Shell reduces its interest in Woodside

Royal Dutch Shell plc (“Shell”) announces an agreement to sell part of its stake in Woodside Petroleum Limited (“Woodside”) to equity investors.

Shell’s subsidiary, Shell Energy Holdings Australia Limited (“SEHAL”), has entered into an underwriting agreement with UBS AG, for the sale of 78.34 million shares in Woodside, representing 29.18% of its interest in Woodside and 10.0% of the issued capital in Woodside at a price of A$42.23 per share. Upon completion of the sale, SEHAL will continue to own a 24.27% interest in Woodside. As part of this transaction, SEHAL has committed to retain its remaining shares in Woodside for a minimum of one year, with limited exceptions, including a sale to a strategic third party of an interest greater than 3% in Woodside provided the purchaser agrees to be bound by the same escrow restrictions to which SEHAL is subject or in pursuit of an acceptance to a bona fide takeover offer for Woodside.

Shell CEO, Peter Voser, said “Shell is an industry leader in global LNG, and will be a leading investor in Australia for years to come. Our Australian LNG portfolio has developed rapidly in recent years, with exploration success around Gorgon and Prelude, and our entry into coal bed methane plays through the joint acquisition of Arrow Energy. This is a strong platform for new growth.”

Voser continued “Our stake in Woodside has been an important part of Shell’s portfolio in Australia for many years. We are looking forward to working with Woodside on important new growth projects where we are partners. However, with Shell’s recent portfolio progress in Australia, our world-wide push to simplify the company and to improve our capital efficiency, we will increasingly focus our investment in Australia through direct interests in assets and joint ventures, rather than indirect stakes. We will manage our remaining position in Woodside over time in the context of our global portfolio.”

Shell Australia’s Country Chair, Ann Pickard, concluded “these are exciting times for the LNG industry in Australia, and for Shell. We are unlocking new LNG supplies from our portfolio, and working closely with Woodside on further growth projects where we will remain with them as a partner. Shell’s directly-owned Australia LNG capacity is around 2.7 mtpa today, and is forecast to more than double to some 6.5 mtpa by 2015, as Gorgon comes on line. Looking beyond 2015, we see significant further growth potential from pre-FID options. Our directly-owned assets in Australia could add a further 10 mpta for Shell beyond 2015 towards a total of 16 mtpa. Shell will be a major player in Australia for years to come, and all of this will help to further consolidate Australia’s position as a leader in energy and resource supply for the Asia Pacific region.”

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Shell had 18.5 mpta (million tonnes per annum) of world-wide LNG capacity at end-2009, with interests in seven LNG plants, including 0.93 mtpa held through its indirect stake in Woodside. Shell’s world-wide LNG capacity, excluding Woodside, is forecast to reach some 22 mtpa in 2015, an increase of around 20% from today’s levels, underpinned by growth at Qatargas 4 in Qatar and Gorgon in Australia.

Shell’s most recent LNG start-up was at Sakhalin II in Russia, and this 9.6 mtpa project, where Shell has a 27.5% stake, ramped up to full capacity ahead of schedule in early 2010. The Sakhalin project, combined with performance from other LNG facilities world-wide, underpinned over 30% higher LNG sales volumes for Shell in the first three quarters of 2010 compared to the same period in 2009.

Looking into 2011, Shell’s LNG capacity is expected to increase again, with the start-up of the Qatargas 4 LNG project, which has 7.8 mtpa of capacity (Shell 30%). Qatargas 4 will be Shell’s eighth LNG plant, and further adds to Shell’s industry-leading portfolio.

Australia is set to underpin Shell’s next tranche of LNG growth, aimed at growth markets in Asia Pacific. In September 2009, Shell and its partners took the final investment decision (FID) on the 15 mtpa Gorgon LNG project, where Shell has a 25% interest. Successful start-up of Gorgon will take Shell’s directly owned LNG capacity in Australia from 2.7 mpta today to some 6.5 mtpa.

Looking beyond 2015, Shell has launched front end engineering and design (FEED) for the 100%-owned Prelude and Concerto discoveries, that could support a 3.6 mpta floating LNG project, and we anticipate reaching FID on that project in 2011. Shell’s joint acquisition of Arrow Energy Ltd with PetroChina in 2010 opens up the prospect of a 6-7 mtpa LNG scheme from coal bed methane resources. Shell has further stakes in non-operated projects with LNG potential, including Sunrise (26.5%) and Browse (~9.5%), operated by Woodside. In total, these pre-FID options could add up to a further 10 mtpa of new capacity for Shell in Australia, leading to a total capacity of over 16 mtpa. Shell also continues with an active and successful exploration campaign which is adding further options for future development.