MOSCOW (MRC) -- Shell's upstream oil production increased by 6% on the year to 1.77 million b/d in the fourth quarter of 2019, contributing to what CEO Ben van Beurden insisted is a "very strong upstream business," even as profits plummeted on the back of low commodity prices and financial impairments, said the company.
Shell's oil output was boosted by new developments ramping up in Brazil, the US Permian basin and the US Gulf of Mexico, although a 9% reduction in its upstream gas output resulted in flat overall production, of 2.81 million b/d of oil equivalent.
Van Beurden said further production growth was expected from Shell's newly producing Appomattox oil field in the Gulf of Mexico, which came on stream last May. The facility is producing 75,000 b/d from four wells, with another 14 to come on stream, he said, adding that Shell was also ramping up at its liquids-rich Permian assets in the US.
Chief Financial Officer Jessica Uhl highlighted Shell's rising Brazilian production, including the latest floating production facility to come on line, in the Berbigao-Surura area, describing Brazil as an upstream "heartland," with 16 such floating facilities now producing 400,000 boe/d for the company.
Shell's upstream division, however, plunged to a USD787 million loss in the quarter, on the back of weak prices, decommissioning costs and a USD1.65 billion impairment in the value of its US unconventional assets, notably its Marcellus and Utica shale production in Pennsylvania. Van Beurden added that part of the conventional business -- not including deepwater or shale -- continued to experience "challenges."
The company's overall fourth-quarter profit was down 88% on the year at USD871 million. Excluding "identified items" -- mainly impairments -- Shell's profit was down 48% at USD2.9 billion.
"Frankly speaking, all macro-economic indicators are working against us," Van Beurden said in a call with journalists. However, he went on to describe 2019 as "a year of progress" and said Shell would continue to sustain upstream investment at around USD11 billion-13 billion annually.
Overall capital expenditure this year would be at the low end of a USD24 billion-29 billion range, but even the bottom of that range would be $4 billion more than needed to ensure growth, Van Beurden said.
Shell signalled it would be going slow on share buy-backs, while a $20 billion two-year divestment program begun at the start of last year would continue, with half of the target already achieved. There would be no rush to sell based on a need for "early cash," Van Beurden said.
On the issue of resilience, he said the average breakeven oil price for projects approved by Shell for development last year was under USD30/b, and noted a desire to increase investment in electricity projects.
As MRC informed earlier, Shell Singapore restarted its naphtha cracker in Bukom Island in early December 2019, following a two months maintenance shutdown since the beginning of October 2019. Thus, this cracker was taken off-stream for the turnaround on 1 October 2019. The cracker is able to produce 960,000 tons/year of ethylene and 550,000 tons/year of propylene.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,904,410 tonnes in the first eleven months of 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments increased from both domestic producers and foreign suppliers. The PP consumption in the Russian market was 1,161,830 tonnes in January-November 2019, up by 7% year on year. Deliveries of all grades of propylene polymers increased, with the homopolymer PP segment accounting for the largest increase.
Royal Dutch Shell plc is an Anglo-Dutch multinational oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the biggest company in the world in terms of revenue and one of the six oil and gas "supermajors". Shell is vertically integrated and is active in every area of the oil and gas industry, including exploration and production, refining, distribution and marketing, petrochemicals, power generation and trading.
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