Delivery commitments and exploration
We sell crude oil and natural gas from our producing operations under a variety of contractual obligations. Most contracts generally commit us to sell quantities based on production from specified properties, although some natural gas sales contracts specify delivery of fixed and determinable quantities, as discussed below.
In the past three years, we met our contractual delivery commitments, with the notable exceptions of Egypt, Trinidad and Tobago, and Malaysia. In the period 2023-2025, we are contractually committed to deliver to third parties, joint ventures and associates a total of 5,870 billion scf of natural gas from our subsidiaries, joint ventures and associates. The sales contracts contain a mixture of fixed and variable pricing formulae that are generally referenced to the prevailing market price for crude oil, natural gas or other petroleum products at the time of delivery.
In the period 2023-2025, we expect to meet our delivery commitments for almost all the areas in which they are carried, with an estimated 71% coming from PD, 5% through the delivery of gas that becomes available to us from paying royalties in cash, and 24% from the development of PUD as well as other new projects and purchases. The key exceptions are:
- In Egypt, the expected shortfall of 491 billion scf (85% of the promised gas delivery) for the 2023-2025 period is mainly caused by the performance of the West Delta Deep Marine fields being insufficient to meet the committed quantities to ELNG. If the government divert more gas to the domestic market, this would increase the shortfall.
- In Trinidad and Tobago (North Coast Marine Area), we expect to cover 77% of our delivery commitments from existing developed resource volumes and new projects, resulting in an expected true shortfall of some 62 billion scf.
- In Malaysia, one of the third-party gas supply lines which was under maintenance has not been repaired during 2022. Force majeure has been declared, and no penalties have been incurred, resulting in an expected true shortfall of some 77 billion scf (64% of the promised gas delivery).
Shell’s exploration team searches for crude oil and gas, both onshore and offshore. Exploration may result in discoveries of oil and gas that we can develop, helping maintain energy security and contributing to our Powering Progress strategy.
In 2022, producible hydrocarbons were encountered in Malaysia, the UK and the Gulf of Mexico. Hydrocarbons were also encountered in Namibia and further appraisal is being undertaken to determine producibility.
Gulf of Mexico
In 2022, Shell acquired 20 blocks in the Gulf of Mexico in Lease Sale 257. We relinquished a lease for one block ahead of expiration.
In 2022, the Brazilian government ratified 11 Santos Basin blocks. Shell secured five blocks in the 2021 17th National Petroleum Agency Bid-Round and the remaining six in the 2022 3rd Permanent Offer Concession Bid-Round (Shell interest 70% in seven of them, 100% in the remaining four, operator in all cases). We also secured one Santos block in 2022 1st Production Sharing Permanent Offer Bid-Round in Brazil (Shell interest 40%, non-operated), which is awaiting government ratification.
In 2022, Shell relinquished one non-operated Sabah block (Shell interest 50%). We signed three exploration PSCs for the offshore Sarawak and Sabah blocks (Shell interest 92.5% in two Sarawak blocks, 50% in two Sabah blocks, operator). We also signed an exploration PSC for another non-operated Sabah block (Shell interest 25.1%).
In 2022, Shell farmed into three exploration licences in the UK’s southern North Sea area (Shell interest 50%, non-operated).
In June 2022, Shell secured two blocks in the Open Uruguay Round, which are awaiting government ratification (Shell interest 100%, operator).
In September 2022, we took over an additional 50% participating interest in two operated blocks offshore Sao Tome and Principe, after the withdrawal of a partner, giving us a total interest of 85% in both blocks.
In December 2022, we completed the farm-out of a 45% non-operated participating interest in a deep-water exploration licence off the Western Cape of South Africa.
For further information, see “Supplementary Information – oil and gas (unaudited)”.