Tuesday, September 26

Shell’s upstream, downstream strategies to drive group further in 2013


MORE SPENDING: Voser (inset) says Shell’s downstream and mature upstream positions will see around US$12 billion of spending in 2013, or about a third of the group’s organic capital expenditure. — Reuters photo

KUCHING: International oil and gas player Royal Dutch Shell Plc (Shell) hopes to grow its global businesses further with more upstream and downstream plans in the pipeline.

During a recent media strategy briefing after announcing its 2012 financial year results, the group’s chief executive officer Peter Voser gave an update on Shell’s strategic priorities hoped to keep the momentum on the group’s continuous strategic drive.

“A year ago, we set new priorities for the company, to grow our cash flow by 30 to 50 per cent for 2012 to 2015 compared with the preceding four years in US$80 and US$100 oil price scenarios; to use that cash flow to fund US$120 to US$130 billion of investment and to pay a competitive dividend for shareholders,” Voser said during the briefing.

“These are ambitious and exciting targets, and we know we’ve got more to do to get there. We’ve taken a fresh look at how we manage our portfolio,” he added.

“We are driving capital choices, innovation and human resources along a series of strategic themes which are really global, rather than just country level or regional. Each theme has distinctive drivers, specific technologies, markets, investment profiles and returns characteristics.”

The CEO noted that Shell’s downstream and mature upstream positions would see around US$12 billion of spending in 2013, or about a third of the group’s organic capital expenditure.

“These ‘engines’ are generating strong free cash flow for the company today of about US$11 billion in 2012. Here, we are looking to extend asset lives through technology and selective exploration in upstream, and working hard on profitability and selective growth in downstream.”

More specifically, the group’s downstream accounted for some15 to 20 per cent of its capital investment, noted Voser, and about half of that was on maintaining safe and reliable operations, with the remainder going into selective growth projects.

“We are also working on new chemicals capacity in North America and in Qatar, which would be integrated with Upstream gas for feedstock.

These are pre-FID projects, and the Qatar opportunity entered FEED in 2012.

Overall we will continue to have quite a measured approach to Downstream manufacturing: relatively small stakes in new manufacturing assets, building just one or two at a time, and positioning for low cost, advantaged feedstocks and market growth potential.

Turning to upstream, Voser said Shell was in the midst of getting a steady flow of final investment decisions, construction and start-ups, as it replaced decline and deliver financial growth over time.

“We started up five new developments in 2012, totalling nearly 200 thousand barrels of oil equivalent per day of peak production potential.

“Shell has taken final investment decision on further seven developments over the last year, bringing the total number of projects under construction to around 30, which should unlock 7 billion boe of resources, and nearly 1 million barrels per day of peak production potential.”

Voser said 15 of these new fields would come on stream in the next two years, giving examples such as Kashagan (where Shell will be the operator from first production), Iraq (where the group should reach 175,000 barrels per day), the first commercial production on Majnoon in 2013, and start up the Basrah Gas Joint Venture and new oil and gas production in Asia Pacific, Malaysia and Australia.

“Putting all this together, we expect a slight increase in production in 2013 compared to 2012.Looking further into the future, we’re working on another suite of new fields, which should come to FID in the next few years, with over 30 potential investments on the drawing board, and perhaps another 1 million barrels per day of peak production,” he concluded.