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Investing in Global Upstream Operations SHELL

PRODUCTION: David Napier

Shell is looking to the world’s emerging high-growth markets for its future sources of resources. This means big investments in places like Brazil, Mexico, Nigeria, Australia and elsewhere.

// Royal Dutch Shell - the global energy giant that has operations across more than 70 countries and interests in oil, gas, renewable, chemical products, manufacturing and retail – is solidifying its position as one of the front runners in all markets that it operates in by focussing on its strategy on fuel production and divesting from non-core assets in various markets around the globe.

Shell is incorporated in England and Wales and is listed on the London, Amsterdam and New York stock exchanges. Through its 110-year history, Shell has become one of the world’s most recognised brands and its yellow and red colours are synonymous with highquality fuel products across all continents.

Recent advancements in developing markets are helping to position Shell for the future, and secure supply as the company looks to help meet global energy demand in a responsible way. Geographies including Australia, Brazil, Nigeria and Mexico are all on Shell’s radar and earlier this year, exciting news began to flow from these interesting markets. PRELUDE The Prelude FLNG project is now rather famous because of its ambitious size and potential. Prelude FLNG is a 488-metre-long floating facility loaded with state-of-the-art technology for the extraction and storage of natural gas. It allows Shell to access offshore gas fields that would otherwise be too costly or difficult to develop.

In July, the vessel arrived in Australian waters and the long, complicated process of mooring and hooking up began. This milestone for Shell is significant because of the significant impact the project will have on the economy in the north of Australia. “Prelude’s arrival is a clear demonstration of Shell’s longstanding commitment to investment and development in Australia – delivering significant economic benefits to the nation,” said Shell Australia Chairman Zoe Yujnovich. “Prelude is an Australian project and Shell has recognised how important it is to build strong partnerships with Australian industry,” she said.

Highlighting just a few of the many important impacts the project has had on the region, she said: “To develop and maintain a safe, high performance culture on the facility, Shell has partnered with South Metropolitan TAFE in Western Australia to develop specific training for Prelude technicians.

“150 technicians have been trained across a broad range of critical skills, including helicopter landing and refuelling skills, rigging, scaffolding and first aid.

“West Australian based company CIVMEC, a construction and engineering services provider, constructed the four massive anchor piles for Prelude’s subsea flowlines from their facility in Henderson.”

Over the next few months, Prelude FLNG will be home to 260 local workers on board the facility during operations and create over a 1500 jobs during the hook-up and commissioning phase of the project. The extraction and liquification of natural gas at sea, followed by delivery to customers around the world will help to entrench Shell’s name as a technology and provision leader in the natural gas industry.

GBARAN-UBIE In Nigeria, Shell announced recently that its project in the Niger Delta region - with partners Nigerian National

Petroleum Corporation (NNPC, 55%), SPDC (30%), Total E&P Nigeria (10%) and ENI subsidiary Nigerian Agip Oil Company Limited (5%) – had started production. The Gbaran-Ubie Phase 2 development, described as a “key project” by the company will see around 175,000 barrels of oil equivalent (boe) per day flowing by 2019.

To date, 18 wells have been drilled and a new pipeline installed to connect various facilities in the region. First gas flowed from the wells in March 2016 and progress is now well underway to see Phase 2 completed on time and on budget.

Andy Brown, Shell’s Upstream Director said at the start of production in August: “Today’s announcement is a positive step for Shell’s global gas portfolio. It is also good news for Nigeria as gas from Gbaran-Ubie Phase 2 will strengthen supply to the domestic market and maintain supply to the export market.”

At its peak, Gbaran-Ubie Phase 2 is expected to deliver approximately 864 million standard cubic feet of gas per day (MMscf/d) and 26,000 barrels of condensate per day.

LATIN AMERICAN GROWTH Extremely strong in the US market, Shell boasts around 25,000 gas stations across the country. But its eyes are now on expanding further in the Americas. With approximately 1800 service stations across Canada, the next obvious choice for expanding its retail network is Mexico. This became a reality in September when Shell opened its first Mexican site.

In the coming months, Shell will open further new service stations and will look to offer its quality products to Mexican customers, both commercial and individual. The company has said that “if market conditions continue to improve” it expects to invest $1 billion in Mexico.

István Kapitány, Shell’s Executive Vice President of Retail said of the development: “This is a major milestone for Shell and shows our ongoing commitment to Mexico. As the fifthbiggest consumer of gasoline in the world, it is an important and growing market. We have been present in Mexico for more than 60 years, but this is our first opportunity to improve Mexican motorists’ journeys through our unique retail experience.

“The opening of fuel stations is important for Mexico, given that there are currently just 11,400 service stations, each serving an average of more than 3000 vehicles a day.”

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With other big-name international players looking to enter to Mexican market in the near future, this firstmover advantage could stand Shell in good stead for ongoing domination in this exciting sector.

BRAZIL DEEP WATER At the end of last month, Shell signed an agreement with Brazil’s Petrobras to ensure ongoing cooperation with regards to technical and cost-effective solutions.

The pair are mutually interested

//AS THE FIFTH-BIGGEST CONSUMER OF GASOLINE IN THE WORLD, IT IS AN IMPORTANT AND GROWING MARKET//

in the development of Brazil’s pre-salt fields. The five-year agreement will see Shell learn about Petrobras’s technical solutions, contract management expertise and cost efficient initiatives. Petrobras will benefit from Shell’s global deepwater experience, especially on cost efficiency efforts and use of technology.

“Competitive growth of deepwater resources remains key to our company’s strategy for decades to come, and we’re very pleased to advance the technical and operational benefits of our joint-ventures with

Petrobras in Brazil,” said Wael Sawan, Executive Vice-President, Deep Water for Shell.

“We’ve seen cost, safety, innovative thinking, and production growth evolve in a very positive way. Preferred partnerships and shared expertise are core to that success.” Together, Shell and Petrobras partner on the Libra and Lula fields and other important areas such as Sapinhoá, Lapa, and Iara, all in Brazil’s Santos Basin.

Globally, Shell is also investing

in areas including India, South Africa and Indonesia while reinvesting in areas where it is strongest such as the UK, USA, the Netherlands, Germany and France.

This is a business that still believes that oil and gas will remain a vital part of the global energy mix for many decades to come and, as such, is investing its considerable resources in ‘extracting and delivering these energy resources profitably and in environmentally and socially responsible way’. In 2016, Shell’s revenues were $233.6 billion with income of $4.8 billion. Its global expansion strategy is clearly working.

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