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Royal Dutch Shell Upstream
Royal Dutch Shell (NYSE:RDS) used a recent analyst day to highlight several major upstream projects that have started up in 2011, while also stressing the current investment the company is making to generate future production.
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Upstream Goals
Royal Dutch Shell expects the company to produce an average of 3.5 million barrels of oil equivalent (BOE) per day in 2012. This would represent 11% production growth from 2009 levels of 3.1 million BOE per day.
2011 Projects
Royal Dutch Shell has started up three large oil and gas projects in 2011. These projects contributed new production of 170,000 BOE per day in the second quarter of 2011 and 400,000 BOE per day at the expected peak levels of production.
RDS is involved with the Athabasca Oil Sands Project (AOSP) in Canada, and recently finished the expansion of the Scotford Upgrader which receives bitumen from the nearby Muskeg and Jackpine mines for further processing. The expansion added total capacity of 100,000 barrels per day to AOSP, bringing total capacity to 255,000 barrels per day of synthetic crude. This project is operated and 60% owned by Royal Dutch Shell, with Chevron (NYSE:CVX) and Marathon Oil (NYSE:MRO) each owning a 20% share.
Qatargas 4
In 2011, Royal Dutch Shell also started up production at Qatargas 4, a liquefied natural gas (LNG) project that will receive natural gas from the North Field in Qatar. The natural gas is liquefied, put on special vessels for transport and then regassified at the destination. Qatargas 4 has one train and shipped its first cargo to India in February 2011.
Qatar Petroleum is involved with all the Qatargas projects and has three other projects under operation. Qatargas 3 also has a single train and started up in late 2010. The project is 30% owned by Conoco Phillips (NYSE:COP).
Exxon Mobil (NYSE:XOM) and Total (NYSE:TOT) are involved in Qatargas 2, which has two trains and started up in 2009. Both these companies are also in the original Qatargas project, which has three trains and began operations in 1996.
Pearl GTL
Royal Dutch Shell is involved with Qatar Petroleum in the Pearl Gas to Liquids project. This facility will also receive natural gas from the North Field and produce transportation fuels and other products. Train one at Pearl GTL is ramping up according to schedule and the second train is expected to be on line before the end of 2011.
New Projects
Royal Dutch Shell has made nine final investment decisions in 2011 as it works to continue its production growth.
One project that was approved by the company was the construction of a floating LNG facility that will initially be used at the Prelude natural gas field in Australia. This facility will have capacity to produce 110,000 BOE per day from this field and is expected to be in place for 25 years. Royal Dutch Shell also approved the Cardamom project located in the Gulf of Mexico. This project is expected to produce 50,000 BOE per day at the peak. These and other projects approved in 2010 and 2011 are expected to add another 400,000 BOE per day of future production into the pipeline for Royal Dutch Shell.
Exploration
Royal Dutch Shell is also working for long-term growth and is active on the exploration front. The most recent discovery was reported offshore French Guiana, where net oil pay was discovered in two different zones.
The Bottom Line
Royal Dutch Shell should be commended for its ability to get production growing off such a large base, a feat that is difficult for many of its peers. The company's pipeline of projects also makes it likely that this growth will continue.
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Upstream Goals
Royal Dutch Shell expects the company to produce an average of 3.5 million barrels of oil equivalent (BOE) per day in 2012. This would represent 11% production growth from 2009 levels of 3.1 million BOE per day.
2011 Projects
Royal Dutch Shell has started up three large oil and gas projects in 2011. These projects contributed new production of 170,000 BOE per day in the second quarter of 2011 and 400,000 BOE per day at the expected peak levels of production.
RDS is involved with the Athabasca Oil Sands Project (AOSP) in Canada, and recently finished the expansion of the Scotford Upgrader which receives bitumen from the nearby Muskeg and Jackpine mines for further processing. The expansion added total capacity of 100,000 barrels per day to AOSP, bringing total capacity to 255,000 barrels per day of synthetic crude. This project is operated and 60% owned by Royal Dutch Shell, with Chevron (NYSE:CVX) and Marathon Oil (NYSE:MRO) each owning a 20% share.
Qatargas 4
In 2011, Royal Dutch Shell also started up production at Qatargas 4, a liquefied natural gas (LNG) project that will receive natural gas from the North Field in Qatar. The natural gas is liquefied, put on special vessels for transport and then regassified at the destination. Qatargas 4 has one train and shipped its first cargo to India in February 2011.
Qatar Petroleum is involved with all the Qatargas projects and has three other projects under operation. Qatargas 3 also has a single train and started up in late 2010. The project is 30% owned by Conoco Phillips (NYSE:COP).
Pearl GTL
Royal Dutch Shell is involved with Qatar Petroleum in the Pearl Gas to Liquids project. This facility will also receive natural gas from the North Field and produce transportation fuels and other products. Train one at Pearl GTL is ramping up according to schedule and the second train is expected to be on line before the end of 2011.
New Projects
Royal Dutch Shell has made nine final investment decisions in 2011 as it works to continue its production growth.
One project that was approved by the company was the construction of a floating LNG facility that will initially be used at the Prelude natural gas field in Australia. This facility will have capacity to produce 110,000 BOE per day from this field and is expected to be in place for 25 years. Royal Dutch Shell also approved the Cardamom project located in the Gulf of Mexico. This project is expected to produce 50,000 BOE per day at the peak. These and other projects approved in 2010 and 2011 are expected to add another 400,000 BOE per day of future production into the pipeline for Royal Dutch Shell.
Exploration
Royal Dutch Shell is also working for long-term growth and is active on the exploration front. The most recent discovery was reported offshore French Guiana, where net oil pay was discovered in two different zones.
The Bottom Line
Royal Dutch Shell should be commended for its ability to get production growing off such a large base, a feat that is difficult for many of its peers. The company's pipeline of projects also makes it likely that this growth will continue.
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by
Eric Fox
Eric J. Fox, CFA, is a freelance financial writer and has previous experience working in the asset management industry as an equity analyst and portfolio manager on the buy side. His favorite area to write on is the energy sector and he keeps current on the industry by reading Haynesville Shale, Permian Oil and Gas and various other blogs.
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