(Adds details, comments on flaring and Permian potential)
Feb 5 (Reuters) - Royal Dutch Shell, which plans billions of
dollars in spending on shale drilling projects, boosted output
in the top U.S. shale field to 250,000 barrels per day in
December, the company's Permian Basin head said on Wednesday.
Shell plans to spend about $3 billion per year for the next
five years on shale projects, said Amir Gerges, vice president
of Permian assets for Shell, at the Argus Americas Crude Summit
in Houston. Its Permian Basin production rose more than 100,000
barrels per day in the last year.
“We continue to ramp up our production from our core
acreage,” Gerges said.
Shell and rival oil majors Exxon Mobil, Chevron and BP are
spending billions in the Permian Basin of Texas and New Mexico.
The companies see shale as a short-cycle asset that complements
projects such as deepwater wells that take years to bring into
production.
The Permian has 30 years of so-called “tier one” high
quality drilling inventory and will remain at the heart of U.S.
oil growth, Gerges said. But the industry faces challenges in
the region, ranging from too much natural gas flaring to
inadequate infrastructure and "even today’s investor
sentiments," he said.
Previously, Shell indicated it might seek a way to expand
its presence in the Permian, but during last week's earnings
call, Chief Executive Officer Ben van Beurden indicated the
timing is not right for an acquisition.
"I think anything inorganic would not be the right thing to
do," van Beurden said.
Oil and gas companies of all sizes have been under pressure
to produce more free cash and return it to investors through
share buybacks and dividends.
The industry also faces pressures to reduce emissions,
especially from prolific gas flaring, deliberately burning gas
produced as a byproduct to oil. The practice can worsen climate
change by releasing carbon dioxide.
The U.S. drilling industry flared or vented more natural gas
in 2019 for the third year in a row, as soaring production in
Texas, New Mexico, and North Dakota have overwhelmed regulatory
efforts to curb the practice, according to state data and
independent research estimates.
“The flaring and emissions in the Permian Basin have become
famous and it’s not something we would like to be recognized
for,” Gerges said.
The region needs more infrastructure such as natural gas
pipelines, but it is more important to have "robust,
fit-for-purpose policies and regulatory requirements that
incentivize reduction in flaring," Gerges said.
(Reporting by Jennifer Hiller in Houston
Editing by Bernadette Baum and David Gregorio)
