Royal Dutch Shell (NYSE:RDS.A) has dozens of upstream oil and gas projects under construction or in the planning stage and will develop these during the balance of the decade as it seeks to keep production growing. The company is putting focus on deepwater areas of the world to find this new production.
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Royal Dutch Shell's largest upstream projects are set to add 700,000 barrels of oil equivalent (BOE) per day to the company's production base. The success and timing of these developments are critical if Royal Dutch Shell is to meet its promised production level of 3.7 million BOE per day by 2014.
Royal Dutch Shell plans to add 200,000 BOE per day of new production from three deepwater projects by 2015. The company has been successful in this area in past years, and in 2010 started up production from the Perdido development in the Gulf of Mexico. Chevron (NYSE:CVX) and BP (NYSE:BP) are both involved in the Perdido development, and have a 37.5% and 27.5% share, respectively.
Parque das Conchas
Royal Dutch Shell is working on phase two of the Parque das Conchas development, located offshore Brazil in the Campos Basin. Phase two of this project will have a peak capacity of 100,000 BOE per day, and the company hopes that it will be as successful as phase one, which started up production in 2009. Petrobras (NYSE:PBR) has a 35% interest in the Parque das Conchas development.
Royal Dutch Shell is also developing the Gumusut project located in offshore Malaysia. This project will have a peak capacity of 135,000 BOE per day, and involves drilling 19 wells in the field. Conoco Phillips (NYSE:COP) and Murphy Oil (NYSE:MUR) are helping with the development of this field, and own a 33% and 14% share, respectively.
The Mars B project is also located in the deepwater Gulf of Mexico, and was approved for development by Royal Dutch Shell in September 2010. The company started up production from the Mars field in the mid 1990s after building a tension leg platform at the field.
Mars B involves building a second tension leg platform at the site to accommodate production from eight offshore blocks. Mars B will have a peak production capacity of 100,000 BOE per day, and is set to start up production in 2015.
Risks to Consider
One risk to consider is that the regulatory environment in the Gulf of Mexico may delay the development of some of the company's projects. Although the moratorium has been lifted by the U.S. government, it may still be difficult to obtain approvals in a timely manner. There is also a history of destructive hurricanes in the Gulf of Mexico that might disrupt production from fields here.
Royal Dutch Shell will spend hundreds of billions in capital through 2020 as the company moves to develop its large inventory of upstream oil and gas projects. The breadth of the company's deepwater portfolio will help it meet the production growth promised over the next decade. (It was the largest takeover in history and one of the most dramatic. Learn all about it in The Getty Oil Takeover Fiasco.)
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