Shell looks beyond Europe for future upstream projects

Shell chief executive Ben van Beurden said today the firm is increasingly looking beyond an unfriendly environment in Europe to other parts of the world for upstream oil and gas development.

Acknowledging mounting opposition to the development of new oil and gas supplies in Europe, van Beurden said the region "has no problem with consuming oil and gas", so Shell will look to parts of the world "where there is actually support for that type of development."

He highlighted the US Gulf of Mexico, "where we have a number of new projects coming on stream this year", alongside Brazil, Kazakhstan and Oman.

Speaking to reporters about Shell's second quarter results, van Beurden said Shell still sees "a lot of potential" in frontier areas such as Suriname and Namibia — "countries that are very keen to also develop their economies and [so] making a first step with resources is a logical next step". He said these are resources the world "desperately needs", and while Shell supports the energy transition this "means that demand should reform so that supply can follow, and not the other way around."

Shell in March began production at the US Gulf 20,000 b/d of oil equivalent (boe/d) PowerNap development, and the company's 100,000 b/d Vito deepwater project in the region will begin producing by the end this year. Van Beurden said Shell follows the debate in the US on resources and leases, and said he welcomed a new round of lease sales.

"In countries like the US, which have a very strong supply position themselves, just curtailing domestic supply in the hope that somehow domestic demand will follow suit is not realistic," he said. "So, again, if you want to do something about the energy transition, do something on demand."

In Europe Shell remains committed to expediting gas projects such as its Jackdaw field development, on which it took a final investment decision this week.

"Of course, we are doing things in Europe to help out," he said, noting Jackdaw is capable of supplying 6pc of UK demand. "And we have shifted some of our capex into gas investments." He also said Shell is trying to redevelop the Pierce oil field as a gas producer. But he said there is no change in the company's stance on the contentious Cambo oil field.

"The economics are simply not supportive enough," van Beurden said.

Addressing the energy transition, van Beurden warned Europe's new-found taste for LNG could prove to be a setback. While he said companies like Shell are investing in new LNG supplies, van Beurden said these "take time to develop", and cannot come on stream quickly enough in response to an emergency. Instead, short-term supplies need to be pulled away from markets such as China, where LNG demand has not yet recovered back to pre-Covid levels.

"But, of course, if we really have to supply a lot more into Europe to deal with the tightness that may come into winter, we will have to significantly — as a world — eat into LNG supplies that would otherwise go to an economy that also needs [those supplies]," he said. "So, in other words, there will be pressure on price, which is unfortunate, but a reality. That's how the market works.

"And… more unfortunate, the alternatives then for countries like China and others that will not have these [LNG] supplies anymore is to revert to coal-firing, much as… Europe is doing at this point in time," he said.

By Jon Mainwaring