Arrow LNG won't fly this year

AMID the carnage that was its full-year results, Shell has also confirmed it is unlikely to approve development of the $US10 billion ($A11.4 billion) Arrow LNG project this year.
Arrow LNG won't fly this year Arrow LNG won't fly this year Arrow LNG won't fly this year Arrow LNG won't fly this year Arrow LNG won't fly this year

Ben van Beurden. Image courtesy of Shell.

Noel Dyson

After cutting back on Arrow Energy staff last month, Shell told media last night that it was unlikely it would be making any big announcements in the region this year.

Shell CEO Ben van Beurden said in light of its results, the company had been forced to make some capital expenditure decisions.

He said these included recently ceasing design work on a gas-to-liquids project in Louisiana and postponing “the final investment decision on Arrow LNG”

“We simply didn’t like the economics and inflation risks in those proposals,” van Beurden said.

“Shell’s focus in LNG is to deliver Prelude, Elba and the not operational Gorgon project.”

However, it appears Arrow is still on Shell’s agenda, just a little further down the pecking order.

Shell had been due to make a final investment decision on Arrow last year, but deferred it.

The capital spending disciplines being imposed come after a year when income attributable to shareholders, according to Shell’s unaudited results, fell 39% from $US26.7 billion to $US16.3 billion.

The company’s earnings on a current cost of supplies basis were down 38% from $US27.1 billion to $US16.7 billion.

Van Beurden, who became CEO on January 1, said Shell’s momentum had slowed in 2013.

“We must improve our financial results, achieve better capital efficiency and continue to strengthen our operational performance and project delivery.

“The company has a high quality portfolio and key strengths in technology and project delivery.”

Van Beurden said Shell would continue to invest in new projects but would have to sharpen up in some areas.

“The landscape the company had expected has changed,” he said.

“Factors such as the worsening security situation in Nigeria in 2013 and delays to non-operated projects in several other countries have altered the outlook.”

Also, while oil prices remain high globally, North American gas prices and associated crude markers were low and industry refining margins were under pressure.

Key focuses for Shell in 2014 are improved financial performance, including restructuring in some areas of the company; enhancing capital efficiency; and continued strong delivery of projects and the integration of recent acquisitions.

Van Beurden also foreshadowed $US15 billion in asset sales coming in 2014 and 2015.

“We are marking hard choices in our worldwide portfolio to improve Shell’s capital efficiency,” he said.

In recent days Shell has sold off its stake in Chevron’s Wheatstone project to Kuwait and part of its Parque das Conchas stake in Brazil to Qatar Petroleum.

Van Beurden said the company’s Wheatstone stake had simply been too small to be material to Shell.

Capital spending will be reduced. In 2013 this totalled $US46 billion, including $US8 billion in acquisitions. In 2014 Shell expects total capital spending of about $US37 billion, including $US2 billion of previously announced acquisitions.

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