Shell Petroleum plans to invest on average, $30 billion of cash capital expenditure, (capex) per year over 2021-2025, including a minor acquisition spend of up to $1 billion, with a ceiling of $32 billion a year. This however, excludes “major inorganic opportunities” over the period.
The company also plans to maintain production levels from its conventional oil and gas operations at around 1.5 million barrels a day, b/d of oil equivalent over the coming five years, with a modest increase from 2025 to 2030, the company said in a strategy update. Shell, the leading deepwater player in the Nigeria, US Gulf of Mexico, Brazil, Malaysia, and Mexico, said it planned to sustain deepwater production above 900,000 barrels of oil equivalent, boe/d through 2025, a level likely to hold to 2030.
In Shell’s US-dominated shale portfolio, output was expected to grow 50% to 600,000 boe/d and generate $2 billion-$3 billion of free cash flow per year by 2025. Shell, which does not issue production targets, reported average production of 3.75 million boe/d in the first quarter of 2019, down 2 per cent from a year earlier.
“We will continue our focus on fully sustaining our upstream business well into the coming decades because for as long as there is sustained demand for oil and gas, there will be sustained commitments from Shell and that means also sustained investments,” CEO Ben van Beurden said at a strategy presentation in London.
“We do believe that we have what it takes to deliver the sustainability in upstream and integrated gas well through the 2030s”. Like many of its oil major peers, Shell has prioritized lower-cost upstream assets in the recent years, selling off parts of its legacy portfolio and investing in large-scale gas assets and high-margin deepwater and US tight oil acreage. Shell said it was targeting average forward-looking breakeven prices of around $30/b in its upstream businesses after asset “high-grading” has doubled its portfolio of sub-$40/b breakeven projects since 2016.
Van Beurden said he expected Shell’s US shale portfolio to become cash flow positive this year. Shell’s Permian shale assets are already cash flow positive with breakevens on operated assets of $35/b, a level which beats 75% of operating results from the sector, according to the company. Overall, Shell said it planned to invest $11 billion-13 billion per year on its core upstream portfolio, including shale and deepwater, compared with a target of $12 billion-$15 billion in 2020.