A major energy firm is looking to increase investments in high-return shale assets
2017 will be the third straight year of lowering capital expenditures for Royal Dutch Shell, the company announced as it outlined plans to increase production at one of its Alberta light oil assets.
The Netherlands-based company informed analysts of its plans to invest in its Fox Creek, Alberta, assets as it pursues a larger US$2- to $3-billion strategy to double down on its highest-return shale plays, according to the Financial Post.
Outgoing Shell CFO Simon Henry said that Fox Creek is among the top three shale assets in its global portfolio in terms of near-term growth. Fox Creek, when combined with another shale asset in the Permian basin in Texas and Louisiana, is expected to increase production by 140,000 of oil equivalent in 2017.
Over half of the planned shale investment will go to the Permian asset. The company didn’t say how much capital would go toward Fox Creek.
The company joins others in an industry-wide shift toward operations with faster returns on investment, notably shale, following the 2014 decline in oil prices. Energy firms with rigs around the world are turning lukewarm toward developments with high up-front costs that can take a long time to recoup.
Tara Lemay, a spokesperson for Royal Dutch Shell subsidiary Shell Canada, said the company now views the oilsands as a “cash engine, not a growth engine.” Based on investor presentations, the company will maintain oilsands investment at around $1 billion yearly, mostly for maintenance, operations, and de-bottlenecking efforts.
The 225,000-acre Fox Creek asset produced 8,000 barrels of oil equivalent and 38 million cubic feet equivalent of gas in 2015, according to the Shell Canada website. However, Henry said that Fox Creek pales in comparison to its Permian counterpart.
“[It] may have the quality of the Permian, [but] it doesn’t have the scale of the Permian for us,” he said.
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