With the opening of the Pearl gas-to-liquids (GTL) plant in Qatar and the final investment decision (FID) on the Prelude floating, liquefied natural gas (FLNG) plant off Australia, Shell’s portfolio will have an even higher proportion of natural gas to oil by the end of this decade.

“A lot will depend on the second half of the decade. Will we be able to drill in the Arctic, and will we be successful? How fast will Iraq develop? Future investment decisions will also have a major impact on the mix. We want to maintain our leadership in the world gas market -- in particular LNG, said Peter Voser, Royal Dutch Shell’s chief executive officer, in presentations on the upcoming year for the company.

“Tight gas is also a significant part of our business. We see very strong developments in shale gas and tight gas in North America, China and Australia. And, most recently, we signed a deal in Ukraine. We are also looking for other opportunities in Europe but the development of shale gas in Europe will face some difficulties due to regulations and legislation, high-population density, and challenges with permits,” he stated.

With the Arctic region holding an estimated 13% of the world’s oil resources, Shell is focused on Alaska and to some extent Greenland. The company recently signed a letter of intent for a 3D seismic survey offshore Greenland that will start in the third quarter 2012. That is an indication of an increase in Shell’s activities in the region.

For Alaska, “we are in the application process for drilling in 2012 and 2013. So far, we have received the necessary permits but we are still going through a lengthy process -- which includes discussions on environmental protection -- before we start to drill,” he noted.

In addition to Alaska and Greenland in the coming years, there may also be opportunities in Russia, he added.

Investment is the key to unlocking oil and gas resources potential of over 20 billion barrels of oil equivalent (boe). Shell made FIDs on 17 new projects in 2010-11. Around $3 billion of investment in development projects in 2012 will be in countries with large undeveloped resources positions -- Nigeria, Kazakhstan and Iraq.

“Net capital investment will be some $30 billion in 2012, with more than 80% of that in upstream. Of that, 60% will be in North America and Australia. In 2011, the company built new positions including Iraq gas, Asia-Pacific LNG, liquids-rich shales, and new exploration acreage in 10 countries. This portfolio growth supports our increased investment program and updated growth outlook,” Voser emphasized.

“We continue to balance exploration drilling in established basins with selective expansion into frontier acreage and new plays such as liquids-rich shales. Our exploration spending increased by some 30% to $3.6 billion in 2011, excluding acreage purchases, and should increase a further 35% in 2012 to some $5 billion,” he continued.

LNG remains an integral part of Shell’s business. The company has about 8.0 million metric tons per year (MMmt/y) of LNG capacity under construction -- all in Australia – which is an increase of about 40% over today’s position. At least $5 billion of capital investment is planned for 2012. In addition, Shell has some 15 MMmt/y of new LNG capacity under study.

Its deepwater oil and gas spending in 2012 will be around $4 billion. Shell has 250,000 boe/d under construction, in seven projects spanning the Gulf of Mexico, Brazil and Malaysia.

For tight gas and liquids-rich shales, “Shell continues to build a world-wide portfolio in these new plays. Some $4 billion of worldwide development investment is planned for 2012, focusing on production from the lowest cost gas positions and growing our liquids production. Production from liquids-rich shales has the potential to reach some 250,000 boe/d in 2017,” Voser explained.

“We have worked hard to generate a strong pipeline of investment opportunities for Shell, and we put the emphasis firmly on a competitive financial performance. Shell’s investment programs create cashflow growth, which in turn funds our dividends. All of this is supported by efficiency gains from our continuous improvement programs, where the opportunity set runs to billions of dollars for Shell,” he said.

Shell’s continues to expand its portfolio worldwide. “Europe is an important region for us in terms of current production and cash flow, and we also have growth projects in the North Sea. In 2011 we took investment decisions for major projects, for example, to develop further production in the U.K. North Sea,” Voser commented.

“Naturally our investment portfolio is global and therefore growth regions like the Middle East, Asia Pacific, along with Africa and South America, take a key share. And we will also invest heavily in the coming years in North America and Australia.

Shell is also focused on China. “There are two strategic elements in this: first, we see global partnerships as key to the development of our company. Second, China will be a key market over the decades to come. Shell would like to have a firm footing there. Our partnership with China National Petroleum Corp. (CNPC) covers both those strategic aims. We work with CNPC in countries like Qatar and Australia. And together we are developing our business in China, which is around shale and tight gas – including well management -- and many other initiatives.

Contact the author, Scott Weeden, at sweeden@hartenergy.com.