Shell reported a 60 percent drop in profit in the second quarter as it wrote down $2 billion worth of its investments in North American shale assets. Some analysts are raising warning flags on North American shale, the Wall Street Journal notes, though Shell’s executives still seem bullish:
Shell Chief Executive Peter Voser said the write-down doesn’t indicate that the outlook has soured for U.S. shale oil. “I think the liquids-rich shale development in North America in general is progressing well,” he said. The reduction in the value of its assets simply reflects the greater risks involved in exploring some shale formations, Mr. Voser said.
We’ve noted that some very seasoned oil traders are shale skeptics. As we’ve seen with California’s fields, some deposits are more difficult to get at than others. Shell’s shifting shale fortunes are to be expected in a fast-moving energy environment. They reflect the reality that some fields aren’t quite ready for exploitation at current prices and with current technologies.The North American shale boom is real enough. Production is up sharply and people are flocking to the new centers of activity like North Dakota. Just compare US quarterly oil production against Saudi Arabia’s for the last decade and change (h/t Mark Perry):Nevertheless, the energy business is full of risk and surprise. It’s wise to expect more news like this as companies place their bets.