By Sarah Young
LONDON Jan 20 Royal Dutch Shell said
on Monday it had agreed to sell stakes in a gas project in
Western Australia for $1.14 billion as part of the oil company's
drive to improve its return on investment.
Shell said it is selling an 8 percent stake in the
Wheatstone and nearby Iago gas fields as well as a 6.4 percent
stake in the related Wheatstone liquefied natural gas (LNG)
project to the Kuwait Foreign Petroleum Exploration Company
The move raises KUFPEC's holding in the Chevron-led
LNG project, in which the state company is already a partner, to
"We are making hard choices in our worldwide portfolio to
improve Shell's capital efficiency," Shell chief executive Ben
van Beurden, who took over two weeks ago, said in a statement.
"We are refocusing our investment to where we can add the
most value with Shell's capital and technology," he said, adding
that the company would remain a major player in Australia's
KUFPEC is focused on using OPEC member Kuwait's oil wealth
to diversify into energy projects abroad. Wheatstone, one of the
super-sized Australian LNG projects due to come on stream over
the next few years, is about 25 percent complete.
With some 80 percent of its future production committed to
Asian buyers, the project is scheduled to cost about $29
billion. Chevron expects capital spending on it to peak this
Shell issued a "significant" profit warning for the fourth
quarter on Friday, in which it detailed across-the-board
problems, less than three months after its third-quarter profits
undershot analyst forecasts.
Analysts and shareholders said the company's weak results
would push the world's number-three investor-controlled energy
firm to keep a tighter control on costs after it said 2013
capital expenditure would peak at about $45 billion.
Since van Beurden began working alongside outgoing boss
Peter Voser at the start of the fourth quarter, the company has
cancelled plans to build a gas-to-liquids plant in the United
States, raising investor hopes of a tighter spending regime.
Shell's Arrow Energy joint venture with PetroChina Co Ltd
in Australia said on Monday it had carried out a
"review of staffing levels as it manages costs," declining to
confirm reports it may cut 600 jobs, or half its workforce.
The cost cutting bolstered speculation that Arrow's proposed
A$20 billion LNG project in Queensland may be shelved in favour
of selling gas to one of three rival projects in the state as
costs have soared amid an LNG construction boom.
Arrow said it "will continue to assess development options,
including collaboration opportunities, as it looks to develop
significant gas reserves."
Shell is not the only big energy company facing increasing
investor pressure to hold down spending as costs rise and
prospects for higher oil prices wane.
At $1.14 billion, the Wheatstone disposal kicks off a year
in which Shell said it would significantly step up disposals to
keep cash flowing in.
Recent media reports have suggested the company's
divestments could total $15 billion this year, equivalent to
around 6.5 percent of its $232 billion market capitalisation.
"The thing that Shell has to do is accelerate divestments
and re-instill capital discipline so in that vein it's
positive," Santander analyst Jason Kenney said.
Analysts and bankers say another of Shell's Australian
assets, its 23.1 percent stake in Australian group Woodside
Petroleum - worth over $6 billion at current prices -
could be put on the block.
Shares in Shell traded down 1 percent at 2,153 pence at 0939
GMT, underperforming Britain's blue-chip index.
Chevron has a 64.14 percent stake in Wheatstone,
which is due to come on stream in 2016. The other stakeholders
are Apache Corp with 13 percent, Tokyo Electric Power Co
with 8 percent and Kyushu Electric Power Co
with 1.46 percent.