Oil and Gas explorer and producer Shell, New Zealand's largest gas producer, has announced a shock review of all its New Zealand assets, which could include an exit from the country.
If Shell were to exit New Zealand, it would leave a huge exploration void, with the Government having pinned high hopes on the oil and gas sector becoming a cornerstone to economic development.
After a century operating in New Zealand, Shell New Zealand's assets are widespread and the review process is likely to spark huge interest and speculation about the purchase of the production assets.
In a short notice news conference in Wellington yesterday, Shell New Zealand chairman Rob Jager outlined details of the review, saying the valuation of the company's New Zealand assets was part of parent Royal Dutch Shell's global review.
"The Shell business in New Zealand is a great but small part of the global Shell business and hence the decision to undertake a strategic review at this time,'' he said.
The outcome of the valuation of Shell's New Zealand assets and subsequent options could range from "business as usual, to potentially a full country exit and any alternatives in between'', Mr Jager said.
When asked whether the review was an announcement of New Zealand assets being put up for sale, Mr Jager said that was only "speculation'', with all options being considered.
Shell had 70 staff in the country, while Shell Todd Oil Services had 360, the latter company having already been briefed on the situation, Mr Jager said.
Mr Jager said the review would be completed "over months, not weeks''.
Shell has an 83.75% stake in offshore Maui, 48% stake in offshore Pohokura, 50% in onshore Kapuni, 60% in Great South Basin (GSB) exploration and 30% in Caledonia basin exploration, the latter two deepwater prospects.
Mr Jager declined to put a value on the New Zealand assets, saying that would be "inappropriate''.
Shell and partner OMV were to have test drilled in the GSB this summer, in an estimated $91million one-hole programme, but then postponed that plan.
Shell had in the meantime completed shipborne seismic testing in the basin.
On the question of continuing its GSB exploration programme, and sale of the Taranaki Maui gas pipeline, Mr Jager said both projects would continue as "business as usual'', despite the review.
He said Shell decided to announce the review publicly, instead of keeping it private, in order to be "open and upfront'' with its workforce.
When asked if the review decision was linked to the current seven-year low of global crude prices of about $US40 a barrel, Mr Jager said ‘‘not directly'', it was more linked to Shell's global strategy.
He reiterated parent Shell had during the past six months signalled a review of all global assets, possibly for divestment over a three-year period.
The review team would be "mainly Shell staff'', but would include a small number of ‘‘external advisers''.
He declined to reveal if Shell was making any bids in the Government's current tender round for taking up oil and gas exploration blocks, onshore and offshore, the outcome of which is likely to be announced next week.
● Dow Jones Newswires reported yesterday Shell was pushing to conclude a takeover of smaller British company BG Group PLC early next year, in a deal valued about $US70 billion, when announced in April.
Shell had been shedding assets around the world and cutting capital expenditure plans.
In October, the Anglo-Dutch company said it had swung to a third-quarter loss due to write-downs after scrapping a number of big ticket projects.
