Shell to Leave ExxonMobil JV in California

Shell to Leave ExxonMobil JV in California

Anglo-Dutch major Shell has plans to leave a joint venture with ExxonMobil that accounts for about 25% of the oil and gas production in California.

Relying on four people that Reuters said were familiar with the talks, the news service reported that Shell has plans to leave its joint venture with Exxon, called Aera Energy.

The partnership produces about 125,000 barrels/day of oil and 32mn ft3/d of natural gas, representing about a quarter of all of the production in California. Gavin Newsom, the state’s governor, has called for a ban on new hydraulic fracturing in the state, and potentially the end of its oil production.

Aera CEO Erik Bartsch said last month the proposal was counter-intuitive, as the state would still need oil and gas despite its ambitous climate initiatives.

The report followed rumours that surfaced in June about the potential Shell sale of assets in the Permian shale basin for as much as $10bn.

Shell produced about 193,000 barrels of oil equivalent/day from the Permian basin last year, down from its average of 250,000 boe/d in 2019. The shale basin, situated predominately in Texas, is the top oil producer in the continental US and the second-largest gas producer, behind the Haynesville play in northwest Louisiana and eastern Texas.

Sources familiar with the Permian matter told Reuters that the potential sale aligned with the company’s shift away from fossil fuels.

Shell’s shift away from oil began years ago. In 2015 it acquired UK oil and gas company BG Group for $70bn as part of a shift toward natural gas. The company unveiled a new strategy in February expanding its energy transition plans, forecasting a 1-2% annual decline in its oil output over the coming years. 

A Dutch court in May ruled that Shell’s climate ambitions fell short of the goals outlined in the Paris climate agreement, ordering the company to make steeper cuts in its Scope 1, 2 and 3 emissions.

By Natural Gas World, July 6, 2021