In the deepwater vs shale oil contest, Shell backs both

The logo of energy giant Royal Dutch Shell is pictured on pumps at a petrol station in London. (AFP)
Updated 20 February 2018
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In the deepwater vs shale oil contest, Shell backs both

LONDON: Royal Dutch Shell will expand deepwater output and turn a profit from its shale production in coming years as both together will help the oil major cope with a world of low crude prices, the head of its oil and gas production said on Tuesday.
Shell's deepwater production in Brazil, Nigeria, the Gulf of Mexico is much bigger and more profitable, but the firm sees the nimble, fast-returns U.S. onshore shale as an engine for growth.
"We can see strong (shale) production growth, strong cash surpluses that gives us a balance in our portfolio where you can ramp investment up and down, you can moderate that, very unlike deepwater which is quite chunky," Andy Brown told Reuters in an interview on the sidelines of the IP Week conference.
"They sit nicely together in a portfolio."
Now, mammoth deepwater projects and smaller shale fields both compete for Shell's tightly-controlled capital and could generate profits with oil as low as $40 a barrel, Brown said.
Benchmark Brent crude is now trading at about $65, up from below $30 at the start of 2016.
Following Shell's $54 billion acquisition of BG Group in 2016, the Anglo-Dutch company became a major player in deep water, which is set to produce 900,000 barrels of oil equivalent per day (boed) by the end of the decade, roughly a fifth of Shell's total output. Today, it produces about 750,000 boed.
Shell made its deepwater goals clear when it swept up nearly half the Gulf of Mexico oil and gas blocks awarded in a Mexican auction in January, months after picking up Brazilian blocks.
The offshore business was set to generate $6 billion to $7 billion a year in free cash flow in the next three years, roughly a quarter of Shell's total free cash flow, Brown said.
"The aim is to get it (the cash generation) and sustain it through the next decade," he said.
Shell aimed to approve several new deepwater developments this year, including Vito in the U.S. Gulf of Mexico and Bonga Southwest in Nigeria, he said, adding it would also work on plans to develop its Gulf of Mexico Whale discovery.
Brown has overseen a sharp reduction in development costs in recent years with the help of new technology and by simplifying designs to make projects profitable at lower oil prices.
But Shell, along with others such as Exxon Mobil and Chevron, has invested heavily in the shale businesses, lured by lower development costs and quicker start up.
Shell still did not generate a profit from its shale activities, much of it focused in the Permian basin in west Texas and New Mexico, but aimed to break even by 2019, a year earlier than originally planned, Brown said.
"We had an ambition to get cash flow positive in 2020, we accelerated that to 2019. There are circumstances we can be cash flow positive this year," Brown said.
Shell would increase its shale output to 200,000 barrels of oil equivalent per day (boed) by 2020, he added.


Toyota recalls 70,000 vehicles to replace air bag inflators

Updated 12 December 2018
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Toyota recalls 70,000 vehicles to replace air bag inflators

  • Takata uses the chemical ammonium nitrate to create a small explosion and inflate the bags
  • Can deteriorate and burn too fast, blowing apart a metal canister

DETROIT: Toyota is recalling about 70,000 Toyota and Lexus brand vehicles in North America to replace air bag inflators that could explode and hurl shrapnel at drivers and passengers.
The recall covers the 2003 to 2005 Corolla, the 2002 to 2005 Sequoia, the 2003 to 2005 Tundra and the 2002 to 2005 Lexus SC.
Takata uses the chemical ammonium nitrate to create a small explosion and inflate the bags. But it can deteriorate and burn too fast, blowing apart a metal canister.
The Toyota and Lexus vehicles were recalled previously and the inflators replaced with new ones that still used ammonium nitrate. In the latest recall, Toyota will use inflators made by another company with a safer chemical.
Owners will be notified early next year. Toyota says it has replacement parts available.
About 65,000 of the recalled vehicles are in the US
Toyota says it’s doing the recall a year ahead of a schedule set by the US National Highway Traffic Safety Administration.
At least 23 people have died worldwide due to the problem caused by inflators made by Takata Corp., resulting in the largest series of auto recalls in US history. They cover 37 million vehicles and about 50 million inflators in the US About 100 million inflators are being recalled worldwide.
The recalls forced Takata of Japan to seek bankruptcy protection.