project along with Petrobras (NYSE: PBR). This project started up production in 2009 and is designed to produce 100,000 BOE per day at its peak.

International Investment To Power Promised Production

Royal Dutch Shell will use its heavy investment in international upstream projects to power its promised production over the next few years. The company must make continued investments here as well to grow in the long term. (For a primer on the oil and gas industry, refer to our Oil And Gas Industry Primer.)

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