Energy giant Royal Dutch Shell has announced a deal with Qatar Petroleum to sell 23% of its take in a Brazilian oil field for $1 billion as Shell seeks to purge some of its assets to offset soaring spending costs.
Shell acquired a 23% stake in the Brazilian oilfield, Parque das Conchas field, or BC-10, from state-run Petrobras and the sale is expected to net minimum, if any, profit.
Only last October, Shell and its other partner in BC-10, India’s Oil & Natural Gas Corp., had agreed to raise their stakes in the venture by dint of blocking another group’s bid to acquire Petrobras’ 35% stake.
With a new CEO at helm of Shell, however, and problems justifying soaring expenditures, it’s all about downsizing and divesting some of the company’s biggest, most expensive endeavors that have shown less reward in relation to risk.
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In this latest deal, Shell will be giving up an oil field that is producing about 50,000 barrels of oil equivalent a day, with a second project phase projecting an additional 35,000 bpd at peak. The final investment decision for the third phase was approved last summer and would add an additional 28,000 bpd.
Shell has agreed to sell $2.1 billion in holdings in Australia and Brazil and is said to be considering divesting some of its troublesome Nigeria assets. There has also been talk that Shell might sell off all or part of its $6.3 billion stake in Woodside Petroleum Ltd. The company has already sold around $300 million in assets in Q4 2013, including a liquids-rich shale play in Ohio.
Shell’s Q4 2013 earnings of $2.9 billion were down from $5.6 billion for the same quarter in 2012. Shell blames high exploration costs and problems in Nigeria for the most part. Overall, profits were down 71% based on earnings statements released on Thursday. Shell’s oil production was down 5% in 2013 to 3.25 million barrels per day, largely because of issues in Nigeria and overall natural decline in its mature oil fields.
By. Joao Peixe of Oilprice.com