Dow Jones Newswires: Royal Dutch Shell Plc CEO Sees Oil Prices ‘Lower Than Today’ -Newsweek

Sunday 17 September 2006

LONDON (Dow Jones)-Royal Dutch Shell PLC (RDSB.LN) Chief Executive Jeroen van der Veer said in an interview with Newsweek this weekend that Russia’s government and energy officials have some justification to be irritated by the country’s portrayal as a threat to Europe’s gas supplies, comments that carry additional resonance given Russian authorities are threatening a Shell-led multibillion dollar integrated oil and gas development off of the country’s far eastern coast.

In the interview, van der Veer also made a rare forecast for where oil prices are heading,. saying they will “be significantly lower than today”, adding that all evidence pointed toward healthy physical supplies currently in the market. U.S. light, sweet crude futures dropped to fresh five-and-a-half month lows Friday to $62.03 a barrel, down a fifth since hitting a record $78.40/bbl mid-July.

Asked if fears in Europe over the reliability of Russia as an energy supplier were overblown, van der Veer replied: “I think the Russians have a bit of a point in that they feel that the West is looking only one way – to their own advantage. If the Russians want to invest in the West in distribution companies, I think that is very good news. Then you have mutual dependency, which is win-win.”

Russia’s state-run gas giant Gazprom OAO (GSPBX.RS) has been tipped as a possible buyer of U.K. utility Centrica (CAN.LN) and has made small forays into Europe, buying small gas distribution companies and setting up local marketing arms.

Saturday, a Russian official told Dow Jones Newswires that a key environmental permit for the second phase of a $20 billion oil and gas project off Russia ‘s Sakhalin island led by Shell may be canceled as early as this week. Withdrawing the permit would halt work on liquefied natural gas development due onstream by the summer of 2008. Shell in London was unable to comment.

Russia’s Minister of Natural Resources, Yuri Trutnev, said last week that enhanced environmental scrutiny of Sakhalin Energy is part of Russia’s efforts “to defend its interests” after Shell announced that the cost of the whole project would nearly double to $20 billion.

Van der Veer told Newsweek: “Of course, when the oil prices are high, the governments take a very sharp interest, usually at a very senior level, over what’s going to happen with that national resource. I understand that. But in the end, you have to stand politely with your cap in your hand, and make sure that you propose something that is in the interest to that particular government-otherwise you don’t do business. That was the same 20 years ago; it’s the same now and will be the same 20 years from now. Russia has a lot of gas reserves. They know that Shell is good, we are leading in liquid natural gas, and they want access to that expertise as well.”

Van der Veer, who has previously shown a reluctance to predict the direction of oil prices, in contrast with his BP PLC (BP) peer John Browne, said: “Recent data shows that crude-oil stocks in factories around the world are very normal or even better than normal. It’s a bit of a mixed picture, but by and large, there is no physical shortage in the world.”

He didn’t name a price but said: “I’ve grown up in a physical world, and what I see from the physical world is that the lines of ships at refineries, and things like that, are OK.”

Oil prices had surged partly due to non-traditional money entering commodities markets from hedge funds and pensions funds: “Nobody knows the correlations there. It’s new territory. But some people estimate there is north of $100 billion in hedge-fund money in oil markets right now, which is, of course, significant.”

-By Adam Smallman, Dow Jones Newswires; +44 (0) 20 7842 9343; [email protected]
 

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