Shell to divest 15% of its refining capacity

Paula Dittrick
OGJ Senior Staff Writer

HOUSTON, Mar. 16 -- Royal Dutch Shell PLC forecast its production will climb 11% during 2009-12, saying it plans to cut costs by divesting 15% of its refining capacity and 35% of its retail markets.

The supermajor expects production will reach 3.5 million boe/d in 2012 compared with 3.15 million boe/d in 2009. Outlining the company’s strategy from London on Mar. 16, Shell executives did not specify which downstream assets might be sold or when.

“Shell should be in a surplus cash flow position in 2012,” said Peter Voser, Shell chief executive officer. The company’s 2009 earnings were sharply reduced by the recession, which Voser attributed to Shell’s high exposure to refining and natural gas.

“Near-term pressures on downstream and gas margins remain,” Voser said. “However, the medium-term upstream fundamentals are robust. We expect oil to trade typically in a $50-90[/bbl] range, and to trend to the upside.”

He forecast attractive medium-term fundamentals for gas, adding he believes the global refining industry “may be in oversupply for some time.”

Shell expects net capital investment to be $25-27 billion/year for 2011-14, with up to $3 billion/year of asset sales, and $25-30 billion/year of organic investment, he said.

As projects come on stream, Shell expects cash flow from operations will increase by around 50% in 2012 compared with 2009, assuming oil prices of $60/bbl. The company forecasts cash flow could jump by more than 80% if oil prices average $80/bbl.

He sees what he calls “tremendous opportunity” for the company during 2015-20.Voser expects Shell’s exploration in the US, Canada, and Australia will strongly support the company’s anticipated upstream growth.

Shell reported its most successful exploration efforts in a decade during 2009 in terms of reserves additions, he said. Executives are assessing more than 35 new upstream projects, expected to underpin growth through 2020.

Growing production
The company reported proved reserves additions of 3.4 billion boe in 2009. Exploration efforts succeeded in the Gulf of Mexico, US and Canadian tight gas, and Australia. In the gulf, Shell established new production hubs at Vito, Stones, and in the Mars area.

Reserves additions included fields in the Gorgon LNG project in Australia, US deepwater developments (Perdido and Auger), the BC-10 project off Brazil, and an extension to the Muskeg River synthetic oil project in Canada.

Shell also added proved reserves in Nigeria, the Netherlands, Qatar, Kazakhstan, China, Malaysia, and Russia.

At yearend 2009, net proved reserves attributable to Shell were 14.1 billion boe, up 2.2 billion boe from yearend 2008. Shell’s reserves-to-production ratio increased to 11.9 years as of Dec. 31, 2009, compared with 10 years for yearend 2008.

Shell also has built “strong foundations” in gas-to-liquids, oil sands, and LNG projects, he said.

“In Canada, we retain options for further heavy oil expansion, with the nearer-term priority on improving operating efficiency and facilities debottlenecking,” Voser said.

Downstream, Shell is adding new chemicals capacity in Singapore and refining capacity in the US, and making selective growth investment in marketing.

“We are making substantial investments in new refining and petrochemicals capacity,” Voser said. “Once these projects are on stream, I expect the downstream growth emphasis will switch to further strengthening our marketing for the next several years.”

Contact Paula Dittrick at paulad@ogjonline.com.

Related Articles

Cenovus trims budget, slows oil sands work

12/16/2014 Cenovus Energy Inc., Calgary, is trimming its capital spending in response to declining crude oil prices and will slow development of some of its t...

Pengrowth starts commercial steam operations at Lindbergh thermal project

12/16/2014 Pengrowth Energy Corp., Calgary, reported the startup of commercial steam operations at Phase 1 of its Lindbergh thermal project in the Cold Lake a...

Sunshine Oilsands appoints chief executive officer

12/15/2014

Sunshine Oilsands Ltd., Calgary, has appointed Luo Hong as chief executive officer and Jiang Qi as president and chief operating officer.

Husky reports start of steam operations at Sunrise oil sands project

12/12/2014

Husky Energy, Calgary, reported the start of steam operations at the in situ Sunrise Oil Sands Project in northeastern Alberta.

Kearl resumes oil sands production, Imperial reports

12/09/2014 Imperial Oil Ltd., Calgary, has resumed production at its Kearl oil sands operations in Alberta after a precautionary shutdown due to a “vibration ...

Nexen starts bitumen production at Kinosis 1A in Alberta

12/08/2014 China National Offshore Oil Corp. Ltd. reported the start of bitumen production at the Kinosis 1A (K1A) steam-assisted gravity drainage (SAGD) faci...

Suncor wraps maintenance on Alberta upgrader

12/01/2014 Suncor Energy Inc. has completed 11 weeks of scheduled maintenance on one of two oil sands upgraders at its operations near Fort McMurray, Alta.

Senate debates, then barely rejects, Keystone XL approval bill

11/19/2014 The US Senate finally debated a bill authorizing construction of the proposed Keystone XL crude oil pipeline on Nov. 18 before rejecting the measur...

Cenovus receives approvals for Telephone Lake oil sands project

11/18/2014 Cenovus Energy Inc., Calgary, has received approval from the Alberta Energy Regulator (AER) and the province of Alberta for its wholly owned Teleph...

White Papers

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts


On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

register:WEBCAST


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected