Shell is on track to make significant gains in its production capacity as major projects in Qatar come online according to American financial research firm Sanford C Bernstein & Co., Bloomberg reported.
In a note to investors on Friday, Oswald Clint, a London based analyst at Bernstein, said: “After a decade of declining production, Shell is finally entering a sweet spot for production growth.”
He said that Shell has probably got the best portfolio of pre-final investment decision projects around, “and a strategy refocused on the exploration and production business, with plenty of interesting exploration options to add to reserves.”
Shell, which posted second quarter 2010 earnings of US$4.5 billion compared $2.3 billion in Q2 2009, is to spend $19 billion to build the world’s largest gas to liquids plant in Qatar. Once completed, Shell’s Pearl project will produce 140,000 barrels a day of liquid fuel and 120,000 barrels equivalent of ethane gas and condensate.
The company also has a 30% stake in Qatargas 4, part of the world’s largest LNG complex, due to start exports in 2011.
In Qatar Shell signed a new Exploration and Production Sharing Agreement (EPSA) for Qatar Block D with Qatar Petroleum and PetroChina to explore for natural gas in an area of 8,089 square kilometres onshore and offshore Qatar over 30 years.
In addition to Qatar, the Anglo-Dutch company is targeting hard to reach rock formations in Australia, China and the US to boost production growth. As much as 40% of Shell’s capital spending in the next few years has been earmarked for the Asia-Pacific region.
In his second year as CEO, Peter Voser, in July said that he expects to double cumulative asset sales to as much as $8 billion by the end of 2011.
Voser is assessing more than 35 projects that may add 8 billion barrels of oil equivalent, boosting production until 2020.
Shell expects a 1% production increase in 2009 to 2012 with a forecast of 3.5 million barrels of oil equivalent a day in 2012. Shell, which has been adding more gas than oil to its resources since 2005, expects the share of gas as a proportion of total output to rise to 52% in 2012.
In the note, Clint said: “The company is set to enter a period of rapid production growth in 2011 and 2012 and, combined with leverage to oil and gas prices, we expect this to drive up cash flow per share and earnings.”
