Daily Telegraph: We'll be running to stand still until 2009, says Shell: “…Mr Van der Veer was dismissive of suggestions it might merge with French giant Total. He said: "The fact that [that story] can get legs shows that our reputation is not where we want it to be.": “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.” (ShellNews.net)
By Christopher Hope, Business Correspondent (Filed: 23/09/2004)
Shell pledged yesterday to spend more cash on finding oil and gas over the next three years as the world's third largest oil company admitted that its production was likely to be flat between now and 2009.
Shell also said it would sell off $10 billion to $12 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 earlier this year.
Unveiling Shell's strategy for the next three years, Jeroen van der Veer, the chairman of Shell's committee of managing directors, admitted that production "is expected to grow to between 3.8m and 4m barrels per day by 2009", well behind where rival BP is likely to be. Shell's production last year was 3.9m 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 is planning to spend $15 billion a year between now and 2006 on capital expenditure, with an bigger share - $1.5 billion - going on exploration. It is also hoping to sell off $5 billion of non-core fields over the same period - twice the rate between 2001 and 2003. It has also decided to base some of its investment decisions on oil at $25 a barrel, rather than $20, because of surging prices.
Malcolm Brinded, managing director of exploration and production, admitted that Shell's reserve replacement rate would only be 100pc over the next five years - less if the "lost" barrels were not included.
He said that in future Shell would focus on "big cat" fields, those which guarantee more than 100m barrels of oil or gas for Shell, in 25 countries - compared with 40 three years ago. Shell was planning to drill 19 "big cats" this year, compared to 12 last year and eight in the year before, he added.
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. However he pointed out that Cairn's success only accounted for between 5pc and 10pc of Shell's annual output.
Shell also said it had received an "unsolicited" offer for its liquefied petroleum gas business, which made $400m of underlying earnings last year.
Shell hinted at selected acquisitions, but Mr Van der Veer was dismissive of suggestions it might merge with French giant Total. He said: "The fact that [that story] can get legs shows that our reputation is not where we want it to be."
Shell's shares fell 14.25 to close at 418p with analysts also concerned that the company did not say more about any planned share buybacks.