Shell reorganizing its upstream businesses

Royal Dutch Shell PLC is reorganizing its upstream businesses in a move the company says will continue when it completes its $70-billion acquisition of BG Group next year (OGJ Online, Sept. 3, 2015).

Shell also is slashing spending by the combined company.

“We are reshaping the company, and this will accelerate once this transaction is complete,” said Chief Executive Officer Ben van Beurden at a meeting with shareholders in London.

Shell is making integrated gas a stand-alone organization and creating separate upstream and unconventional resources organizations.

Maarten Wetselaar, currently executive vice-president of integrated gas, will be director of the stand-alone integrated gas business. He also will become a member of the Shell executive committee.

Marvin Odum, now upstream Americas director, will be director of the unconventional resources organization, which will cover heavy oil and shale operations in the Americas.

Odum’s work, according to a company statement, will include “ongoing reviews of portfolio and investment opportunities in these longer term themes” as well as Shell’s withdrawal from offshore Alaska.

The company last month said it was halting construction of its Carmon Creek thermal bitumen project in Alberta (OGJ Online, Oct. 28, 2015). In September it said it would cease exploration off Alaska after disappointing results from its Burger J well in the Chukchi Sea (OGJ Online, Sept. 28, 2015).

The director of Shell’s new upstream organization, covering worldwide conventional oil and gas, will be Andrew Brown, now upstream international director.

Cost cuts

Also at the meeting, Shell reported reductions this year of 10% in operating costs and 20% in capital spending, together totaling $11 billion.

It reported asset sales totaling $20 billion in 2014-15 and a further $30 billion planned for 2016-18 after the combination with BG.

The company said it has raised its estimate of “identified and reported-on pretax synergies” from the BG consolidation to $3.5 billion in 2018 from its earlier estimate of $2.5 billion.

The new estimate includes $2 billion of operating cost savings and a $1.5 billion reduction in exploration expenditure in 2018.

“Shell expects 2018 exploration spend for the combined group to be less than $3 billion, a 40% reduction from 2014 levels on a combined Shell and BG basis,” the company said.

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