Royal Dutch Shell (NYSE:RDS.A) is depending on the successful development of several large integrated gas projects over the next few years to meet the aggressive production goals set by the company at a recent analyst meeting.

TUTORIAL: Index Investing

Production Growth
Royal Dutch Shell has established some fairly aggressive production growth targets for a company of its size. The company hopes to reach production of 3.5 million barrels of oil equivalent (BoE) per day by 2012, and 3.7 million by 2014. The 2014 target would represent 12% growth over 2010 production. The capital spending needed to generate this growth is staggering, and will total between $25 billion and $27 billion a year through 2014. Much of this spending will go toward two large integrated gas projects that the company has in its portfolio.

Pearl GTL
The Pearl Gas to Liquids (GTL) is under construction by Royal Dutch Shell and Qatar Petroleum, and will be the largest GTL plant in the world. Pearl is designed to process natural gas from the North Field, an offshore natural gas field that contains approximately 900 Tcf reserves.

Royal Dutch Shell will transport production from this field to a natural gas processing plant which will extract ethane, propane and condensates from the natural gas stream. The plant will also remove sulfur, and then ship the natural gas to Pearl.

Pearl is designed to convert the natural gas into various products including kerosene, paraffin, base oil, gasoil and naphtha. Royal Dutch Shell expects Pearl to have peak production capacity of 140,000 barrels per day of gas to liquids products, and 120,000 barrels per day of natural gas liquids. The project will produce 3 billion barrels total over the lifetime of the project.

Qatargas 4
Another project being developed by Royal Dutch Shell and Qatar Petroleum is the Qatargas 4 project, a liquefied natural gas (LNG) plant that started up production in early 2011. The project will also receive natural gas from the North Field, and consists of a single LNG train with a production capacity of 7.8 million tons per year. Qatargas 4 will have a peak capacity of 1.4 billion cubic feet per day of natural gas and 70,000 barrels per day of natural gas liquids.

Royal Dutch Shell will send most of this LNG to markets in Asia, and in 2008, the company signed an agreement to supply PetroChina (NYSE:PTR) with LNG from Qatargas 4.

This is the fourth LNG plant in Qatar, which has a total of seven trains in four different projects. Other public companies involved with these projects include Exxon Mobil (NYSE:XOM), Total (NYSE:TOT) and Conoco Phillips (NYSE:COP).

Royal Dutch Shell's final integrated gas project is Gorgon, which is operated and 50% owned by Chevron (NYSE:CVX). Gorgon is located offshore of Australia, and will consist of the development of several offshore natural gas fields, and the construction of a LNG facility with capacity of 15 million tons per year. Chevron will also build a processing plant onshore to supply Australian markets with natural gas.

Although production from Gorgon won't begin until 2015, and isn't needed to meet the 12% production growth target, the company still needs to execute successfully on the construction of this complex project to get production growth past 2014.

The Bottom Line
Royal Dutch Shell needs to successfully finish several large integrated gas projects in the Middle East and Australia in order to meet the production growth goals espoused at a recent analyst meeting. The company is making steady progress on these so far. (So you've finally decided to start investing, but what should you put in your portfolio? Find out in How To Pick A Stock.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Savings

    Easy Ways to Go Green and Stay Budget Friendly

    Social entrepreneurs recruit "skeptics" to team green, by providing economically efficient products and services that minimize consumers' carbon footprint.
  2. Investing

    Top Investment Banks In The Energy Industry

    Many global Investment banks are highly involved in the energy industry, but there are also some smaller banks and boutiques that are strong players.
  3. Stock Analysis

    3 Stocks that Are Top Bets for Retirement

    These three stocks are resilient, fundamentally sound and also pay generous dividends.
  4. Investing News

    Are Stocks Cheap Now? Nope. And Here's Why

    Are stocks cheap right now? Be wary of those who are telling you what you want to hear. Here's why.
  5. Investing News

    4 Value Stocks Worth Your Immediate Attention

    Here are four stocks that offer good value and will likely outperform the majority of stocks throughout the broader market over the next several years.
  6. Investing News

    These 3 High-Quality Stocks Are Dividend Royalty

    Here are three resilient, dividend-paying companies that may mitigate some worry in an uncertain investing environment.
  7. Stock Analysis

    An Auto Stock Alternative to Ford and GM

    If you're not sure where Ford and General Motors are going, you might want to look at this auto investment option instead.
  8. Stock Analysis

    The 6 Biggest Russian Energy Companies

    Learn about the top energy companies in Russia, a country that holds some of the largest reserves of oil, natural gas and coal in the world.
  9. Mutual Funds & ETFs

    The 4 Best Buy-and-Hold ETFs

    Explore detailed analyses of the top buy-and-hold exchange traded funds, and learn about their characteristics, statistics and suitability.
  10. Stock Analysis

    The Biggest Risks of Investing in Netflix Stock

    Examine the current state of Netflix Inc., and learn about three of the major fundamental risks that the company is currently facing.
  1. How do I read and analyze an income statement?

    The income statement, also known as the profit and loss (P&L) statement, is the financial statement that depicts the ... Read Full Answer >>
  2. Can working capital be too high?

    A company's working capital ratio can be too high in the sense that an excessively high ratio is generally considered an ... Read Full Answer >>
  3. How do I use discounted cash flow (DCF) to value stock?

    Discounted cash flow (DCF) analysis can be a very helpful tool for analysts and investors in equity valuation. It provides ... Read Full Answer >>
  4. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  5. What is the formula for calculating compound annual growth rate (CAGR) in Excel?

    The compound annual growth rate, or CAGR for short, measures the return on an investment over a certain period of time. Below ... Read Full Answer >>
  6. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!