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What Royal Dutch Shell Has To Say About 675 Billion Barrels Of Oil In Its Deepwater Reserves

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In its latest monthly publication, Shell quoted the International Energy Agency as saying the oil giant has 675 billion barrels of oil in global deepwater reserves

Published: November 18, 2014 at 7:53 am EST

By: Micheal Kaufman

In its latest monthly publication “Shell World,” Royal Dutch Shell plc (ADR) (NYSE:RDS.A) has quoted the International Energy Agency as estimating the company’s global deepwater oil reserves to be around 675 billion barrels. The oil giant stated in the publication that it has enjoyed several successful projects over the decades and some breakthrough achievements regarding global deepwater during the current year.

Strategy For Improving Productivity

Shell stated that its Nigerian Bonga North West (BNW) field, which produced oil in August for the first time, shows the commitment of the company to conducting deepwater exploration activities in Nigeria. The Anglo-Dutch oil giant added that its subsidiary Shell Nigeria Exploration and Production Company (SNEPCo) has taken initiatives in the region to upgrade facilities for local contractors and hold specialized training for workers to improve productivity in the energy sector.

Shell has also installed a new subsea pipeline to carry oil from BNW to existing Bonga subsea fields, and has further added tools and control systems to Bonga Main topsides.

According to the publication, most of the construction project was undertaken by Nigerian companies, which helped save cost and provide access to better raw materials for rigs. Shell Vice President Nigeria & Gabon Markus Droll said that the local people working on BNW scheme have a major contribution in the growth of deepwater exploration and engineering experience in SNEPCo. Mr. Droll confirmed that the company has taken precautionary measures to eliminate any potential injury.

Current Progress In Deepwater

According to Mr. Droll, the second phase of the operations that started in BNW two months ago strengthens the commitment of the company to Nigeria and deepwater exploration activities.

Shell has now entered in the third phase, where it is planning to drill eight additional wells in the Bonga field to increase output. The company expects to add 40,000 barrels per day (bpd) through the current floating production, storage and offloading (FPSO) facility.

These wells which are to be drilled include four oil producing and four water injection wells. The operations are anticipated to begin in 2015, where the oil will be delivered by current pipelines to the FPSO facility. The output from these wells stands at more than 200,000 barrels of oil and 150 million cubic feet of gas per day.

Shell will hire the same local construction companies in the third phase which helped build the existing infrastructure.

Bonga Field

The Bonga field became Nigeria’s first ever deepwater drilling project with more than 1,000 meters in depth, after it started producing oil and gas in 2005. The current statistics show that 500 million barrels of oil have been extracted from Bonga to date.

Advantage To Shell’s Financial Performance And Stock Price

Shell’s deepwater assets have allowed the company to attain competitive advantage, with such large reserves of oil helping generate greater revenue for the company. The cost of undertaking exploration program is lower in the Bonga field than other global regions. The company benefits from cheap labor, low-cost service providers, and flexible terms of contracts.

Though Shell’s stock price declined yesterday by a slight margin, it is expected to show good performance in the near future. The stock is already up 1.5% in pre-market trading today.

Shell gets coverage from 17 analysts, out of whom 10 rate the company’s stock a Hold, while six analysts recommend a Buy.


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