U.S. Shale-Oil Boom May Not Last as Fracking Wells Lack Staying Power by Asjylyn Loder, October 10, 2013, Bloomberg Businessweek
Peter Voser says he regrets Shell’s huge bet on US shale by Guy Chazan, October 6, 2013, Financial Times
Peter Voser said the failure of Royal Dutch Shell’s huge bet on US shale was a big regret of his time as chief executive of the company. Shell has invested at least $24bn in so-called unconventional oil and gas in North America. But it is a bet that has yet to pay off. Its North American upstream business has struggled to turn a profit and in August Shell announced a strategic review of its US shale portfolio after taking a $2.1bn impairment. “Unconventionals did not exactly play out as planned,” Mr Voser said.
But his last months in the job were tarnished by Shell’s setbacks in the US. Like other majors, it entered the American shale sector late in the game and was accused by some investors of overpaying for assets. Its earnings were then hit when a supply boom pushed US gas prices to 10-year lows. As well as its $2.1bn writedown, mostly related to its US tight oil assets, Shell also said its US exploration and production business was lossmaking and would likely remain so to the end of the year and possibly beyond.
He also acknowledged that exploration results in the US shales had been disappointing. “We expected higher flow rates and therefore more scalability for a company like Shell,” he said. … Mr Voser also said rhetoric about the US shale revolution being exported to other countries was “hyped”, and that the rest of the world was in an early “exploration phase” which could yield “negative surprises”. He singled out China, where Shell has drilled 22 wells, as one of the most prospective countries for shale gas, but warned that costs there were higher than in the US. [Emphasis added]
Investors keep watch on fracking by Peter Ker, October 8, 2013, The Sydney Morning Herald Business Day
One of Australia’s biggest investment companies has revealed it is closely monitoring the development of fracking in Australia, and says it is keen to avoid its money being linked to any sort of environmental damage. Speaking at the annual meeting of Djerriwarrh Investments, managing director Ross Barker said the board had been closely studying fracking and the other forms of unconventional oil and gas production, which have swept the United States and Australia in recent years. Djerriwarrh has a strong exposure to energy through its investments in local coal seam gas companies such as Santos and Origin, as well as conventional petroleum producers such as Oil Search and Woodside, and Mr Barker said the company would closely watch the sector for any sign of trouble. ”None of us want to end up in an environmental problem later down the track. We certainly, as an investor, don’t want to be in that camp.”
Mr Barker said the Djerriwarrh board had found no evidence that farmland in the US had been permanently destroyed by fracking, which produces gas by cracking open underground rocks with high-pressure solutions of water, sand and sometimes chemicals. But he said it was too early to tell whether the technique would cause problems in Australia. ”I don’t think we can predict what might happen there. I think it’s important for governments to have their scientists looking into the issue,” he said. … The Australian Council of Superannuation Investors does not advise for or against investing in companies that conduct fracking in Australia. ACSI chief executive Ann Byrne said there was a lack of long-term data on the cumulative impact of fracking, and energy companies should work harder to provide this information. [Emphasis added]