Shell Reserves Decline, Groningen is a Factor
Shell's overall reserves base fell last year, with much of the decrease down to a fall in its undeveloped gas resources - in part due to its problems with the earthquake-hit Dutch onshore Groningen field.
According to its 2017 annual report, released March 15, Shell's proven developed and undeveloped oil and gas reserves fell by 7.7% to 12.233 bn barrels of oil equivalent at end-2017, from their end-2016 level of 13.248bn boe.
Shell was boosted in 2016 by the addition of assets at BG, which it took over in February 2016 some of which it has since sold. Shell reserves at end-2015 were 11.747bn boe.
Shell's proven undeveloped reserves in 2017 decreased by 1.158bn boe (or by 34%) to 2.177 billion boe. That included decreases of 627mn boe in Muskeg River Mine (Canada) mainly due to divestment, 519mn across Gorgon (gas offshore Australia), Lula (Brazil, largely oil) and Kashagan (Kazakhstan, largely oil) mainly due to maturation to proven developed (PD) reserves, but also 201mn boe in Groningen (Netherlands gas) "mainly due to a negative revision of compression volumes," Shell's annual report said.
The Dutch government is currently deciding whether to oblige Shell/Exxon joint venture operator NAM to reduce production at Groningen below its current 21.6bn m3/yr annual production cap - with a reduction to just 12bn m3/yr being contemplated, as proposed by the official mining regulator following a series of earthquakes, including a sizeable one January 8 2018. NAM has since stopped production completely at certain parts of the field. NAM has 60% equity in the Groningen field, alongside Dutch state holding EBN with 40%.
The Anglo-Dutch major said the declines were partly offset by an increase of 117mn boe in the Permian (USA) mainly due to extensions and discoveries and a net increase of 72mn boe spread across other fields. It said a total of 1,566mn boe were matured to PD status.
It said its fields with the largest proven undeveloped reserves at end-2017 were Prelude (where Shell within months is expected to start its first floating liquefaction project), Gorgon and Jansz-Io (all gas offshore Australia), plus Clair (UK) and Lunskoye (Russia).
The 12.233bn boe proven developed and undeveloped reserves at end-2017 were made up of 4,613mn barrels of oil and other liquids, 40,432bn ft3 gas and 649mn bbls synthetic oil. In this article, billion in all cases refers to thousand million.
Shell noted in annual results February 1 that $24bn of assets had been sold out of its overall $30bn divestment programme, with more than $6bn announced or in progress. Its annual report now says Shell will aim to divest at least $5bn/yr of assets during 2019-20.