Royal Dutch Shell (NYSE:RDS.A) expects its North American assets to power production growth for the company over the next few years as the company allocates substantial capital to its prospects in this politically stable area of the world.
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Shell expects to invest $10 billion per year in various upstream projects in the United States and Canada from 2011 to 2014. If the company executes successfully on these projects, the company's production from North America is expected to reach 1 million barrels of oil equivalent (BOE) by 2014. This would be a 40% increase over the current level of 714,000 BOE per day and would help boost the total production for the entire company to 3.7 million BOE per day by 2014.
Shell is focusing on heavy oil and tight gas development as well as the deepwater projects to achieve this growth. The company is also active in exploration activities in the Gulf of Mexico.
Shell added 2.4 billion BOE of reserves to the company in 2009, and a lot of these additional reserves are owing to successful exploration programs. In North America, one area that Shell is focused on is in Alaska, where the company is working in the Beaufort and Chukchi Sea.
Since 2005, the company has invested more than $2 billion to acquire acreage in these two areas and other places in Alaska. The offshore moratorium has temporarily stopped drilling here, but the company expects to move forward here eventually.
Shell is also exploring in the deepwater area of the Gulf of Mexico, where the company is working the Paleogene, Miocene and Mesozoic plays. Shell has leased 130 blocks where the company feels that hydrocarbons may be present in one or more of these plays.
One recent discovery for Shell was at the Vito Prospect located at Mississippi Canyon Block 940. The company found "high quality net oil pay" here, and has a 55% working interest. Anadarko Petroleum (NYSE:APC) and Statoil (NYSE:STO) also have a non-operated interest at this prospect. The company made another discovery at the Appomattox prospect and believes these two areas have total resources of 450 million BOE.
Shell produced an average of 170,000 BOE per day of heavy oil in 2009, and feels that the company can add 100,000 BOE per day of heavy oil production over the next decade. Shell has a heavy oil project in California, where the company partners with Exxon Mobil (NYSE:XOM) to use steam and water flooding to produce oil from thousands of wells.
Shell also has billions of barrels of reserves in the oil sands in Canada, where the company is conducting both mining and in situ to develop these assets. The company expects to ramp up production here starting in 2011.
Shell ramped up development of various tight gas and shale plays in North America, building up substantial acreage positions in the Eagle Ford and Marcellus Shale. The company also has large existing acreage and production from areas in Western Canada and Wyoming.
Shell has 12,000 drilling locations to develop on 2.3 million prospective acres and estimates its resource potential here at 40 trillion cubic feet. The company feels that its production from tight gas plays can double to 400,000 BOE per day by 2015.
Shell is counting on its portfolio of North American oil and gas assets to help achieve production growth going forward. The company is putting its capital into the deepwater, tight gas and heavy oil projects to achieve this growth. (For related reading, take a look at Accounting For Differences In Oil And Gas Accounting.)
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