Shell plans to invest $100bn in new projects

Published on Monday 14 March 2011 21:54

OIL major Royal Dutch Shell yesterday announced plans to invest $100 billion (£62.4bn) in new projects as it seeks to boost production to meet soaring demand from emerging markets.

It is aiming to produce 3.7 million barrels of oil equivalent per day by 2014, an increase of 12 per cent on 2010 levels. The firm claims its ambitious targets are among the highest growth rates in the sector.

At the company's annual strategy update yesterday, chief executive Peter Voser said Shell has 20 new projects under construction, which will add more than 800,000 barrels of oil equivalent per day, putting it on course to meet its previous target of 3.5 million barrels per day for 2012.

It will also make final investment decisions on some ten projects over the next two years in Australia, Malaysia, Canada and the Gulf of Mexico.

In addition, Shell has more than 30 projects on the drawing board for the period to 2020.

Voser said: "We have made good progress in 2010. Our profitability is improving and we are on track for our growth targets. There is more to come from Shell."

The British-Dutch firm nearly doubled its profits to 11.6bn in 2010 thanks to higher oil prices. Yesterday Voser said it was on track to achieve a targeted 50-80 per cent increase in cash-flow from operations between 2009 and 2012, after adding $10bn, or 40 per cent, in 2010.

The company also announced plans for a further $1bn in cost reductions in its less profitable refining and distribution operations over the next two years, having already cut more than $2.5bn in 2009 and 2010.

David Hunter, analyst with consultancy M&C Energy Group, said the scale of the investment was "massive" but not surprising considering the opportunities in the sector, as the high price of oil made increasingly remote and difficult-to-access fields potentially profitable.

"There are large areas still with untapped hydrocarbons, increasingly in deeper water and inhospitable places," he said.

Hunter said that while oil companies were not making investment decisions based on the exceptionally high prices seen since the start of the political unrest in the Arab world, there was a growing consensus that prices would not drop back to the $40 a barrel low seen during the recession.

Yesterday Shell also announced that it would divert some of its liquefied natural gas (LNG) to Japan to make up for energy lost from the country's nuclear plants.

Shell's own refining facilities have not been hit by the severe earthquake and ensuing tsunami which struck parts of Japan on Friday, although damage to its retail and distribution businesses was unclear.

Spot LNG prices in Europe were likely to rise as a result, Shell's chief financial officer Simon Henry admitted.UK prices rose to their highest level since 2008 on Monday amid fears over Japan's power supply.

Shell owns 30 per cent of a large LNG production facility in Qatar that started loading its first tankers last month.