Daily Telegraph: Shell pledges $19bn capital investment to boost reserves: “Peter Hitchens, analyst at Teather & Greenwood, said the statement contained "nothing to suggest the group will be able to increase its growth prospects".: Wednesday 14 December 2005
By Philip Aldrick (Filed: 14/12/2005)
Royal Dutch Shell is raising its annual capital investment by $4billion (£2.3billion) next year in an effort to lift its reserves replacement level back to the industry standard.
The Anglo-Dutch group yesterday said its investment budget for 2006 would be $19billion, up from earlier plans of about $15billion. Chief financial officer Peter Voser added that beyond 2006, it was likely to invest "at least" $19billion a year.
Some investors are concerned the higher spending plans will reduce dividends. But the programme is required if Shell is to reach its 100pc reserve replacement target - the level at which every barrel produced is replaced with new finds.
Mr Voser said he was "reasonably confident" of hitting the target for 2004-2008.
Some 55pc of the additional $3billion-$4billion being invested upstream will be spent on developing new projects. Another 20pc will be ploughed back into redeveloping existing fields, and the final 25pc will cover inflation.
Rig rates have leaped with exploration levels, which have boomed as the high oil price has made previously expensive projects now economical.
Spending on downstream activities such as refining will be over $4billion compared with earlier plans of $3billion.
Mr Voser said Shell hoped to raise production to 3.8m-4m barrels of oil equivalent per day (boepd) by 2009 compared with current rates of around 3.5m boepd.
Peter Hitchens, analyst at Teather & Greenwood, said the statement contained "nothing to suggest the group will be able to increase its growth prospects". There are fears it will ramp up production from sources such as tar sands projects, which are costly, offering lower returns. Shell shares rose 11 to £18.79.
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