Global oil giant, Royal Dutch Shell, has announced the postponement of the final investment decision on the $12bn Bonga South-West project in deep-water Nigeria amid the sustained drop in oil prices.
The company on Thursday announced that its adjusted profit fell by 56 per cent in the fourth quarter of 2015 compared to a year earlier, while its earnings fell by 80 per cent to $3.84bn, compared to $19bn in 2014.
The Chief Executive Officer, Royal Dutch Shell Plc, Ben van Beurden, said the acquisition of British oil and gas producer, BG Group, expected to close in a few weeks, marked the start of a new chapter in Shell, rejuvenating the company and improving shareholders’ returns.
“We are making substantial changes in the company, reorganising our upstream, and reducing costs and capital investment, as we refocus Shell and respond to lower oil prices. As we have previously indicated, this will include a reduction of some 10,000 staff and direct contractor positions in 2015-16 across both companies,” he said.
Beurden noted that in 2015, the company significantly curtailed spending by reducing the number of new investment decisions and designing lower-cost development solutions.
“For 2016, we have exited the Bab sour gas project in Abu Dhabi, and are postponing final investment decisions on LNG Canada and Bonga South West in deep-water Nigeria. Operating costs and capital investment have been reduced by a total of $12.5bn as compared to 2014, and we expect further reductions in 2016,” the Shell CEO said.
He explained that the company would take further impactful decisions to manage through the oil price downturn should conditions warrant that.
The Shell Nigeria Exploration and Production Company Limited, which operates the Bonga field, had in February last year restated its commitment to the implementation of the SNEPCo-operated Bonga South West/Aparo project, denying reports that it had stopped the development due to the slump in oil price.
The Managing Director, SNEPCo, Tony Attah, had said, “Although, the process has encountered some delays, we are optimistic for a final investment decision in the 2015/16 time frame under the right conditions.”
The BSWA project includes the construction of a new Floating Production, Storage and Offloading facility, with an expected peak production of 225,000 barrels of oil per day.
Shell, in 2014, announced that it had started the contract award process for the construction of the FPSO for the Bonga South West project.
The Bonga project itself, which began producing oil and gas in 2005, is Nigeria’s first deep-water development in water depths over 1,000 metres. In 2014, SNEPCo also started oil production at the Bonga North-West deep-water development, with the oil transported by a new undersea pipeline to the existing Bonga FPSO and export facility.