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Lloyds List: Shell's big game hunt for elephant projects

Van der Veer expects oil major to be tackling 10 mammoth developments by 2015, writes Martyn Wingrove
Feb 15, 2006
ROYAL Dutch Shell expects its higher capital investments this year to push through new elephant sized energy projects and to find the next generation of developments.
The Anglo-Dutch oil major has increased spending to $19bn, the highest of all the international oil companies, as it develops three huge projects and searches for more in the future.
Chief executive Jeroen van der Veer told the first day of International Petroleum Week in London: 'We will see more of what I call elephant projects. By 2015, I expect that Shell will have 10 of these under way, up from three today.
'We have almost doubled investment in five years from $10bn to $19bn, while exploration investment has gone from $1bn to $2.1bn.'
The London-listed group has turned its strategy around in two years, from an oil company known for downgrading hydrocarbon reserves to one that has ramped up investments and finding large fields.
It is pushing ahead with frontier projects such as the $20bn Sakhalin II campaign and developing non- conventional resources, including Canadian oil sands, to rebuild its international business.
'This year Shell is investing $19bn, with $4bn in the downstream and $15bn in upstream projects,' said Mr van der Veer. 'Of this, $2.1bn is in exploration and $13bn on developing our projects. Shell has the highest investments of all the international oil companies.
'We have a good development flow and opportunity set and we could have seen more than $19bn with our portfolio of projects.'
A large slice of its future spending will be on the elephant projects, where hydrocarbon resources are estimated to be more than 1bn barrels of oil equivalent.
These currently include Sakhalin II in eastern Russia, where two offshore oil and gas fields are under development and a liquefied natural gas plant is being built. It also includes the Bonga deepwater project in Nigeria, which started production late last year, and the huge Nanhai onshore development in China.
Shell is also searching for 'big cat' projects, where resources are more than 100m barrels; it found seven last year from its growing exploration programme, including four in Nigerian deep waters.
Mr van der Veer thinks there will be more of these projects to develop in the future but they will increasingly be found in ultra deep waters or harsh environments.
'Half of the conventional oil undiscovered is in deep waters or in the Arctic,' he told the IP Week event, run by the Energy Institute.

'Meeting future energy demand means we will need to explore in more remote regions, develop in ever deeper waters and overcome more difficult geology.
'All this means that energy projects are going to be bigger and more expensive.
'We should not underestimate the demands these massive projects will make on resources, people and finances.
'The scale of the investment required to meet global energy demand is immense. As an industry we will need to double the level of investment per year.'

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