Royal Dutch Shell Group .com

Lloyds List: Shell attempts to reorganise its reserves as year of massive investment looms: Oil major announces strategy to cope with rising costs after troubles of recent years, writes Tony Gray: Wednesday December 14, 2005


Shell plans to hoist capital investment by a thumping 27% to $19bn next year as it copes with rising costs and attempts to improve its record on replacing reserves.


Chief financial officer Peter Voser said the oil major expected investment to be running at a similar level for the next few years.


At the beginning of this year, Shell said capital investment in the medium term was expected to be around $15bn a year.


Chief executive Jeroen van der Veer said that next year $15bn would be ploughed into upstream projects and more than $4bn allotted to downstream investments.


Upstream investment would help unlock 13bn barrels of oil equivalent resources by the end of 2009 and bring 5bn boe to final investment decision in the same timeframe.


Mr Voser said Shell remained 'reasonably confident' of reaching its 100% reserve replacement target over the 2004-2008 period.


The company aims to raise production to between 3.8m-4m boe per day by 2009 and 4.5m-5m boe per day by 2014, compared with current production of around 3.5m boe per day.


Some $10bn-$11bn of upstream investment will be dedicated to 'growth projects', defined as those not yet on stream or with significant expansion potential.


This figure includes approximately $2bn for Shell's gas and power division and $2bn for exploration. Gas and power spending relates predominantly to liquefied natural gas, of which Shell is the leading equity supplier in the world.


Shell expect LNG volumes to grow by 14% a year up to 2009.


Mr van der Veer said this growth rate was 'enough to keep our leading position'.


Shell yesterday confirmed that the first commercial LNG cargo from Qalhat LNG had left the Oman facility.


The oil major holds an indirect minority share in Qalhat LNG through its 30% shareholding in Oman LNG, which holds 36.8% of the project.


In 2004, Shell experienced 9% growth in equity LNG sales to 10.2m tonnes, an 8% share of the total market of 131m tonnes. During the first nine months of this year, Shell's LNG output was up 6% to 7.84m tonnes compared with the corresponding period of 2004.


Of the increase in upstream capital investment in 2006 over 2005, Shell said 55% was attributable to the initiation and/or ramp-up in the construction and development phase of new projects and to increased exploration.


Some 20% of the increase was for investment in the development and redevelopment of existing upstream assets.


An estimated 25% of the increase was due to price inflation, exchange rates and increase in service costs, such as drilling rig rates.


Click here to return to HOME PAGE

Click here to return to Royal Dutch Shell Group .com