Conventional Oil and Gas

Oil and gas rig (icon)

The Conventional Oil and Gas business is one of Shell’s Core Upstream themes. Dating back more than 100 years, Conventional Oil and Gas remains at the heart of the Upstream business.

This deep familiarity with our heartlands comes with unique assets, insightful data, established capabilities and deep relationships, which are key differentiators for Shell. Today, it principally consists of our core production areas, or heartlands, in the North Sea, Nigeria, Oman, Malaysia and Brunei as well as a range of other countries across the world including Kazakhstan and Italy.

In 2015, we launched a transformation initiative to improve the efficiency of our projects by operating assets more safely, reliably and cost-effectively. We have been improving our operating cash flow through operational excellence, a relentless focus on controlling operating costs and unlocking value and resources through new deals with host governments.

Since 2015 we have been high-grading and simplifying the portfolio through a series of divestments, focusing efforts on key assets with running room and longevity. We have divested some assets in the UK North Sea and Norway, while exiting business in Denmark, Ireland and Gabon. We intend to continue making strategic divestments in order to concentrate on core countries and competitive growth opportunities.

Selective expansion of existing and new positions allows us to offset the impact of divestments and sustain free cash flow for the coming decades. In recent years we have secured agreements with governments to unlock more value from existing discovered positions, for example in Brunei, Malaysia, Nigeria and Oman. These agreements have been key to the strength of Conventional Oil and Gas and are enabling us to grow in many of the countries in which we are present. Our portfolio has a deep resource base of commercial resources, providing attractive opportunities for infill drilling and debottlenecking.

Together with our Projects & Technology organisation we have sharpened our ability to develop new projects competitively. A strong focus on competitive scoping and efficient execution has halved our average unit development cost from $14 per barrel of oil equivalent in 2015 to $7 per barrel of oil equivalent in 2019. Our ambition is to reduce this further to $5 to $6 per barrel of oil equivalent.

Through improved operational efficiency, a high-graded portfolio and a strong pipeline of competitive new developments, we expect to sustain production at around 1.5 million barrels , with cash capital expenditure of between $4 billion to $5 billion per year over 2021 to 2025. This is expected to deliver between $5 billion and $6 billion of organic free cash flow per year by 2025 at $60 per barrel (real terms 2016).

Two operators during a routine inspection of the Karachaganak field in Kazakhstan. (photo)

Operators at Karachaganak field, Kazakhstan

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volumes are converted into a daily basis using a calendar year
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