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Shell Expects to Invest More Than $20 Billion in Gas by 2015

By Eduard Gismatullin on November 14, 2012

Royal Dutch Shell Plc (RDSA), Europe’s largest oil company, has earmarked more than $20 billion to spend on natural-gas projects through 2015 as profit from extracting, processing and selling the fuel soars.

“Our integrated-gas earnings have more than trebled in the last five years, reaching $9 billion over the last year,” Chief Executive Officer Peter Voser said today. “We see growth opportunities to invest over $20 billion here for 2012-15.”

Shell and its peers have expanded global gas operations as demand for the fuel rises in Asia. Revenue from the liquefied natural gas business, pushed higher by increased shipments following Japan’s Fukushima atomic crisis last year, drove a 2.3 percent gain in third-quarter profit at The Hague-based Shell.

The company expects LNG output to increase 30 percent to about 29 million metric tons a year once it completes projects in Australia, Shell said today in a statement. It also plans to power trucks and ships with the liquefied fuel and is assessing ventures that would use as much as 5 million tons a year.

Shell, which has announced $6 billion in acquisitions this year, has forecast cash flow from operations will rise 50 percent through 2015, driven by new projects in Qatar, where it runs a gas-to-liquids plant, and Canada.

“Shell is continuing to generate substantial cash flows,” said Stuart Joyner, an analyst at Investec Securities Ltd. in London. “We expect Shell to pursue a more active acquisitions strategy.”

East Africa

Shell said yesterday it’s in talks with Anadarko Petroleum Corp., Eni SpA and others to join gas projects off Mozambique, after this year losing a bidding war with Thailand’s PTT Exploration & Production Pcl for Anadarko’s partner Cove Energy Plc. The nation may become the third-largest LNG producer, after Australia and Qatar, in as few as 10 years, Anadarko has said.

“We are taking our time, because we are also quite busy elsewhere in the world,” Maarten Wetselaar, executive vice president of Shell Upstream International, said yesterday in an interview. “We’re not short of opportunities, but it’s certainly something we would like to be involved in.”

Mozambique may hold as much as 250 trillion cubic feet of gas, national oil company Empresa Nacional de Hidrocarbonetos estimated last month after energy explorers made the decade’s biggest discoveries in its waters.

LNG Expansion

Shell, the largest LNG supplier, has also been examining plans to add more than 20 million tons of annual LNG capacity in Australia, Indonesia and North America as it predicts a fourfold increase in demand to 400 million tons a year by 2020 from 2000.

As part of its $50 billion Australian LNG investment plan, the company has been working on a floating production vessel that will liquefy the fuel off Australia’s northwest coast to potentially supply the Asia Pacific region.

Shell also uses gas to produce other liquid fuels. It operates the world’s largest gas-to-liquids plant in Qatar, making diesel and other products. It’s studying plans to build a similar plant in Texas or Louisiana, taking advantage of a decline in North American gas prices. Other possible projects on the continent include the production of commercial petrochemicals from ethane and the use of LNG as vehicle fuel.

Shell in June agreed with TravelCenters of America LLC to sell LNG to heavy-duty trucks. Last year, it started work on the Green Corridor project with Flying J Inc. to offer LNG to trucks along the 900-mile (1,600-kilometer) Canadian highway that runs from Alberta to the Pacific coast.

To contact the reporter on this story: Eduard Gismatullin in London at [email protected]

To contact the editor responsible for this story: Will Kennedy at [email protected]

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