Ithaca Farms Out Beverley License to Shell

UK junior Ithaca Energy reported Monday that it is farming out to Royal Dutch Shell half of its 40-percent interest in UK license P1792, including blocks 21/30f and 22/26c (which cover the Beverley prospect), in the central North Sea.

Ithaca said the farm-out is in exchange for Shell's partial carry of Ithaca's 20-percent share of the costs of a well on the Beverley prospect. The well is required to be drilling by early 2015, according to the license terms.

As well as the Beverley prospect, the P1792 license contains the Belinda and Evelyn discoveries.

Ithaca also confirmed that an appraisal well on the Norvarg discovery, located in production license 535 in the Norwegian sector of the Barents Sea, has begun drilling. The well, operated by Total E&P Norge, is aimed at proving up the volume potential in the northeastern segment of the Norvarg closure. Drilling operations are expected to last 70 days.

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Shell Awards Wood Group-CCC Majnoon Oil Field Contract

Anglo-Dutch oil company Royal Dutch Shell PLC has awarded Wood Group PSN and Consolidated Contractors Company, or CCC, a commissioning services contract, Wood Group said in a statement Tuesday.

The contract is to commission the first phase of the super giant Majnoon oil field in southern Iraq, it said without giving the value of the contract.

Wood Group-CCC, or WGCCC, will be responsible for the provision of skilled resources, tools, services and test equipment to assist the start-up, commissioning and testing of the new production facilities at the field.

Iraq's Oil Minister Abdul Kareem Luaiby said recently that Shell and its partners, Malaysia's Petronas Gas Bhd and the Iraqi state company will start production this month of 100,000 barrels a day from the field, believed to hold as much as 12.6 billion barrels of proven oil reserves.

The one-year contract will commence in June this year and see WGCCC employ about 200 personnel to service the contract, the statement said.

The new production facilities at the field include well site facilities, a central production facility and all new-build facilities and utilities required to operate the field, including pipelines and infrastructure.

Shell and Petronas were awarded the deal in December 2009 to develop the field located in southern Iraq near the Iranian borders and near Basra. Shell owns 45% of the venture and Petronas owns 30%, with the Iraq state-run company holding 25%.

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Shell CEO Will Retire in 2014

Royal Dutch Shell plc announced Thursday that CEO Peter Voser will retire from the company during the first half of 2014. The decision is being seen as surprise move by Voser, since he has served just four years in the post.

Shell said that its board's nomination and succession committee will now lead a "structured and comprehensive" review of candidates to enable an orderly transition to a new CEO.

The departure will not mean a change in strategy for the company and Voser's decision to retire was a personal one, a Shell spokesperson told Rigzone. The company's succession committee would search both internally and externally for a candidate to replace Voser, but that an internal candidate would be preferable, the spokesperson added.

Voser commented in a statement:

"After almost 10 years as CEO and CFO and more than 25 years in Shell, I have elected to retire in the first half of 2014.

"After such an exciting executive career I feel it is time for a change in my lifestyle and I am looking forward to having more time available for my family and private life in the years to come."

Shell's first quarter results revealed that current cost of supplies (CCS) earnings for the 1Q 2013 improved 3 percent over 1Q 2012 to $7.5 billion.

In its Upstream business, the firm said that its first de-bottlenecking project for the Athabasca oil sands project in Canada has been completed. The project, in which Shell has a 60-percent stake, is expected to add some 10,000 barrels per day of capacity.

In Nigeria, the firm took the decision in 1Q 2013 to develop the deepwater project, Erha North Phase 2, some 65 miles off the Nigerian coast. This is expected to produce some 60,000 barrels of oil equivalent per day at peak production.

In Oman, the Amal steam-enhanced oil recovery project has been brought on stream, with this project expected to ramp up to some 20,000 barrels of oil per day (bopd) over the next few years.

In the United States, the firm announced its intention to form a joint venture with Kinder Morgan to develop a natural gas liquefaction plant in two phases at the existing Elba Island LNG terminal to export LNG, while it also took the final investment decision for two natural gas liquefaction units in Louisiana, U.S. and Ontario, Canada.

Elsewhere during the first quarter, Shell entered into an agreement to acquire part of Repsol's LNG portfolio outside of North America for $4.4 billion, while in the UK it completed the acquisition of a further 5.9 percent of the offshore Shiehallion field while also acquiring additional interests in the Beryl area fields.

Shell's Upstream business segment produced 3.56 million barrels of oil equivalent per day during the first quarter of 2013, compared with 3.55 million boepd during 1Q 2012.

A former engineer, Jon is an award-winning editor who has covered the technology, engineering and energy sectors since the mid-1990s. Email Jon at jmainwaring@rigzone.com.

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Shell CEO Will Retire in 2014

Royal Dutch Shell plc announced Thursday that CEO Peter Voser will retire from the company during the first half of 2014. The decision is being seen as surprise move by Voser, since he has served just four years in the post.

Shell said that its board's nomination and succession committee will now lead a "structured and comprehensive" review of candidates to enable an orderly transition to a new CEO.

The departure will not mean a change in strategy for the company and Voser's decision to retire was a personal one, a Shell spokesperson told Rigzone. The company's succession committee would search both internally and externally for a candidate to replace Voser, but that an internal candidate would be preferable, the spokesperson added.

Voser commented in a statement:

"After almost 10 years as CEO and CFO and more than 25 years in Shell, I have elected to retire in the first half of 2014.

"After such an exciting executive career I feel it is time for a change in my lifestyle and I am looking forward to having more time available for my family and private life in the years to come."

Shell's first quarter results revealed that current cost of supplies (CCS) earnings for the 1Q 2013 improved 3 percent over 1Q 2012 to $7.5 billion.

In its Upstream business, the firm said that its first de-bottlenecking project for the Athabasca oil sands project in Canada has been completed. The project, in which Shell has a 60-percent stake, is expected to add some 10,000 barrels per day of capacity.

In Nigeria, the firm took the decision in 1Q 2013 to develop the deepwater project, Erha North Phase 2, some 65 miles off the Nigerian coast. This is expected to produce some 60,000 barrels of oil equivalent per day at peak production.

In Oman, the Amal steam-enhanced oil recovery project has been brought on stream, with this project expected to ramp up to some 20,000 barrels of oil per day (bopd) over the next few years.

In the United States, the firm announced its intention to form a joint venture with Kinder Morgan to develop a natural gas liquefaction plant in two phases at the existing Elba Island LNG terminal to export LNG, while it also took the final investment decision for two natural gas liquefaction units in Louisiana, U.S. and Ontario, Canada.

Elsewhere during the first quarter, Shell entered into an agreement to acquire part of Repsol's LNG portfolio outside of North America for $4.4 billion, while in the UK it completed the acquisition of a further 5.9 percent of the offshore Shiehallion field while also acquiring additional interests in the Beryl area fields.

Shell's Upstream business segment produced 3.56 million barrels of oil equivalent per day during the first quarter of 2013, compared with 3.55 million boepd during 1Q 2012.

A former engineer, Jon is an award-winning editor who has covered the technology, engineering and energy sectors since the mid-1990s. Email Jon at jmainwaring@rigzone.com.

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Shell, India's ONGC Hold Talks on Opportunities in India

LONDON - Royal Dutch Shell PLC said Thursday it has been in discussions with India's state-run Oil & Natural Gas Corp. about potential opportunities as it seeks to expand its presence in India, one of the world's fastest growing economies and where energy demand is expected to more than double over the next 25 years.

Executives at ONGC said they were in the process of agreeing a long-term alliance to jointly explore oil and gas production and were looking at both existing and new projects, but added that it was too early to say what form a potential tie-up will take.

If talks between Shell and ONGC are successful, it would mark Shell's return to exploration in India some 16 years after it sold its 50% stake in Rajasthan assets to Cairn for $7.5 million. The Rajasthan fields last year reached 175,000 barrels a day of crude oil production and Cairn aims to increase that to 300,000 b/d.

Talks between Shell and ONGC also mark increased interest on the part of big international oil companies in the country's oil and gas always sector and come as falling output from India's largest gas deposit in the Krishna-Godavari basin in the Bay of Bengal has hit supplies to the power and fertilizer sector.

The government of the energy-hungry nation is seeking to reduce dependence on oil and gas imports and is currently proposing to allow gas prices in India to be benchmarked to global rates, which would lead to an increase in prices and would benefit the companies involved in extraction.

In February, BP PLC and Reliance Industries Ltd. said they planned to jointly invest more than $5 billion over the next three to five years to boost declining gas output in the KG D6 block in the Krishna-Godavari field off India's east coast.

In 2011, BP spent $7.2 billion buying a 30% stake in 23 oil and gas production sharing contracts that Reliance operates in India, including the producing KG D6 block. The two companies also formed a joint venture to source and market gas in India.

In India, Shell currently has a small retail presence and is involved in developing a liquefied natural gas import and regasification terminal at Kakinada in Andhra Pradesh.

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Shell, India's ONGC Hold Talks on Opportunities in India

LONDON - Royal Dutch Shell PLC said Thursday it has been in discussions with India's state-run Oil & Natural Gas Corp. about potential opportunities as it seeks to expand its presence in India, one of the world's fastest growing economies and where energy demand is expected to more than double over the next 25 years.

Executives at ONGC said they were in the process of agreeing a long-term alliance to jointly explore oil and gas production and were looking at both existing and new projects, but added that it was too early to say what form a potential tie-up will take.

If talks between Shell and ONGC are successful, it would mark Shell's return to exploration in India some 16 years after it sold its 50% stake in Rajasthan assets to Cairn for $7.5 million. The Rajasthan fields last year reached 175,000 barrels a day of crude oil production and Cairn aims to increase that to 300,000 b/d.

Talks between Shell and ONGC also mark increased interest on the part of big international oil companies in the country's oil and gas always sector and come as falling output from India's largest gas deposit in the Krishna-Godavari basin in the Bay of Bengal has hit supplies to the power and fertilizer sector.

The government of the energy-hungry nation is seeking to reduce dependence on oil and gas imports and is currently proposing to allow gas prices in India to be benchmarked to global rates, which would lead to an increase in prices and would benefit the companies involved in extraction.

In February, BP PLC and Reliance Industries Ltd. said they planned to jointly invest more than $5 billion over the next three to five years to boost declining gas output in the KG D6 block in the Krishna-Godavari field off India's east coast.

In 2011, BP spent $7.2 billion buying a 30% stake in 23 oil and gas production sharing contracts that Reliance operates in India, including the producing KG D6 block. The two companies also formed a joint venture to source and market gas in India.

In India, Shell currently has a small retail presence and is involved in developing a liquefied natural gas import and regasification terminal at Kakinada in Andhra Pradesh.

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Shell Looks Set for Bab Sour-Gas Contract

ABU DHABI - State-run Abu Dhabi National Oil Co., or Adnoc, said that Royal Dutch Shell PLC has "good standing" in its bid to operate the Bab sour-gas field, the firm's director general Abdulla al-Suwaidi said Monday. 

The company has shortlisted Shell and France's Total SA for the estimated $10 billion deal, but is yet to make an official announcement on the winner. 

"Shell has good standing... in a couple of weeks we will pick one of them," Mr. Suwaidi told reporters in Abu Dhabi. 

Industry sources have said that Shell won the bid, after the two firms presented competitive offers. The main difference between the two bids was their approach in handling the massive amounts of sulfur produced at the field. 

The Bab field, once developed, will produce between 500 million cubic feet and 800 million cubic feet of gas per day, but expertise is required to handle the large amounts of sulfur generated from the estimated 15% hydrogen sulfide content of the gas. 

Shell has recommended exporting the sulfur, while Total submitted a proposal to reinject the sulfur back into the reservoir. 

The deal needs to be signed off by the emirate's highest oil authority, the Supreme Petroleum Council – which includes the most senior leaders in the emirate.

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US Supreme Court Throws Out Lawsuit Against Shell

WASHINGTON -

The Supreme Court Wednesday said a centuries-old statute making international law enforceable in U.S. federal court can't be applied to actions that take place overseas, blunting a tool human-rights groups had used against torturers and other abusers for violations in their home countries.

In an opinion by Chief Justice John Roberts, the court held that the Alien Tort Claims Act, adopted in 1789 shortly after Congress met for the first time, applies only to actions that take place in the U.S. While all justices voted to dismiss the suit against Royal Dutch Shell PLC, Justice Stephen Breyer, joined by three other liberals, disputed the bright line majority conservatives drew.

Justice Breyer wrote that some lawsuits based on overseas acts should be permitted, if the defendant is an American national or the challenged conduct allegedly harms American interests.

In past decades, victims of former officials of foreign governments have won judgments in federal courts against their abusers. Those rarely have been paid, however, and more recently human-rights advocates have pursued defendants with deeper pockets, such as corporations doing business in countries with questionable regimes, under a theory that they are complicit in the misconduct.

The Supreme Court's ruling Wednesday will close off many such suits.

Still, the majority opinion left open at least the theoretical possibility that some acts abroad could so significantly "touch and concern the territory of the United States" to "displace the presumption" against the statute's use. In a concurring opinion, Justice Anthony Kennedy emphasized that future cases could provide "further elaboration and explanation" of that exception.

The alien tort law remained dormant for most of its history until human-rights advocates rediscovered it in the 1970s and began applying it to violations of modern international law.

In 1980, the U.S. Court of Appeals for the Second Circuit, in New York, ruled that a Paraguayan immigrant could invoke the law against a former Paraguayan police official for the torture and killing of her brother in Paraguay.

Wednesday's ruling involved a case brought by Nigerian refugees against Royal Dutch Shell. The plaintiffs alleged that the Anglo-Dutch oil giant aided and abetted the Nigerian government in a repressive campaign in the country's Ogoni region. Shell denies the allegations.

Initially, the Supreme Court agreed to consider whether the alien-tort law applied to corporations as well as individuals, but after a first round of arguments in February 2012, the justices ordered additional arguments over the far-broader question of whether the law applies at all to events overseas.

At arguments last October, several justices voiced concern that affirming such liability would make American courts a magnet for aggrieved foreign plaintiffs bringing claims for acts completely unrelated to the U.S.--and could invite foreign courts to encourage judging U.S. corporations for actions outside their own borders.

The case is Kiobel v. Royal Dutch Petroleum Co.

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Shell Studying Oil, Gas Areas Up for Bids in Brazil Auctions

RIO DE JANEIRO - Anglo-Dutch oil major Royal Dutch Shell is interested in Brazil's upcoming oil and natural gas concession auctions but has not yet decided whether to participate, Chief Executive Peter Voser said Thursday.

"Shell will study the bid areas and make a technical evaluation before deciding how to participate" in the auctions, Mr. Voser told reporters. The first of three auctions scheduled for this year will be held May 14-15, the first such bid round since 2008.

"Our assumption is that Brazil has significant resources being developed and to be developed," Mr. Voser said, noting that Latin America's largest country will play an important role in the global oil and natural gas map in the future.

In addition to the concession auction, Mr. Voser said that Shell was evaluating assets state-run energy giant Petroleo Brasileiro, or Petrobras, has put up for sale in Brazil and the Gulf of Mexico. Petrobras plans to sell $9.9 billion in assets to fund its $237 billion investment plan through 2017.

"We have a very successful partnership with Petrobras and are interested in further collaboration," Mr. Voser said.

Shell is also carefully watching developments in Venezuela, where the company has a small operation in the Lake Maracaibo region, Mr. Voser said. Venezuela has suffered with political unrest following President Hugo Chavez's death and last weekend's election of his handpicked successor, Nicolas Maduro.

"We take a long-term view on investments in Venezuela," Mr. Voser said, adding that Shell was on the lookout for growth opportunities in the country that is home to the world's largest crude-oil reserves.

Elsewhere, Mr. Voser said, the shale gas revolution in the U.S. could fundamentally change industry in the world's largest economy. "Cheap natural gas feedstock could drive a reindustrialization in the U.S.," Mr. Voser said, bringing previously outsourced manufacturing heavy industry and petrochemicals output back to the U.S.

Shell also expects the U.S. to approve exports of between 50 million and 60 million tons of liquefied natural gas derived from shale gas, Mr. Voser said.

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Shell Studying Oil, Gas Areas Up for Bids in Brazil Auctions

RIO DE JANEIRO - Anglo-Dutch oil major Royal Dutch Shell is interested in Brazil's upcoming oil and natural gas concession auctions but has not yet decided whether to participate, Chief Executive Peter Voser said Thursday.

"Shell will study the bid areas and make a technical evaluation before deciding how to participate" in the auctions, Mr. Voser told reporters. The first of three auctions scheduled for this year will be held May 14-15, the first such bid round since 2008.

"Our assumption is that Brazil has significant resources being developed and to be developed," Mr. Voser said, noting that Latin America's largest country will play an important role in the global oil and natural gas map in the future.

In addition to the concession auction, Mr. Voser said that Shell was evaluating assets state-run energy giant Petroleo Brasileiro, or Petrobras, has put up for sale in Brazil and the Gulf of Mexico. Petrobras plans to sell $9.9 billion in assets to fund its $237 billion investment plan through 2017.

"We have a very successful partnership with Petrobras and are interested in further collaboration," Mr. Voser said.

Shell is also carefully watching developments in Venezuela, where the company has a small operation in the Lake Maracaibo region, Mr. Voser said. Venezuela has suffered with political unrest following President Hugo Chavez's death and last weekend's election of his handpicked successor, Nicolas Maduro.

"We take a long-term view on investments in Venezuela," Mr. Voser said, adding that Shell was on the lookout for growth opportunities in the country that is home to the world's largest crude-oil reserves.

Elsewhere, Mr. Voser said, the shale gas revolution in the U.S. could fundamentally change industry in the world's largest economy. "Cheap natural gas feedstock could drive a reindustrialization in the U.S.," Mr. Voser said, bringing previously outsourced manufacturing heavy industry and petrochemicals output back to the U.S.

Shell also expects the U.S. to approve exports of between 50 million and 60 million tons of liquefied natural gas derived from shale gas, Mr. Voser said.

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Shell Optimistic Over Global LNG Outlook

Royal Dutch Shell plc remains optimistic that the Chevron Corp.-operated Gorgon liquefied natural gas (LNG) project will move forward according its planned timeline, despite the construction cost impacting LNG projects across Australia that prompted Woodside Petroleum Ltd. to scrap its Browse LNG development plans.

"We feel Gorgon remains attractive even with cost increases," said Andy Brown, director of Shell's Upstream International division, in a conference call Friday.

Brown discussed the company's global natural gas strategy and the growing role internationally of LNG ahead of the LNG17 conference in Houston next week. Shell holds a 25-percent interest in Gorgon.

However, Shell anticipates a moderation in the LNG project activity rate due to cost overruns. The company is looking at options for derisking drilling costs and collaboration opportunities going forward with its proposed Arrow LNG plant, whose supply would come from coalbed methane resources in Queensland. Shell CEO Peter Voser said in November 2012 that the company might delay until 2014 a decision on its Arrow LNG venture, Bloomberg reported.

Brown noted that floating LNG was an attractive alternative that could lower LNG project development costs. Construction of the hull and topsides is currently underway at South Korea's Samsung Shipyard on the floating LNG vessel for Shell's Prelude field development project offshore Australia. Prelude LNG will deliver 3.6 million tonnes of LNG and 1.7 million tonnes of condensate and liquefied petroleum gas.

The vessel will weigh 600,000 tonnes, the heaviest object that man has ever built, which Brown called a "real achievement". Shell acts as operator for the Prelude project and also holds a 6.4 percent interest in the Chevron-operated Wheatstone LNG project.

Globally, Shell sees significant LNG potential. Shell has a number of LNG projects under study worldwide, including Badi in Indonesia, Elba Island in the United States and expansion opportunities at the Gorgon LNG and the Sakhalin LNG project in Russia. Shell's recent acquisition of Peru and Trinidad midstream LNG assets from Repsol Corp. will add another 4 million tonnes of equity LNG coming to Shell. The $4.4 billion acquisition will generate substantial cash flow moving forward, Brown said.

Shell anticipates natural gas will become the largest energy supply source as global energy demand doubles between 2000 and 2050 due to global population growth.

"While we see renewables growing, we see energy needs being met predominantly by hydrocarbons," Brown commented. "It is our belief that natural gas will rival both coal and oil as the number one energy supplier."

Shell produces as much as gas as we do oil, and of the majors, has the largest portion of gas, Brown commented, citing the energy industry's commitment to promoting the use of environmentally-friendly natural gas.

Brown estimates that 250 million tonnes of gas supply per annum to meet the mismatch in gas demand and supply. By 2025, that demand will grow to 500 million tonnes per annum as LNG demand continues to grow significantly over the next 12 to 30 years.

Gas demand is expected to double in Asia and the Middle East moving forward. Gas demand in China could grow fivefold. Brown expects to see quite a pickup in North America energy demand as the nation finds ways to tap its indigenous gas supply, including its shale gas resources. However, gas demand in Europe will grow at a more gradual pace.  

Shell's LNG strategy for Europe involves the use of LNG in marine transportation. Interestingly, Shell has seen European gas demand decline in Europe, Brown said. The abundance of U.S. natural gas thanks to the development of shale and tight gas has resulted in Henry Hub gas prices undercutting U.S. coal prices. As a result, U.S. coal is now being imported to Europe, where coal-fired power consumption has actually increased in the past two years, Brown commented.

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Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.

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Coast Guard: Shell Pipeline Spills Oil Into Houston Area Bayou

An estimated 50 barrels of oil spilled from a pipeline operated by a subsidiary of Royal Dutch Shell PLC into a waterway outside Houston, according to the U.S. Coast Guard.

Shell clean-up crews were working to clear the crude out of Vince Bayou, a waterway that connects to the Houston Ship Channel, which leads into the Gulf of Mexico, said Coast Guard Petty Officer Steven Lehman. The spill was contained but the total amount of oil was still being verified, Officer Lehman said.

"That's a very early estimate--things can change," Officer Lehman said.

On April 3, about 700 barrels were found to have leaked from the West Colombia pipeline because of an unknown cause, with up to 60 of those barrels emerging in the bayou, Shell spokeswoman Kim Windon said. The pipeline had been shut down and isolated on March 29 after alarms alerted the company that oil may have leaked from the line.

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Shell, Gazprom to Sign Arctic Agreement

MOSCOW - Royal Dutch Shell PLC will sign a framework agreement Monday to partner Russia's OAO Gazprom Neft on projects on Russia's Arctic shelf, a person familiar with the matter said Friday, becoming the latest international major to seek access to potentially vast but hard-to-recover resources in the region. 

The deal will be signed Monday during a visit to the Netherlands by Russian President Vladimir Putin, the person said, without giving further details. 

Shell is already a partner of Gazprom Neft's parent company, OAO Gazprom, on the Pacific Sakhalin-2 project, and is also working with Gazprom Neft on developing oil resources onshore. 

Gazprom and OAO Rosneft, which are both state-controlled, are the only firms allowed to lead projects on Russia's Arctic shelf. Rosneft is partnering with Exxon Mobil Corp., Italy's Eni SpA and Norway's Statoil ASA. 

Shell's attempts to explore the U.S. Arctic have been marred by problems. 

A spokeswoman for Shell didn't immediately respond to a request for comment.

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Shell, Gazprom to Sign Arctic Agreement

MOSCOW - Royal Dutch Shell PLC will sign a framework agreement Monday to partner Russia's OAO Gazprom Neft on projects on Russia's Arctic shelf, a person familiar with the matter said Friday, becoming the latest international major to seek access to potentially vast but hard-to-recover resources in the region. 

The deal will be signed Monday during a visit to the Netherlands by Russian President Vladimir Putin, the person said, without giving further details. 

Shell is already a partner of Gazprom Neft's parent company, OAO Gazprom, on the Pacific Sakhalin-2 project, and is also working with Gazprom Neft on developing oil resources onshore. 

Gazprom and OAO Rosneft, which are both state-controlled, are the only firms allowed to lead projects on Russia's Arctic shelf. Rosneft is partnering with Exxon Mobil Corp., Italy's Eni SpA and Norway's Statoil ASA. 

Shell's attempts to explore the U.S. Arctic have been marred by problems. 

A spokeswoman for Shell didn't immediately respond to a request for comment.

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Shell Faces New Probe Into Alaska Drilling

Another probe is under way into Royal Dutch Shell's 2012 Alaska drilling season, this time for possible violations of international marine environmental rules, Reuters reported on its website Thursday citing a U.S. Coast Guard official.

The Coast Guard has asked federal prosecutors to consider taking action on possible violations of the International Convention for the Prevention of Pollution from Ships committed in the operations of Shell's Kulluk drillship, said Rear Admiral Thomas Ostebo, head of the Coast Guard in Alaska, in the report.

Rear-Adm. Ostebo said he had commissioned one investigation already launched into the Dec. 31 grounding of the Kulluk and that the Coast Guard has forwarded findings of safety and environmental violations on the Noble Discoverer, Shell's other Alaska drillship, to U.S. prosecutors for possible enforcement action.

"Last week, I also referred a separate Kulluk investigation into potential MARPOL violations from 2012 to the Department of Justice for their review and potential follow-on action," Rear-Adm. Ostebo was quoted as saying at a field hearing convened by Senator Mark Begich.

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Shell Gets Clearance for Chinese Shale Project

BEIJING - Royal Dutch Shell PLC said Tuesday it has received approval from the Chinese government for the company's first shale-gas production-sharing contract in China, a significant milestone as the country looks to tap potentially massive unconventional gas reserves and achieve ambitious shale-gas production targets.

Li Lusha, a spokeswoman for Shell, said the Chinese government has approved the Anglo-Dutch company's plan to explore, develop and produce shale gas with partner China National Petroleum Corp. in the Fushun-Yongchuan block in the Sichuan Basin.

Word of the government's approval comes more than a year after Shell and state-oil giant CNPC said they reached a deal in March 2012 to develop the shale reserves. The companies haven't disclosed details of the contract, but the approval suggests authorities in Beijing have developed the regulatory framework needed to spur wider international investment in developing its shale reserves.

China is looking to replicate a boom in North American natural-gas production, which has begun reshaping global energy markets. Chinese companies need international competitors such as Shell to lend technology and operational expertise in extracting the gas trapped in shale rock formations.

Shell Chief Executive Peter Voser said in Beijing on Tuesday that the company is gearing up for what he described as a "significant drilling season in 2013 and in 2014."

Mr. Voser said Shell and CNPC are continuing to explore which drilling locations are best-suited for long-term development and production, and said the company is committed to helping Beijing achieve its shale-gas production targets.

China has set a target of producing some 6.5 billion cubic meters a year of shale gas by 2015 and as much as 100 billion cubic meters a year by 2020, up from virtually zero in 2012. That is a target some analysts have been skeptical the country can achieve.

The U.S. Energy Information Administration has said China has an estimated 1,275 trillion cubic feet, or 36 trillion cubic meters, of technically recoverable shale-gas reserves, more than Canada and the U.S. combined. If extracted, unconventional reserves could help alter China's energy profile, which has become increasingly reliant on imported oil and polluting coal to power its economic growth.

Such massive estimates are sending Shell's international rivals into the market as well. Chevron Corp., for example, has drilled at least one exploratory well in China and has plans for more, but company executives have cited a shortage of infrastructure and geological data as among the reasons it expects slower progress compared with North America.

Soaring gas production in North America has helped lower fuel prices for chemical production and other industrial activity. In also has raised the prospect of liquefied-natural-gas exports from Canada and the U.S. during the coming decade. Mr. Voser reiterated earlier estimates that U.S. exports of LNG might hit 50 million to 60 million tons a year, but said he expects much of the U.S. gas to remain at home to be used as a replacement for coal in power generation and to build up domestic industry.

"I think LNG will be exported out of the United States but I see the volume as being limited," he said. 

Copyright (c) 2012 Dow Jones & Company, Inc.

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Shell Gets Clearance for Chinese Shale Project

BEIJING - Royal Dutch Shell PLC said Tuesday it has received approval from the Chinese government for the company's first shale-gas production-sharing contract in China, a significant milestone as the country looks to tap potentially massive unconventional gas reserves and achieve ambitious shale-gas production targets.

Li Lusha, a spokeswoman for Shell, said the Chinese government has approved the Anglo-Dutch company's plan to explore, develop and produce shale gas with partner China National Petroleum Corp. in the Fushun-Yongchuan block in the Sichuan Basin.

Word of the government's approval comes more than a year after Shell and state-oil giant CNPC said they reached a deal in March 2012 to develop the shale reserves. The companies haven't disclosed details of the contract, but the approval suggests authorities in Beijing have developed the regulatory framework needed to spur wider international investment in developing its shale reserves.

China is looking to replicate a boom in North American natural-gas production, which has begun reshaping global energy markets. Chinese companies need international competitors such as Shell to lend technology and operational expertise in extracting the gas trapped in shale rock formations.

Shell Chief Executive Peter Voser said in Beijing on Tuesday that the company is gearing up for what he described as a "significant drilling season in 2013 and in 2014."

Mr. Voser said Shell and CNPC are continuing to explore which drilling locations are best-suited for long-term development and production, and said the company is committed to helping Beijing achieve its shale-gas production targets.

China has set a target of producing some 6.5 billion cubic meters a year of shale gas by 2015 and as much as 100 billion cubic meters a year by 2020, up from virtually zero in 2012. That is a target some analysts have been skeptical the country can achieve.

The U.S. Energy Information Administration has said China has an estimated 1,275 trillion cubic feet, or 36 trillion cubic meters, of technically recoverable shale-gas reserves, more than Canada and the U.S. combined. If extracted, unconventional reserves could help alter China's energy profile, which has become increasingly reliant on imported oil and polluting coal to power its economic growth.

Such massive estimates are sending Shell's international rivals into the market as well. Chevron Corp., for example, has drilled at least one exploratory well in China and has plans for more, but company executives have cited a shortage of infrastructure and geological data as among the reasons it expects slower progress compared with North America.

Soaring gas production in North America has helped lower fuel prices for chemical production and other industrial activity. In also has raised the prospect of liquefied-natural-gas exports from Canada and the U.S. during the coming decade. Mr. Voser reiterated earlier estimates that U.S. exports of LNG might hit 50 million to 60 million tons a year, but said he expects much of the U.S. gas to remain at home to be used as a replacement for coal in power generation and to build up domestic industry.

"I think LNG will be exported out of the United States but I see the volume as being limited," he said. 

Copyright (c) 2012 Dow Jones & Company, Inc.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

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Adnoc Selects Shell to Operate Bab Gas Field

DUBAI - State-run Abu Dhabi National Oil Co., or Adnoc, has selected Royal Dutch Shell PLC to operate the strategically important Bab sour-gas field, the International Oil Daily reported Tuesday, citing industry sources.

The company had shortlisted Shell and French major Total SA for the estimated $10 billion deal, but Shell won the bid, according to the report in the daily, which is run by Energy Intelligence Group.

Both Shell and Total had put forward competitive offers, but the main difference was their approach in handling the massive amounts of sulfur produced at the field.

The Bab field, once developed, will produce 500 million-800 million cubic feet of gas per day, but expertise is required to handle the large amounts of sulfur generated from the estimated 15% hydrogen sulfide content of the gas.

Shell recommended exporting the sulfur, while Total submitted a proposal to reinject the sulfur back into the reservoir, the report said.

The deal needs to be signed off by the emirate's highest oil authority, the Supreme Petroleum Council--which includes the most senior leaders in the emirate--according to the report.

Shell declined comment when contacted by Dow Jones Newswires.

Copyright (c) 2012 Dow Jones & Company, Inc.

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Adnoc Selects Shell to Operate Bab Gas Field

DUBAI - State-run Abu Dhabi National Oil Co., or Adnoc, has selected Royal Dutch Shell PLC to operate the strategically important Bab sour-gas field, the International Oil Daily reported Tuesday, citing industry sources.

The company had shortlisted Shell and French major Total SA for the estimated $10 billion deal, but Shell won the bid, according to the report in the daily, which is run by Energy Intelligence Group.

Both Shell and Total had put forward competitive offers, but the main difference was their approach in handling the massive amounts of sulfur produced at the field.

The Bab field, once developed, will produce 500 million-800 million cubic feet of gas per day, but expertise is required to handle the large amounts of sulfur generated from the estimated 15% hydrogen sulfide content of the gas.

Shell recommended exporting the sulfur, while Total submitted a proposal to reinject the sulfur back into the reservoir, the report said.

The deal needs to be signed off by the emirate's highest oil authority, the Supreme Petroleum Council--which includes the most senior leaders in the emirate--according to the report.

Shell declined comment when contacted by Dow Jones Newswires.

Copyright (c) 2012 Dow Jones & Company, Inc.

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DOI: Shell Failed to Finalize Key Components of Alaska Program

Royal Dutch Shell plc's failure to finalize key components of its 2012 Alaska Arctic drilling program, including its oil spill containment system Arctic Challenger, led to Shell's failure in receiving needed permits to drill into oil-bearing zones in the Chukchi and Beaufort seas, according to the findings of a U.S. Department of Interior (DOI) review released Thursday.

Secretary of the Interior Ken Salazar called for a high-level, expedited review of Shell's program Jan. 8, including Shell's preparations for last year's drilling season and its maritime and emergency response operations – to identify the challenges Shell faced in its Arctic drilling plans and future lessons to be learned from that experience.

The review examined Shell's safety management system and the company's ability to meet the stringent standards set by the Department of the Interior for Arctic development. It focused on Shell's inability to obtain certification for the Arctic Challenger on a timely basis, the difficulty Shell encountered in deploying the vessel, and the marine transport issues Shell faced with the Noble Discoverer (mid-water drillship) and Kulluk drilling rigs, including the Kulluk's grounding offshore Kodiak Island, Alaska while being towed. Both rigs are en route to Asia for repairs.

Shell's failure to monitor contractor progress on key components of its Arctic drilling program, including the Arctic Challenger, was a pervasive theme in the review's findings. The contractor that Shell used to design and build the Arctic Challenger, had extensive experience working in the Gulf of Mexico, but ultimately, Shell ran into problems bringing the containment system online. The vessel failed to receive its U.S. Coast Guard certification, and the deployment of the system itself failed.

"Working in the Arctic requires thorough advanced planning and preparation, rigorous management focus, a close watch over contractors, and reliance on experienced, specialized operators who are familiar with the uniquely challenging conditions of the Alaska offshore," Salazar commented during a conference call Thursday with reporters.

Shell fell short in this area, Salazar noted, which contributed to many of the problems it faced, including the inability to deploy a functioning containment system, as well as the violation of air emissions requirements Shell encountered.

DOI Deputy Secretary David J. Hayes said the review confirmed the importance of strong coordination of among federal agencies in connection with permitting and exploration activities. This coordination has been an initiative through Executive Order 13580. Established in July 2011, the working group was created to coordinate efforts of federal agencies responsible for overseeing safe and responsible development of onshore and offshore energy in Alaska.

These agencies include the Bureau of Ocean Energy Management (BOEM), the Bureau of Safety and Environmental Enforcement (BSEE), the U.S. Coast Guard, the National Oceanic and Atmospheric Administration (NOAA), and the U.S. Environmental Protection Agency (EPA).

The review also reinforces the Obama administration's commitment to ensuring oil and gas exploration activities maintain safety at all levels, said BSEE Director James Watson.

"We will continue to maintain rigorous oversight of drilling and hold anyone operating in public waters to the highest environmental and safety standards."

Watson noted the administration looks forward to learning more from the findings of the Coast Guard's current investigation into the Kulluk grounding incident.

Shell should submit to DOI a comprehensive, integrated plan describing all phases of operation, from preparations through demobilization, when the company resumes exploratory drilling in Alaska's Arctic offshore region. This plan will go one step beyond the current recommendations for plan submissions, including not only details of drilling plans but for maritime operations as well.

The review also recommended Shell complete a full third party management system audit to confirm the capability of the company's management system, including oversight of key contractors, are tailored for Arctic operations, and that Shell has addressed the issues it faced in the 2012 drilling season.

Additionally, the review findings confirmed the necessity of an Arctic-specific model, and recommends continuing work on safety and environmental practices appropriate for the Arctic.

"We must recognize and account for the unique challenges of this region, which holds significant energy potential, but where issues like environmental and climate conditions, limited infrastructure, and the subsistence needs of North Slope communities demand specialized planning and consideration," said Principal Deputy Assistant Secretary for Land and Minerals Management Tommy Beaudreau, who led the review team.

The review, which involved the efforts of BSEE James Watson and staff, Alaska regional staff for BSEE and the BOEM, as well as input from NOAA and the EPA, which oversaw Shell's Alaska activity. The Coast Guard also provided technical assistance. Additionally, DOI officials met with Alaska state legislators, native Alaskan organizations, and environmental groups, as well as marine contractors and oil and gas companies.

When asked whether Shell's Alaska program highlighted any changes that needed to be made to the government process, Salazar noted government officials had learned a great deal from Shell's 2012 effort and still had a lot to learn.

"The Arctic is a difficult environment, and Shell is one of the most resource-capable companies in the world. Just because Shell encountered problems there doesn't mean that exploration shouldn't occur," Salazar commented, noting that 30 exploration wells have previously been drilled in both the Beaufort and Chukchi seas. "We allowed Shell to move forward cautiously with limited activity in the Arctic because Shell didn't meet the requisite permit requirements," Salazar said.

Hayes noted that Shell had been cooperative with the review process, and has acknowledged the issues it faced in terms of contractor timing with the Arctic Challenger.

"They put a lot of effort late into the game to get it certified, but not in time for the 2012 season."

Salazar said Shell should use its planned pause of its Alaska drilling plans for 2013 to learn the lessons from its 2012 drilling season. Hayes noted that Shell would use the time to conduct more testing of the Arctic Challenger to ensure all of its systems are in place so they will not be pressed for time the same way they were pressed for time for the 2012 season. 

Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.

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