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Shell paves the way for future as natural gas giant

THE TIMES (UK): Shell paves the way for future as natural gas giant

Thursday 23 June 2005

By Carl Mortished, International Business Editor

June 23, 2005

SHELL will transform itself into a global gas major over the next ten years, producing more natural gas than crude oil, as the company steps up investment in ten multibillion-dollar projects, known as “elephants”, Jeroen van der Veer, the chief executive, said.

Shell expects that its production of hydrocarbons will rise from current levels of 3.5 million barrels per day (bpd) to 5 million bpd as the company raises its investment in research and new technology.

Mr van der Veer said that the business would change, with unconventional oil, such as tar sands, heavy oil and gas-to-liquids technology, playing an important part in the growth.

He said that growth would come from Shell’s vast oil sands deposits in Canada, as well as gas projects in Australia, Nigeria and Qatar. Asked whether the investment could tip the balance of Shell’s output, currently 60 per cent oil, towards gas, he said. “I don’t exclude that. You can see the gas building up.”

The group has invested $1 billion (£550 million) in renewables, but Mr van der Veer poured cold water on the potential for wind power. Shell’s business would remain crude oil and gas as well as uncoventional fuels, while gas-to-liquids and coal gasification technology would become important.

“Hydrocarbons will have the lion’s share of energy supplies. Renewables are simply too expensive,” he said. “Over the long term, technology may make them cheaper, but they will always be more expensive than barrels out of Saudi Arabia.”

The Dutchman may continue as chief executive beyond 2008. Under existing rules, he is required to retire at 60 but changes in Dutch law may open the door to a longer tenure.

Mr van der Veer, speaking before Shell’s annual meeting on Tuesday, when the group will ask investors’ permission to merge its Dutch and English parent companies, signalled his determination to raise Shell’s game with a focus on skills and research.

Spending on research and development, currently $553 million, will increase and the status of technology will be boosted with the appointment of ten chief scientists. Mr van der Veer said that there was no fixed budget: “If energy prices are there, the technology payout is high. I am telling people: don’t keep your mindset in a $20 per barrel world.”

He said that the high oil price was not because of low stocks but concern about the lack of spare capacity. “There is nothing unusual about the stocks position. No one is queueing for gasoline. What is a surprise is the slow reaction to the high price. Will people switch from driving an SUV to a small Toyota or will they reallocate their income to deal with high prices? We don’t know that.”

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