We produce oil and gas in the Gulf of Mexico, heavy oil in California and primarily onshore tight gas in Louisiana, Pennsylvania, Texas and Wyoming. The majority of our oil and gas production interests are acquired under leases granted by the owner of the minerals underlying the relevant acreage (including many leases for federal onshore and offshore tracts). Such leases usually run on an initial fixed term that is automatically extended by the establishment of production for as long as production continues, subject to compliance with the terms of the lease (including, in the case of federal leases, extensive regulations imposed by federal law).
SOUTH TEXAS AND GULF OF MEXICO
The Gulf of Mexico is the major production area, accounting for a little over 50% of Shell’s oil and gas production in the USA. We hold approximately 600 federal offshore leases in the Gulf, about one third of which are producing. Our share of production in the Gulf of Mexico averaged over 180 thousand boe/d in 2011. Key producing assets are Auger, Brutus, Enchilada, Holstein, Mars, NaKika, Perdido, Ram Powell and Ursa.
The 2010 drilling moratorium in the Gulf of Mexico, and new regulatory requirements following the BP Deepwater Horizon incident, resulted in deferment of various Shell exploration and development programmes. Those deferments continued to affect the operational flexibility and delivery timing of our Gulf of Mexico business in 2011. Since the lifting of the moratorium, Shell has met all deep-water regulatory permitting and environmental assessment requirements for key projects. Although the new regulatory regime has resulted in a longer permitting process, the number of permits we secured in 2011 is approximately the same as in 2009 and is aligned with 2011 activity plans. Additionally, all Shell rigs are compliant with new regulatory mandates and are conducting operations.
Shell also announced a multibillion-dollar investment to develop its major Cardamom oil and gas field in the deep waters of the Gulf of Mexico. The Cardamom project (Shell interest 100%) is expected to produce 50 thousand boe/d at peak production.
PENNSYLVANIA, NEW YORK AND OHIO
We hold some 3,400 km2 (850,000 acres) of mostly contiguous tracts of land in the Marcellus shale, centred on Pennsylvania in the north-east USA. We additionally have some 1,100 km2 (270,000 acres) of mineral rights in the Eagle Ford shale formation in south Texas. Not only did we conduct 3D seismic surveys there in 2011, but we also had five rigs drill a total of 43 wells. We also have other ongoing multi-rig drilling programmes at the Pinedale Anticline in Wyoming (35,000 acres) and in the Haynesville tight-gas formation of north-west Louisiana (200,000 acres).
Furthermore, we are actively appraising our acreage in multiple liquids-rich US plays, including the Niobrara and Utica shales and the Mississippi Limestone.
We hold a 51.8% interest in Aera Energy LLC (Aera), an exploration and production company with assets in the San Joaquin Valley and Los Angeles Basin areas of southern California. Aera operates more than 15,000 wells, producing about 140 thousand boe/d of heavy oil and gas, and accounting for approximately 30% of the state’s production.
ALASKA, YUKON AND NORTHWESTERN TERRITORIES
We hold over 410 federal leases for exploration in the Beaufort and Chukchi seas in Alaska. Following an adverse Environmental Appeals Board ruling on Environmental Protection Agency air permits at the end of 2010, we cancelled our 2011 Alaska exploratory drilling programme. We therefore focused on obtaining the permits required for drilling in 2012, receiving conditional approvals from the Bureau of Ocean Energy Management, Regulation and Enforcement for the Beaufort and Chukchi Seas Exploration Plans. We also received an air permit for the Discoverer drillship to work in both the Beaufort and Chukchi seas.