Shell has outlined its intent to sink more than US $6 Bn this year alone into deepwater oil and gas exploration and development projects, as part of its strategic drive to grow its upstream businesses.
Deepwater is one of the Anglo-Dutch major’s three central planks in its ongoing strategic growth drive, which is aimed at unlocking around 7 Bn barrels of resources. It currently expects its average group production level to grow from 3.3 MMboe/d at the end of 2012 to circa 4 MMboe/d in 2017/2018.
The company will make a net capital investment of $33 Bn in 2013, with $12 Bn of this to go into both its upstream and downstream areas, according to Shell’s CEO Peter Voser.
But the majority of its spending, around $18 Bn, will be directed at its “growth priorities”, he said: “We want more integrated gas, more deepwater, and more resources plays – such as shales”. He added: “Our organic spend in these three themes will total some $18 Bn, spread fairly evenly between the three.”
Another $4 Bn will be invested this year in areas such as the Arctic, onshore Nigeria, Kazakhstan, Iraq, and heavy oil projects.
Shell says that its increased spending from 2012-13 onwards will be driven by higher investment in its deepwater and upstream ‘engines’, reflecting its current project flow, and an increase in core exploration spending from $6.4 to $7 Bn, allocated to its strategic themes.
The 2013 capital investment programme also includes an increase of around $1 Bn for non-cash capitalised leases, predominantly in deepwater growth projects, it added.
Exploration drilling activity will also step up in 2013-2014. Shell expects to drill more than 40 high-potential wells in 18 conventional basins, and test 10 key resources plays for tight gas and liquids-rich shales.
Specifically on deep water, Voser continued: “Shell is one of the industry’s pioneers in the deepwater oil and gas business. We have some 330,000 b/d of production today, with a strong growth outlook. We’re pushing hard on the exploration side. We have nine new fields under construction, in the Gulf [of Mexico], Brazil and SE Asia.”
The key was, he added, to standardise the development concepts, to control costs and speed up the development pace. For example, Shell has installed five Tension Leg Platforms (TLPs) in the Gulf of Mexico since 1993.
“Our latest TLP is Olympus, for the 100,000 b/d Mars B development. We took the FID on this one in 2010, during the moratorium after BP Macondo, when we saw a cost opportunity, with spare capacity in the supply chain. Today, the Olympus TLP has moved from South Korea to the US, and we are working on the topsides. Mars B is on track for a late 2014 or early 2015 start up,” he said.
“Mars B and Cardamom are just two of a number of projects underway in the Gulf. We’ve been working on three further developments, Stones, Vito and Appomattox. Appraisal drilling at Vito and Appomattox has gone well, and there is potentially more upside at Appomattox, as we drill in the Vicksburg area there this year.”
Shell has estimated deepwater resources either onstream, under construction or being studied of 3.3 Bn boe globally.
On its Stones development in the GoM, it has pencilled in plans for a 60,000 boe/d FPSO for the 250 MMboe field. Shell operates Stones with a 60% stake, and envisages project startup by around 2016.
On its 300 MMboe Vito project, which it operates with a 51.33% interest, the final appraisal well is underway. The field is expected to be developed via a 100,000 boe/d hub floating production system, with a Final Investment Decision (FID) expected in 2015.
Also in the GoM its Appomattox potential floater hub, which it operates with an 80% stake, is targeted as a 150,000 boe/d production hub. The field has estimated resources of 500 MMboe, with the Vicksburg appraisal (Shell 75%) expected to be the final jigsaw piece in the puzzle required for that development to also get an FID around 2015.
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