Shell shifts focus to gas, CEO mulls Pearl train 3
CEO: Shell will shift to majority gas by 2012, Qatar "a new heartland"
Peter Voser, Shell CEO, said on Tuesday that Qatar is “a new heartland” for the Anglo-Dutch supermajor and Shell “will produce more gas than oil by 2012”.
The firm has clearly worked hard to build its relationship with the Qatari government, and they now investing in partnership with them internationally, most notably in Singapore.
The largest energy company in Europe has invested heavily in Qatar, contributing all the $20 billion required for the Qatargas 4 and Pearl GTL projects in the last five years, including $100 million over ten years on a technical facility at Qatar Foundation’s Science and Technology Park outside Doha.
"This is not all we are doing in Qatar. Two months ago we signed a memorandum of understanding with Qatar Petroleum to explore development of a major petrochemicals project," Mr Voser said. "We're also developing new markets for LNG including China and Dubai."
Shell expects a rapid rate of return on investment from the Pearl GTL facility alone slated to provide the firm with $4bn in net cashflow, assuming oil prices at $70 a barrel. Given they are currently above $100 and look to remain high, Shell’s target looks realistic.
Voser also floated the prospect of a train 3 at Pearl. “When the Qatari government decides that the gas moratorium could be lifted, one could think about a train 3,” he said.
While cautioning that “I want to deliver first before going into the next one,” Voser stated that Shell is always keen to look at further options, including bringing Shell’s proprietary GTL technologies to North American shale production. “There are also various other countries where we are looking at that at this stage,” he said.
Voser predicts global demand for gas will increase by 50% by 2030. Voser is changing Shell’s energy profile to meet this challenge: “by 2012, Shell will produce more gas than oil”, he said. Gas will account for around 52% of Shell’s revenue by 2012, he said, a trend that is set to continue.
Voser is also increasing Shell’s oil output, and is aiming to produce 3.5 million barrels per day across the company by 2012, a 6% increase on 2010, rising to 3.7 million barrels a day by 2014.
Together, these developments will see Shell’s net cashflow increase 80% in 2012 over 2009, Voser said. “We have enough new projects coming in to deliver growth over the whole of this decade,” he added.
Voser said Shell is investing $25-27 billion annually, irrespective of the economic cycle. "It is right for the energy industry and right for Shell to keep investing, and not bring volatility into these investments. This is not an industry in which you can slow down and increase the pace again: it just takes too long to recover,” he said.
Adding value to produced gas is clearly of huge strategic importance to both Shell and Qatar. Andy Brown, Qatar Shell Country Chairman and Managing Director, Pearl GTL, said GTL products are a “natural hedge” for Qatar against “the vagaries of the gas market”.
Such a hedge must also be important for Shell, which is investing heavily in an energy source whose global supply, while predicted to grow significantly from numerous sources in the next ten years, is without any multilateral control, and which an increasing number of companies have the expertise to manage upstream.
An example of Shell extracting greater value from Gas products is Gasoil, the company’s automotive diesel equivalent. Asked about pricing strategy, Voser explained that Gasoil products, because they burn more cleanly and show improved performance characteristics, are likely to attract a premium price at the pump, as will GTL lubricants.
The Shell Pearl facility is fully integrated, from offshore extraction to GTL product delivery, and the company is developing innovative solutions to large-scale production problems.
The company is keen to retain and reuse all the plant’s effluent water on-site, and is finding new uses for the sulphur by-product, including water-free cements and asphalts.