Shell spends big to recoup
By Christopher Hope
September 24, 2004
Shell has pledged to spend more cash on finding
oil and gas over the next three years as the world's No.3 oil
company admitted that its production was likely to be flat until
Shell also said it would sell $US10 billion
to $US12 billion ($A14-$A17 billion) of non-core assets as part
of an "urgent need" to restore its position after
"losing" 4.4 billion barrels of proven oil and gas
Unveiling Shell's strategy for the next three
years, Jeroen van der Veer, chairman of the committee of managing
directors, admitted that production "is expected to grow
to between 3.8 million and 4 million barrels per day by 2009",
well behind where rival BP is likely to be. Shell's output last
year was 3.9 million barrels a day.
He said: "Replacing our reserves is a
priority to support future growth. Everyone at Shell understands
the urgent need for performance and delivery. This requires
action and decisiveness in everything we do. You speak words,
but this is all about action and urgency. I wish we had not
gone through the last six months. Crisis is not the way to operate.
We want to use this setback to show what we can do."
Shell plans to spend $US15 billion a year
until 2006 on capital expenditure, with a bigger share - $US1.5
billion - going on exploration. It also hopes to sell $US5 billion
of non-core fields in that time - twice the rate of 2001-03.
It will also base some of its investment decisions on oil at
$US25 a barrel, rather than $US20, because of surging prices.
Managing director of exploration and production
Malcolm Brinded admitted that Shell's reserve replacement rate
would only be 100 per cent over the next five years - less if
the "lost" barrels were excluded.
He said Shell would focus on "big cat"
fields - those that guarantee more than 100 million barrels
of oil or gas for Shell - in 25 countries, from 40 three years
ago. It planned to drill 19 big cats this year, from 12 last
year and eight in 2002.
Shell was embarrassed about selling a field
in North India to oil minnow Cairn Energy for a few million
dollars which later yielded hundreds of millions of barrels
of oil, he said, but Cairn's success accounted for only 5-10
per cent of Shell's annual output.
Shell said it had received an "unsolicited"
offer for its liquefied petroleum gas business, which made $US400
million of underlying earnings last year.
Shell hinted at selected acquisitions, but
Mr van der Veer dismissed suggestions it might merge with French
giant Total. "The fact that (that story) can get legs shows
that our reputation is not where we want it to be."