Upstream overview

Oil and gas rig (icon)Oil and gas rig (icon)

Conventional oil and gas
Cash engine

Deep-water drilling rig (icon)Deep-water drilling rig (icon)

Deep water
Growth priority

On-shore drilling rig (icon)On-shore drilling rig (icon)

Shales
Future opportunity

Our Upstream business explores for and extracts crude oil, natural gas and natural gas liquids. It also markets and transports oil and gas, and operates the infrastructure necessary to deliver them to market. We also extract bitumen from mined oil sands and convert it into synthetic crude oil.

Milestones in 2016

  • Following the acquisition of BG in February 2016, we completed the integration of BG assets into our portfolio.
  • Also in early 2016, in the United Arab Emirates, we decided to exit the joint development of the Bab sour gas reservoirs (Shell interest 40%) with Abu Dhabi National Oil Company (ADNOC) in the emirate of Abu Dhabi, and to stop further work on the project.
  • In Brazil, the seventh, eighth and ninth floating production, storage and offloading facilities (FPSO) – Cidade de Maricá, (Shell interest 25%, production capacity of 150 thousand ), Cidade de Saquarema (Shell interest 25%, production capacity of 150 thousand boe/d) and Cidade de Caraguatauba (Shell interest 30%, production capacity of 100 thousand boe/d) respectively – achieved first oil in various offshore blocks.
  • In Brunei, the non-Shell-operated ML South development (Shell interest 35%) achieved first production. The expected peak production from this development is around 40 thousand boe/d.
  • In Kazakhstan, first crude oil was exported on October 29, 2016, and the Commencement of Commercial Production milestone was achieved on November 1, 2016, from the non-Shell-operated Kashagan development (Shell interest 16.8%).
  • In Malaysia, we started production from the Malikai tension leg platform (TLP) (Shell interest 35%), located 100 kilometres off the coast of the state of Sabah. Malikai is expected to reach a peak production of 60 thousand .
  • In the USA, we started production at the Stones development (Shell interest 100%) in the Gulf of Mexico. Stones is expected to produce around 50 thousand boe/d when fully ramped up at the end of 2017.

We continued to divest selected assets during 2016, including:

  • In Canada, we sold our interest in 145 thousand net in the Deep Basin acreage and 61 thousand net acres in the Gundy acreage.
  • In the USA, we sold our 100% interest in the Brutus TLP, the Glider subsea production system, and the oil and gas pipelines used to transport the production from the TLP.
  • Also in the USA, we sold a 20% interest in the Kaikias development in the Gulf of Mexico. We retain an 80% interest.
  • In Malaysia, we agreed to sell our 50% interest in the 2011 North Sabah Production Sharing Contract in Malaysia, subject to obtaining regulatory and partner approval.

Additionally, in 2017

  • In January, we agreed to sell our interests in some of our UK North Sea assets, for up to $3.8bn. The transaction is subject to partner and regulatory approvals, with completion expected in 2017.
  • In March, we agreed to sell all of our in-situ and undeveloped oil sands interests in Canada, and reduce our interest in the Athabasca Oil Sands Project (AOSP), for a net consideration of $7.25 billion. Upon completion, we will continue as operator of the Scotford Upgrader and Quest carbon capture and storage (CCS) project. The transactions are expected to close in mid-2017, subject to customary closing conditions, adjustments and regulatory approvals.

Upstream key statistics

 

2016

2015

2014

2013

2012

[A]

Available for sale.

[B]

Natural gas volumes are converted into oil equivalent using a factor of 5,800 scf per barrel.

Earnings ($ million)

(3,674)

(8,833)

5,231

3,640

11,254

Earnings excluding identified items ($ million)

(2,704)

(2,255)

6,754

6,644

10,693

Cash flow from operating activities ($ million)

7,662

5,453

19,150

17,841

22,131

Liquids production (thousand b/d) [A]

1,615

1,305

1,263

1,317

1,495

Natural gas production (million scf/d) [A]

6,781

5,911

6,593

7,059

7,488

Total production (thousand boe/d) [A][B]

2,784

2,323

2,399

2,534

2,786

Capital investment ($ million)

47,507

18,349

22,169

28,481

25,102

Capital employed ($ million)

128,782

84,727

88,692

93,135

87,413

Employees (thousands)

22

22

22

21

N/A

Upstream earnings and cash flow [A]

$ billion

Upstream earnings and cash flow (in $ billion) excluding identified items – development from 2012 to 2016 (bar chart)Upstream earnings and cash flow (in $ billion) excluding identified items – development from 2012 to 2016 (bar chart)

[A] Earnings excluding identified items.

Production available for sale

mboe/d

Production available for sale (in million boe/d) for Liquids and Gas – development from 2012 to 2016 (bar chart)Production available for sale (in million boe/d) for Liquids and Gas – development from 2012 to 2016 (bar chart)
boe(/d)
barrels of oil equivalent (per day); natural gas volumes are converted to oil equivalent using a factor of 5,800 scf per barrel
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boe(/d)
barrels of oil equivalent (per day); natural gas volumes are converted to oil equivalent using a factor of 5,800 scf per barrel
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Acre
approximately 0.004 square kilometres
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EOR
enhanced oil recovery
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