Petronas And Shell Sign Production Sharing Contracts For Enhanced Oil Recovery
Jan 16, 2012
New projects to boost production offshore Sarawak and Sabah
PETRONAS and Shell Malaysia today signed two new production sharing contracts (PSCs) for enhanced oil recovery (EOR) projects offshore Sarawak and Sabah.
The contracts build upon two existing PSCs for fields in the Baram Delta Operations area and North Sabah, where oil has been produced for decades using mainly primary and secondary recovery techniques.
The development is expected to have a positive impact on Malaysia’s oil reserves and benefit the country as a whole. Associated work activities and new investments from the partners are expected to extend the life of the fields to beyond 2040 and lead to increased oil production.
Under the new contracts, Shell Malaysia’s upstream companies and partner PETRONAS Carigali Sdn. Bhd. will further develop six oil fields in the Baram Delta offshore Sarawak, and three oil fields in the North Sabah development area offshore Sabah, using EOR or other appropriate related technologies.
The innovative deal combines the remaining periods of the earlier PSCs which would have expired in 2018 (Baram Delta Operations) and 2019 (North Sabah) with license extension to 2040, and with the addition of the EOR component for integrated PSCs with new terms.
“This agreement is a good example of how partners working together can apply technical innovation to make the most of the world’s valuable energy resources,” said Shell Chief Executive Officer Peter Voser.
Anuar Taib, Chairman Shell Malaysia added “The development extends the sustainability of Shell Malaysia’s upstream operations in the country for at least another generation or two of Shell staff, and will have a real impact on Malaysia’s oil reserves and the country’s upstream oil and gas industry.”
Malaysia’s Prime Minister Yang Amat Berhormat Dato' Sri Mohammad Najib Abdul Razak witnessed the signing between the two companies. The contracts were signed by President and Chief Executive Officer of PETRONAS Dato’ Shamsul Azhar Abbas and Chief Executive Officer of Royal Dutch Shell Peter Voser.
Notes to editors
Enhanced Oil Recovery
Oil producers typically only manage to recover around a third of a reservoir’s oil: the rest is left in the ground. Injecting steam, chemicals or gas into a reservoir – a process called enhanced oil recovery (EOR) – eases the flow of oil and boosts recovery by an average of 10%. In total it could help to unlock 300 billion more barrels of oil, equal to 10 years’ global production at today’s levels. Enhanced oil recovery currently accounts for 4% of global oil production. This could rise to 20% by 2030.
PETRONAS Carigali holds a 60 per cent equity interest in the BDO production sharing contract (expiry 2018) and is operator, with Shell holding the remaining 40 per cent equity interest. The North Sabah PSC (expiry 2019) is Shell-operated, with each company holding a 50 per cent equity interest. Shell currently has participating interests in 14 PSCs in various offshore blocks in Sarawak and Sabah, excluding these new ones.
The Baram Delta EOR PSC comprises the Bokor, Bakau, Baram, Baronia, Betty, Fairley Baram, Siwa, Tukau and West Lutong oil fields, while the North Sabah EOR PSC contains St. Joseph, South Furious, SF30 and Barton fields.
Shell Malaysia’s upstream companies refer to Sarawak Shell Bhd (SSB), Sabah Shell Petroleum Company Ltd (SSPC), and Shell Sabah Selatan Sdn Bhd (SSS).
The projected increase in the average recovery factor in the BDO and North Sabah fields will be from 36% to 50%, adding significant value to the upstream industry in Malaysia sustainably over the coming decades.
On a combined basis, these EOR development opportunities could be the biggest in the world in an offshore environment. The technology employed in the North Sabah fields could potentially lead to the first field-scale offshore Chemical EOR in the world. The technology employed in the North Sabah fields could potentially lead to the world's first offshore Alkaline Surfactant Polymer (ASP) EOR project using horizontal wells.
Shell Media Relations
Asia: Cindy Lopez (firstname.lastname@example.org)
Malaysia: Stephanie Khoo (email@example.com) +603 2091 2115
Shell Media Relations International, UK, European Press: +31 70 377 3600
Shell Investor Relations
Europe: + 31 70 377 3996
United States: +1 713 241 2069
The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate entities. In this release “Shell”, “Shell group” and “Royal Dutch Shell” are sometimes used for convenience where references are made to Royal Dutch Shell plc and its subsidiaries in general. Likewise, the words “we”, “us” and “our” are also used to refer to subsidiaries in general or to those who work for them. These expressions are also used where no useful purpose is served by identifying the particular company or companies. ‘‘Subsidiaries’’, “Shell subsidiaries” and “Shell companies” as used in this release refer to companies in which Royal Dutch Shell either directly or indirectly has control, by having either a majority of the voting rights or the right to exercise a controlling influence. The companies in which Shell has significant influence but not control are referred to as “associated companies” or “associates” and companies in which Shell has joint control are referred to as “jointly controlled entities”. The term “Shell interest” is used for convenience to indicate the direct and/or indirect ownership interest held by Shell in a venture, partnership or company, after exclusion of all third-party interest.
This release contains forward-looking statements concerning the financial condition, results of operations and businesses of Royal Dutch Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Royal Dutch Shell to market risks and statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘estimate’’, ‘‘expect’’, ‘‘intend’’, ‘‘may’’, ‘‘plan’’, ‘‘objectives’’, ‘‘outlook’’, ‘‘probably’’, ‘‘project’’, ‘‘will’’, ‘‘seek’’, ‘‘target’’, ‘‘risks’’, ‘‘goals’’, ‘‘should’’ and similar terms and phrases. There are a number of factors that could affect the future operations of Royal Dutch Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this release, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for the Shell’s products; (c) currency fluctuations; (d) drilling and production results; (e) reserve estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments including potential litigation and regulatory measures as a result of climate changes; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; and (m) changes in trading conditions. All forward-looking statements contained in this release are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional factors that may affect future results are contained in Royal Dutch Shell’s 20-F for the year ended 31 December, 2010 (available at www.shell.com/investor and www.sec.gov). These factors also should be considered by the reader. Each forward-looking statement speaks only as of the date of this release. Neither Royal Dutch Shell nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this release. There can be no assurance that dividend payments will match or exceed those set out in this release in the future, or that they will be made at all.
The United States Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use certain terms in this release, such as resources and oil in place, that SEC's guidelines strictly prohibit us from including in filings with the SEC. U.S. Investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575, available on the SEC website www.sec.gov. You can also obtain these forms from the SEC by calling 1-800-SEC-0330.