Shell (RDSA) Signs Oil Contract with PETRONAS

Royal Dutch Shell plc (LON:RDSA) announced today that they have signed a Heads of Agreement (HOA) contract with PETRONAS.

The deal is a pair of 30-year production sharing contracts (PSC’s) for enhanced oil recovery (EOR) projects offshore Sarawak and Sabah.  Sarawak  is one of two Malaysian stateson the island of Borneo.  Much like Sarawak, Sabah is located on the Malaysian island of Borneo.

Shell said that the HOA will see staged work activities and new investments from shell and its joint venture partner PETRONAS Carigali Sdn Bhd (PCSB), to extend the life and increase the recovery factor of the Baram Delta (BDO) and North Sabah fields.  Shell believes that the increase of average recovery factor in the BDO and North Sabah fields will see a rise from 36% to 50%.

PETRONAS Carigali holds a 60 percent equity interest in the BDO production sharing contract which has a 2018 expiration and is also the operator.  Shell, on the other hand, holds the remaining 40 percent interest.  The North Sabah PSC which has a 2019 expiration is Shell operated and both companies have an even equity interest in it.

The company also released the following statement, “This new agreement confirms Shell’s commitment to continue investing in Malaysia and its position as a heartland for Shell. The agreement also provides an opportunity to work together with PETRONAS on building local knowledge and capabilities in enhanced oil recovery,” said Peter Voser, Shell’s CEO.

Shell also said that they expect improvement in the recovery efficiency of the oil fields may result in an additional 90 to 100 kboe/d of oil production and extend the field life to beyond 2040.  Additionally, the new agreement will build upon the existing BDO and North Sabah production sharing contracts, located offshore Sarawak and Sabah as mentioned above.