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Shell’s Upstream Production: Poised for Growth

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May. 16 2019, Published 10:26 a.m. ET

Shell’s growing upstream portfolio

Royal Dutch Shell’s (RDS.A) upstream portfolio includes assets in deep-water, integrated gas, conventional oil and gas, and shales. In these categories, Shell has several projects at various development phases, which are expected to generate production, earnings, and cash flow growth for the company until 2020.

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First, we’ll discuss Shell’s upstream projects in 2019. Shell announced the start-up of production from its P-67 FPSO vessel in Lula North—the seventh FPSO in the field. P-67 has a capacity of 150 Mboepd (thousand barrels of oil equivalent per day). P-69 FPSO started production in the fourth quarter. Shell’s equity production was 375 Mboepd in Brazil in the first quarter—the second-highest in the country.

Shell’s mega project, Appomattox, with peak production levels of ~175 Mboepd, is expected to start production in the second half of 2019. In the Permian, the company can produce ~250 Mboepd of hydrocarbons. The company expects the break-even cost to be just below $40 per barrel in the Permian—lucrative even at lower price points in an oil cycle.

Overall, Shell’s major projects are expected to contribute more than 300 Mboepd of new production net to Shell in 2019. The projects that are scheduled to start in 2020 and beyond will likely add another 350 Mboepd of new production net to the company. Shell has many projects in the pre-FID phase, which could deliver more than 1,000 Mboepd of new production for the company.

Shell’s production compared to peers

In the first quarter, Shell produced 3.75 MMboepd (million barrel of oil equivalent per day) from its worldwide operations. In the first quarter, ExxonMobil (XOM) produced 3.98 MMboepd. Chevron (CVX) and BP’s (BP) production was 3.04 MMboepd and 2.66 MMboepd in the first quarter.

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