31 July 2015, Lagos – Shell Petroleum Development Company of Nigeria has seen its total oil and gas production plunge by 28.2 per cent year-on-year, the company disclosed on Thursday.
Royal Dutch Shell Plc, the parent company of the SPDC, in its unaudited financial statement and operating information for the second quarter of 2015, put its total production in Nigeria at 163,000 barrels of oil equivalent per day for the period, down from 227,000 boepd in the same period last year.
The global oil giant highlighted security impacts in Nigeria as one of the factors responsible for the decline in its production.
The SPDC had in the first quarter of this year recorded total production of 177,000 boepd, down from 209,000 boepd in the fourth quarter of 2014.
Its liquids production available for sale dropped by 40 per cent to 63,000 barrels per day in the second quarter of 2015, compared to 105,000 bpd in the same period last year. It stood at 90,000 bpd in the first quarter of 2015, down from 93,000 bpd in the fourth quarter of last year.
The SPDC also saw its natural gas production available for sale fall to 580 million standard cubic feet per day, 18.2 per cent lower than the 709 million scfpd recorded in the second quarter of 2014.
Shell said its global oil and gas production for the second quarter of this year was 2.731 million boepd, 11 per cent lower than the figure for the second quarter 2014. Natural gas converted to oil equivalent at 5.8 million scfpd equal 1,000 boepd.
“Excluding the impact of divestments, curtailment and underground storage reinjection at NAM in the Netherlands, PSC price effects, and security impacts in Nigeria, second quarter 2015 production was three per cent lower than for the same period last year,” it stated.
Shell said it was planning for a “prolonged downturn” in the oil industry. It reported second-quarter earnings, on a current cost of supplies basis, of $3.1bn (£2bn), down from $5.1bn last year. Its earnings, excluding identified items, fell from $6.1bn to $3.8bn.
In response, Shell said it would further reduce 2015 capital investment to $30bn, down by 20 per cent from a year ago, as it expects the downturn in oil prices to “last for several years.”
It will cut 6,500 jobs and slash its capital spending this year as it seeks to cope with low oil prices.
The Chief Executive Officer, Shell, Ben van Beurden, said the company was competing well in a difficult market.
He said, “Shell’s integrated business and our performance drive are helping to mitigate the impact of low oil prices on our bottom line. As our results today show, we are successfully reducing our capital spending and operating costs, and delivering a competitive performance in today’s oil market downturn.
“We have to be resilient in a world where oil prices remain low for some time, whilst keeping an eye on recovery. We’re taking a prudent approach, pulling on powerful financial levers to manage through this downturn, always making sure we have the capacity to pay attractive dividends for shareholders.”
Shell said that in the medium term it saw potential for oil to return to $70 to $90 per barrel, it would continue to cut costs through the rest of 2015.
Some 6,500 staff and direct contractor jobs will go and the company will review its ongoing projects for affordability and growth potential.