Shell Exits Bab Sour Gas Reservoirs Project

Shell Exits Bab Sour Gas Reservoirs Project
Shell will exit the joint development of the Bab sour gas reservoirs with ADNOC in the Emirate of Abu Dhabi, after an evaluation of the project's technical challenges and costs.

Royal Dutch Shell plc announced Monday that it will exit the joint development of the Bab sour gas reservoirs with ADNOC (Abu Dhabi National Oil Company) in the Emirate of Abu Dhabi, after an evaluation of the project’s technical challenges and costs.

As a result of Shell’s exit, the energy firm will stop further joint work on the Bab sour development, which “does not fit with the company’s strategy, particularly in the economic climate prevailing in the energy industry”, according to a company statement. Shell refused to comment further on the matter when called by Rigzone.

Shell had been chosen by ADNOC to participate in a 30-year joint venture to develop the major Bab sour gas reservoirs back in April 2013. The energy major was the owner of a 40 percent equity stake in the joint venture, with ADNOC holding a 60 percent interest in the project.

The company’s latest exit follows Shell’s announcement in October that it would shelf an oil sands project in Alberta, which it had already invested billions of dollars in. The company also decided in September to cease exploration activity offshore Alaska, taking a large financial hit in the process.

Shell, which expects to finalize a deal to acquire BG Group in early 2016, stated November 3, 2015 that it was “pulling all levers to manage through the current oil price downturn” including a 10 percent reduction in operating costs and a 20 percent reduction in capital spending in 2015, totaling $11 billion. The firm cut its workforce by more than 7,000 people last year and identified a further $1 billion of pre-tax synergies to bring cost savings from combining its business with BG to a total of $3.5 billion by 2018.

A graduate in journalism from Cardiff University, Andreas has eight years of experience as a business journalist. Email Andreas at andreas.exarheas@rigzone.com

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