Shell share price: Venture with Gazprom Neft starts fracking Russian shale formation

on Jan 13, 2014
Updated: Oct 21, 2019
Listen, Monday, January 13: Royal Dutch Shell (LON:RDS.A) and Gazprom Neft, the oil-producing arm of Russian gas giant Gazprom OAO (MCX:GAZP), have started a drilling campaign to assess the shale oil potential of the Bazhenov formation in Siberia, considered to be one of the world’s largest shale oil resources.

Shell’s share price has dropped about 0.3 percent in London trading today.
**Shell and Gazprom start fracking**
Salym Petroleum Development, the venture between Shell and Gazprom Neft, announced today in a statement that it had started drilling the first horizontal appraisal well in the Bazhenov formation in Upper Salym. The well is part of a pilot project which involves construction of five horizontal appraisal wells in 2014-1015 and using multi-fracturing technology.

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“Bazhenov development is an important element of our growth strategy,” Oleg Karpushin, head of Salym Petroleum Development, said in the company statement. “We hope that the pilot project will allow us and our shareholders to make a decision about moving to a large-scale development of the Bazhenov formation in the Salym fields.”
The drilling of the first horizontal well follows three years of studies on the prospect, which included three vertical exploration wells, 3D seismic, coring and well logging in the Upper Salym area.

**Bazhenov shale deposits**
Russia’s Bazhenov layer, a huge geological formation in the heart of Siberia, has attracted the attention of energy giants such as Shell due to its similarities to the Bakken shale formation in North Dakota.
“This is a big theme for Russia,” Ildar Davletshin, an oil and gas analyst at Renaissance Capital, told Bloomberg. “Bazhenov holds as much resources as has been produced in Russia to date. The question is what portion of it can be recovered and at what cost.”

Reuters has reported that estimates of the formation range from a conservative three billion metric tonnes, or over 20 billion barrels, to as much as 143 billion metric tonnes, according to a survey of Russian research by oil consultants IHS Cera.

The news of the appraisal well to be drilled by Shell and Gazprom Neft’s joint venture came after last month, US energy giant ExxonMobil Corp (NYSE:XOM) and Kremlin-backed Rosneft OAO (MCX:ROSN) signed documents establishing a joint venture to implement a pilot project for tight oil reserves development in Western Siberia as part of their agreement on strategic cooperation. The two companies will perform exploration work on 20 license blocks in the Bazhenov formation.
**Analysts on Shell**
Analyst Ratings Network reported on Friday that analysts at BNP Paribas had upgraded Shell to ‘outperform’ with a price target of 2,650p. Citigroup has a ‘neutral’ rating on the stock, while analysts at Barclays rate the European energy giant as ‘overweight’ with a price target of 2,650p.
Shell currently has a ‘hold’ consensus rating with an average price target of 2,422.48p.
**As of 13:16 UTC, buy Shell shares at 2185.50p.**
**As of 13:16 UTC, sell Shell shares at 2184.50p.**

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