Shell Draws Oil from Brazil Block

Zacks

Integrated energy giant, Royal Dutch Shell plc (RDS.A), started production from Phase 2 of the Parque das Conchas block, offshore Brazil.

The BC-10 block consists of subsea fields tied to Espírito Santo, a floating production, storage and offloading (:FPSO) vessel. Production in the second phase started from the Argonauta O-North field reservoir with peak production expectation of 35,000 barrels of oil equivalent per day (BOE/d).

Also, as part of the Phase 2 subsea development program, a monitoring system was brought online for a better understanding of the reservoir. The 4-D Life of Field Seismic monitoring system is the first of its kind to reach depth of 1,800 meters. The system comprises a network of seismic sensors spread across the field.

In July, Shell had announced its decision to develop the Massa and Argonauta O-South reservoirs as part of the Phase 3 development process. Production is expected to reach peak levels of 28,000 BOE in this phase.

The first phase of the BC-10 project had started producing from the Abalone, Ostra and Argonauta fields in 2009. After reaching peak production level of 90,000 BOE/d in 2010, it now produces around 35,000 BOE/d.

Shell has a 50% holding in the project, whereas the other partners, Brazil’s Petrobras (PBR) and India’s Oil & Natural Gas Corporation, hold 35% and 15% stake respectively. Petrobras plans to sell its stake to China's Sinochem for $1.54 billion. However, the other two partners may exercise their pre-emption right to increase their holdings in the offshore field.

Royal Dutch Shell currently retains a Zacks Rank #4 (Sell), implying that it is expected to underperform the broader U.S. equity market over the next 1 to 3 months.

Meanwhile, one can consider other stocks in the energy sector such as Stone Energy Corp. (SGY) and China Petroleum & Chemical Corp. (SNP) as good investment opportunities. Both these stocks sport a Zacks Rank #1 (Strong Buy).
 

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