Shell Sells its Appalachian Shale Gas Assets; Remains Committed to Cracker Plant
Updated: May 11, 2020
Royal Dutch Shell announced it is selling its Appalachian shale gas holdings in northwestern Pennsylvania, but remains committed to its petrochemical plant under construction in Beaver County.
Shell’s affiliate Swepi reached an agreement with National Fuel Gas Company to sell its shale assets for $541 million. National Fuel, through its Seneca Resources subsidiary, has gas drilling operations in the Allegheny National Forest.
National Fuel said the “opportunistic acquisition” will allow the company to acquire “upstream and midstream assets that are geographically contiguous and highly synergistic to existing Tioga County operations, and firm transportation capacity on the company’s Empire pipeline system.”
Shell will sell about 450,000 acres and 350 wells in the Marcellus and Utica plays, along with 142 miles of gathering pipelines, compression, and related facilities. The wells produce about 250 million cubic feet of dry gas per day. Dry gas does not contain ethane, a gas liquid that is used as feedstock for petrochemical plants that turn the component into polyethylene pellets for plastic products.
Shell announced in May that it planned to restructure its shale assets. It entered the Appalachian market when it purchased East Resources for $4.7 billion in 2010. Chevron, which has almost 900,000 acres in the tri-state area, also announced in May that it was trying to divest itself of those assets, eight years after entering the market in another multi-billion dollar acquisition.
Shell will be paid in cash for the holdings, a statement said, but National Fuel could instead provide up to $150 million in common stock at a predetermined price. National Fuel expects the addition of the Shell assets to provide increased efficiencies in and reduce operating expenses by 5 to 8 cents per Mcfe.
In its statement, Shell said it “remains committed to Pennsylvania, for example through our Pennsylvania Petrochemicals Complex, which brings new growth and jobs to the region, with up to 6,000 construction workers involved in building the new facility and an expected 600 permanent employees when completed.”
While divesting itself of its Appalachian position, Shell noted that it “continues to have attractive opportunities in its shales portfolio both inside and outside the United States, which we operate with a focus on driving down costs while increasing efficiency in all areas of our business.”
As natural gas producers continue to seek more efficiency and lower costs to free up cash during the current low-price environment and fallout from the COVID-19 pandemic, more moves within the industry could occur.