Peter Voser said the failure of Royal Dutch Shell’s huge bet on US shale was a big regret of his time as chief executive of the company. Shell has invested at least $24bn in so-called unconventional oil and gas in North America. But it is a bet that has yet to pay off. “Unconventionals did not exactly play out as planned,” Mr Voser said.
From an oil industry expert: Unconventional Oil and Gas
The following is an extract from an article by Guy Chazan published on 6 October 2013 by the Financial Times under the headline: “Peter Voser says he regrets Shell’s huge bet on US shale“
Peter Voser said the failure of Royal Dutch Shell’s huge bet on US shale was a big regret of his time as chief executive of the company. Shell has invested at least $24bn in so-called unconventional oil and gas in North America. But it is a bet that has yet to pay off. Its North American upstream business has struggled to turn a profit and in August Shell announced a strategic review of its US shale portfolio after taking a $2.1bn impairment. “Unconventionals did not exactly play out as planned,” Mr Voser said.
In an attempt to catch up with smaller producers, Shell’s spending on R&D and exploration in the domain of “unconventionals” has exploded, but as admitted by Peter Voser, with very disappointing results.
Since this term – unconventionals – is appearing more frequently in articles about the oil and gas industry and Shell’s problems in particular, it may assist to provide a clarification of what it actually means.
A CONVENTIONAL oil or gas field is a typical field where oil and gas are produced from a reservoir via a well to which the production fluids are able to flow. These were the only types of reservoirs developed until quite recently.
UNCONVENTIONALS cover the range from shale oil and gas to tar sands where extraction of hydrocarbon from the reservoir rocks requires the extensive use of fracking or the application of heat (either in-situ or after removal of the rock from the ground).
The potential volume of “unconventional” hydrocarbons is far greater than “conventionals” – it has been known for many years that there is probably more oil in the Athabasca tar sands than there is in Saudi Arabia, but until the price of oil reached the current level it was simply uneconomical to produce.
The challenge of “unconventionals” is therefore the cost of production.
That is the stumbling block that led to the failure admitted by Peter Voser and probably a factor in his decision to take early retirement.