REUTERS: UPDATE 1-Shell ups 2006 capex plan to $19 bln as costs soar: Royal Dutch Shell Plc will have to invest $4 billion more than previously planned in the coming year, as costs soar and the firm tries to turn around its industry-lagging record on finding oil. Tuesday 13 December 2005, 3:03am EST

LONDON, Dec 13 (Reuters) - Royal Dutch Shell Plc (RDSa.L: Quote, Profile, Research) will have to invest $4 billion more than previously planned in the coming year, as costs soar and the firm tries to turn around its industry-lagging record on finding oil.

Anglo-Dutch Shell, the world's third-largest listed oil firm by market capitalisation, said on Tuesday its capital investment budget for 2006 would be $19 billion, compared with earlier plans of around $15 billion.

Shell said in July that its medium-term guidance for capital expenditure of $15 billion per annum after 2005 was no longer valid and analysts expected the firm to raise its budget to between $17 and 20 billion per year.

Shell said in a statement that $15 billion would be invested upstream, including $2 billion in exploration, and that $4 billion would be invested in downstream activities, where tightness in refining capacity has helped send oil prices to record highs.

Shell said the $15 billion upstream budget excludes Shell's minority share of Sakhalin, a large oil and gas project off Russia's east coast where costs have doubled to $20 billion.

Shell has agreed in principle to sell part of its 55 percent stake in this project to Russia's Gazprom (GAZPPE.RTS: Quote, Profile, Research).

Approximately 25 percent of the increase in upstream capital investment in 2006 relative to 2005 is due to price inflation, Shell said.

Some industry executives have put oilfield-services inflation at around 10 percent per annum as demand for rigs and input costs such as steel have risen sharply.

(Additional reporting by Gavin Haycock)    

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