Shell May Invest $1 Billion a Year in China, CFO Says
Royal Dutch Shell Chief Financial Officer Simon Henry
Jock Fistick/Bloomberg
Royal Dutch Shell Chief Financial Officer Simon Henry said the Hague-based oil producer is looking at jointly expanding its gas acreage in mainland China with PetroChina Co.
Royal Dutch Shell Chief Financial Officer Simon Henry said the Hague-based oil producer is looking at jointly expanding its gas acreage in mainland China with PetroChina Co. Photographer: Jock Fistick/Bloomberg
Royal Dutch Shell Plc, Europe’s biggest oil company, may invest $1 billion a year in China should two wells in Sichuan province show potential for commercial gas production, its chief financial officer said.
“With successful exploration, we could easily invest $1 billion a year in the following five to seven years,” Simon Henry said in an interview today in Tianjin, China. “The geology could be as attractive as the U.S.”
Shell expects the share of gas in China’s total energy use to rise to 10 percent in a decade from 4 percent, Henry said April 28. The Hague-based oil producer is looking at jointly expanding its gas acreage in mainland China with PetroChina Co., the country’s largest oil company, he said today.
PetroChina and Shell signed a joint shale-gas assessment agreement for the Fushun-Yongchuan block in Sichuan, Adam Newton, a Shell spokesman, said Nov. 27. That was Shell’s second gas exploration venture in mainland China following a project at the Changbei gas field in Shaanxi province. Changbei produces 3 billion cubic meters of gas annually, according to Henry.
“We should start drilling in the next couple of months in both areas,” Henry said, referring to the Sichuan test wells. “If we have three Changbeis, that will be really good.”
Stalled Plans
Unlike the Chinese ventures, Shell’s operations in the Gulf of Mexico will suffer a “significant short-term impact” from the U.S. deepwater drilling ban triggered by the BP Plc oil spill, Henry said. Shell had to idle four operating rigs and suspend development of six successful exploration projects because of the federal ban, he said.
“Our aim was to follow up on the exploration successes and progress,” Henry said. “We haven’t moved our rigs yet but clearly that puts a hold on our plans.”
A blast at BP’s Macondo well in the Gulf of Mexico in April killed 11 workers, spilled more than 4 million barrels of oil into the sea and sparked a debate on whether tighter industry regulations are needed.
“It’s a little early to say what the impact would be for the industry,” Henry said. “What we hope for is a concerted response from the U.S. in terms of what is the new regulatory regime, one that has the right balance of risk and rewards, and that other countries not jump to conclusions.”
Refining Margins
Global oil-refining margins next year should stay at the depressed levels seen this year as fuel demand in developed nations remain tepid and growing economies including China and India add crude-processing capacity, Henry said.
“OECD transport or liquids demand is not really growing. In fact, we think it might even go down next year,” he said. China, Brazil and India will continue to drive demand growth, but “every new refinery that comes on stream helps depress the margins,” Henry said.
China, the world’s fastest growing major economy, is expected to add 31.5 million metric tons of annual oil-refining capacity this year, according to China National Petroleum Corp., parent of PetroChina, in February.
Oil prices should remain between $70 and $80 a barrel for the rest of the year, Henry said.
“There’s no reason why current fundamentals should change,” he said. “OPEC has the capabilities and discipline to maintain $70 to $80,” he said, referring to the Organization of Petroleum Exporting Countries.
--Chua Baizhen. Editors: Ryan Woo, Stephen Cunningham.
To contact the Bloomberg Staff on this story: Baizhen Chua in Tianjin at bchua14@bloomberg.net
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