Shell Reveals New Growth Agenda for 2012
Royal Dutch Shell provided an update Thursday on progress against its strategic plan to generate profitable growth. The firm said that in today's volatile economic environment, the company's strategic aim remains to drive forward with its investment program as well as to deliver sustainable growth and provide competitive returns to shareholders.
- Global economy and energy markets likely to see continued high volatility. Shell remains focused on through-cycle investment for sustainable growth.
- Delivery of underlying strategic drivers for 2012 targets established, underpinned by 14 project start-ups 2009-11, and Shell's continuous improvement programs.
- Shell declared circa $10.5 billion of dividends in 2011 and expects to grow the dividend in 2012, reflecting an improving financial position.
- Net capital investment in 2012 of $30 billion – 80 percent in Upstream – as Shell invests for a new tranche of growth.
- Measured increase in spending and payout underpinned by a new outlook for cash flow from operations for the period 2012-15 some 30 to 50 percent higher than the 2008-11 total.
- Growth outlook driven by over 60 new projects and options, maturing circa 20 billion barrels of oil equivalent of new resources potential, including major projects in liquefied natural gas (LNG), deep water, tight gas, liquids-rich shales and traditional plays.
- Performance focus. A substantial corporate reorganization, launched in 2009, simplified the company, reduced costs, and created a platform for faster delivery of its strategy. In addition, the firm is driving the Downstream portfolio to improve returns and growth potential.
- Cashflow from operations excluding working capital movements was $43 billion in 2011 – reaching the headline target set for 2012 – rebalancing the company to surplus cashflow.
- Continuous improvement and capital efficiency are embedded in Shell, the firm said. Disposals of $17 billion from 2009-11, and $15 billion of acquisitions are repositioning the company for new growth.
- Growth delivery. Shell has started up 14 new projects in 2009-11 – including the world class Pearl gas-to-liquids project in Qatar.
- Shell's oil and gas resources base on stream has increased by 33 percent, or three Bboe, to 12 Bboe between 2009 and 2011. Maintaining a strong project flow, the company is maturing a further 20 Bboe of new resources for future growth.
- Exploration. Shell continues to balance exploration drilling in established basins, with selective expansion into frontier acreage, and new plays such as liquids-rich shales. Its exploration spending increased by some 30 percent to $3.6 billion in 2011, excluding acreage purchases, and should increase a further 35 percent in 2012 to some $5 billion.
- Traditional developments in Shell's heartlands will see $6 billion of 2012 investment. This includes extending the life of Shell's mature heartland positions such as the UK North Sea and South East Asia. Around $3 billion of investment in this category will be in countries with large undeveloped resources positions: Nigeria, Kazakhstan and Iraq.
- Integrated gas. Shell has circa eight million tons per annum of LNG capacity under construction – all in Australia – an increase of circa 40 percent over today's position, with at least $5 billion of capital investment planned for 2012. In addition, Shell has some 15 mtpa of new LNG capacity under study.
- Deep water oil and gas spending in 2012 of some $4 billion, with 250,000 boepd under construction, in seven projects spanning the Gulf of Mexico, Brazil and Malaysia.
- Tight gas and liquids-rich shales. Shell continues to build a worldwide portfolio in these new plays, with 50,000 square kilometers in total, including an increase of 12,000 square kilometers in 2011 in liquids-rich plays. The firm allocates capital to these plays on a short term basis with a high degree of flexibility, driven by economics and affordability. Some $4 billion of worldwide development investment is planned for 2012, focusing on production from the lowest cost gas positions, and growing its liquids production. Production from liquids-rich shales has the potential to reach some 250,000 boepd in 2017.
- In heavy oil world-wide, Shell is planning for $2 billion of 2012 spending, covering EOR, mining and upgrading activities. In Canada, Shell is investing in a series of debottlenecking projects in oil sands mining, which will add around 50,000 barrels per day by 2020.The firm expects to take final investment decision on a 1.1 mtpa carbon capture and storage project – Quest – in 2012.
- Shell added that it continues to focus on operational excellence and selective growth in Downstream, with $6 billion investment planned for 2012. Commissioning is underway at the 325,000 barrels per day Port Arthur refinery expansion project, creating one of the largest refineries in the United States, at some 600,000 barrels per day. Shell is also looking at new manufacturing capacity options in North America, in Qatar and in China, as well as selective growth in marketing activities, and continued momentum in Brazil biofuels.
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