Shell CEO: Brazil Output to Quadruple by 2020

Royal Dutch Shell, Europe's largest oil company, expects to make robust investments in Brazil's offshore, hoping to quadruple oil and gas output there by the end of the decade, its chief executive officer said on Monday.

CEO Ben Van Beurden spoke in Brazil shortly after Shell's $52 billion takeover of rival BG Group Plc (BRGXF), approved in late January, took effect.

He said Brazil will be a key area for the Anglo-Dutch company as it focuses its expanded operations in liquefied natural gas (LNGLF) (LNG) and deepwater oil production.

"We believe in the strong fundamentals of Brazil and the fundamentals of its geology," Van Beurden told reporters in Rio de Janeiro. "We will be looking at a substantial part of our production from Brazil."

By adding BG's large Brazilian offshore assets, Shell's local output rose sixfold to about 240,000 barrels of oil and natural gas equivalent a day (boepd), or 13 percent of its total of 1.8 million boepd.

A quadrupling of its Brazilian output would boost production to nearly 1 million boepd by 2020. Shell is already Brazil's No. 2 producer after state-led Petroleo Brasileiro SA, or Petrobras.

In December, Shell and BG had 7.6 percent of Brazil's total output of just over 3 million barrels a day.

The BG takeover also makes Shell the world's largest trader of LNG. While it sells LNG to Petrobras for the Brazilian market, Van Beurden and his Brazilian deputy, Andre Araujo, declined to say if they want to buy Petrobras' natural gas assets, some of which are for sale.

Brazil's importance to Shell is expected to increase as it moves ahead with giant subsalt projects such as Libra, which it is developing with Petrobras, France's Total SA (TTFNF), China's CNOOC, and CNPC.

Subsalt refers to large hydrocarbon resources trapped deep beneath the seabed by a layer of mineral salts. Libra may hold as much as 12 billion barrels of recoverable oil, according to Brazil's government.

Shell faces serious challenges in Brazil. Oil prices have plunged since the BG deal was announced a year ago. Petrobras, Shell's principal partner in the country, is in serious financial and legal difficulty after the price drop and a massive price-fixing, bribery and kickback scandal.

Van Beurden, though, said subsalt areas should be able to break even at oil prices forecast for this year, without saying what those prices might be.

Reporting by Jeb Blount and Marta Nogueira