Shell: North American Natural Gas Production Will Grow

NEW YORK (THE WALL STREET JOURNAL via Dow Jones), Oct. 6, 2009

Royal Dutch Shell plans to increase its natural gas production in North America, said Marvin E. Odum, head of the company's U.S. unit.

Royal Dutch Shell plans to increase its natural gas production in North America, said Marvin E. Odum, head of the company's U.S. unit.

Though gas prices are now very low, Mr. Odum said in a Monday interview with The Wall Street Journal, Shell believes long-term prices will recover, justifying the company's interest.

He said the growth in gas production would come from the company's deepwater discoveries in the Gulf of Mexico as well as from giant shale formations in western Canada, the Rockies and the Gulf Coast.

Shell's natural gas production in the U.S. has fallen to 1.05 billion cubic feet a day in 2008, down 9.5% from two years earlier, according to company filings. Its Canadian production has been flat. Still, North American natural gas currently accounts for about 7.8% of Shell's global oil and gas production.

Mr. Odum declined to say how much he expected North American gas production to grow, but said it "could be much more than what we're producing now."

Among the global integrated oil companies, Shell moved quickly to embrace the unconventional gas discoveries made by smaller, independent producers earlier this decade. In 2007, it partnered with Calgary-based EnCana Corp. to form a joint venture to develop acreage in Louisiana's Haynesville shale. In July 2008 it bid $5.87 billion for Duvernay Oil Corp., a company that had tiny oil and gas production, but had amassed 450,000 acres in western Alberta and British Columbia that appear promising for gas production.

Shell has what Mr. Odum called "a very significant land position" in parts of North America where large amounts of natural gas is trapped in dense rocks such as shale.

Mr. Odum said that Shell was happy with the acreage it had leased, but hadn't ruled out another deal for a company that had amassed a large land position but hadn't started to develop it.

Other companies, mostly European oil giants -- including BP PLC, StatoilHydro ASA and BG Group PLC -- have also snapped up North American shale gas assets in the past couple of years.  

Copyright (c) 2009 Dow Jones & Company, Inc.

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