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Monday, 3 June 2013

Shell returns to west Africa after failure in east Africa

Royal Dutch Shell is returning its exploration focus to the west African heartland after a second attempt to gain a foothold in massive new gas discoveries off Africa's east coast failed.

The Anglo-Dutch energy company has pulled back from talks with Anadarko Petroleum, aimed at buying a share of its gas discoveries off the coast of Mozambique, because the asking price had risen too high. This follows Shell's defeat last year in a bidding war for one of Anadarko's partners in the discoveries, Cove Energy, which was eventually acquired by Thai oil company PTT Exploration & Production.

Instead, Shell plans to deploy a newly refurbished rig to begin drilling for the first time in deep water off the coast of Benin and Gabon, as well as off South Africa's north-western coast next year.


Instead, Shell plans to deploy a newly refurbished rig to begin drilling for the first time in deep water off the coast of Benin and Gabon, as well as off South Africa's north-western coast next year.


Although the outcome of these efforts is more uncertain than an acquisition, analysts say they may ultimately deliver better value for shareholders. Shell's move is indicative of a broader trend in the industry. Western oil companies are under increasing pressure to find more oil and gas to replenish declining reserves. 



Last year Shell had one of the worst records, replacing just 44% of the oil and gas it produced during the period with new resources.