The rising price of crude oil, a strong dollar and a weak European economy have lowered the crude oil demand in developed economies. However, rising demand from emerging economies partially offset the lower demand elsewhere. Three oil and gas companies are adopting various strategic moves to advance in a slow growing industry. These strategies include increasing production, new projects and expanding overseas. Let’s discuss how these strategies will help oil giants to grow.
Hoping for production growth from Gulf of Mexico
Royal Dutch Shell plc (ADR) (NYSE:RDS.B) has been operating in the Gulf of Mexico the last 60 years, and the region contributes around 50% to Royal Dutch’s U.S. oil and gas production. To expand in the gulf, the company announced a successful exploratory well at its Vicksburg field, Gulf of Mexico in July 2013. The Vicksburg A discovery is estimated to have potential recoverable resources of more than 100 million barrels of oil equivalent (mmboe). This adds to existing potential of more than 500 mmboe in the nearby Appomattox discovery. This discovery will strengthen Royal Dutch Shell plc (ADR) (NYSE:RDS.B)’s existing portfolio of deep-water exploration in the Gulf of Mexico. The company holds 75% of working interest in the Vicksburg A well.
Royal Dutch Shell plc (ADR) (NYSE:RDS.B) granted a contract to FMC Technologies to supply sub-sea equipment and infrastructure in order to continue the development of the Stone oil and gas field in the Gulf of Mexico. FMC Technologies will construct a floating production, storage and offloading, or FPSO, vessel that will receive hydrocarbons, process them to convert into oil and store oil. The development will initiate with two sub-sea production wells that will be tied back to the FPSO vessel. First phase of development is expected to generate annual peak production of 50,000 barrels oil equivalent per day.
The Stone field contains more than two billion barrels oil equivalent per day of oil. Hence, Stone’s development will boost Royal Dutch Shell plc (ADR) (NYSE:RDS.B)’s revenue in the coming years. The company holds 100% interest in this project.
From the two above projects, the company expects production in the U.S. segment of Shell to be:
|U.S. (production in ‘000s, barrels oil equivalent per day)||406||549||603|
Overseas expansion will drive maximum revenue
PetroChina Company Limited (ADR) (NYSE:PTR) plans to spend around $16 billion for overseas investment this year. In order to expand its presence in Australia, the company recently bought BHP Billiton Limited (ADR) (NYSE:BHP)’s 8.33% share in the East Browse joint venture, and 20% shares of West Browse joint venture worth $1.63 billion. The Browse liquid natural gas (LNG) project is located on the Northwest coast of Western Australia and worth $45 billion. The project consists of three gas fields: Brecknock, Calliance and Torosa. These fields have large reserves totaling 15.5 trillion cubic feet of gas and 417 million barrels of condensate. This will be an important opportunity for PetroChina Company Limited (ADR) (NYSE:PTR) to improve its overseas LNG, unconventional oil and gas developments, in West Australia. This will eventually bring higher economic returns for the company in the coming years. It has set a target to generate half of its revenue from oil and gas production from overseas by end of the decade. The total revenue of PetroChina Company Limited (ADR) (NYSE:PTR) is expected to increase from $357 billion in 2012, to $362 billion this year, and $387 billion next year.