Oil and gas group Royal Dutch Shell today laid out ambitious plans to increase its production to as much as 4 million barrels of oil a day over the next three years as it beat City forecasts with a 12 per cent gush in first-quarter profits to more than $6 billion – despite production slipping over the period.
As chief executive Jeroen van der Veer described today's quarterly results as merely “satisfactory” – with political turmoil in Nigeria and a Gulf of Mexico hurricane both denting first quarter production levels – he said Shell planned to open up about 20 billion barrels of oil equivalent in resources by the end of the decade.
He also commited Shell to “unconventional” resources such as oil sands and gas-to-liquids energy processes, although he warned investors that these may not qualify as proven oil and gas reserves according to standards set by the American regulator the Securities and Exchange Commission.
In 2004, Shell overhauled its management and paid a record fine after admitting it had misstated the level of its proven reserves for years.
Mr van der Veer described Shell's new strategy as “more upstream, profitable downstream” – as part of its commitment to explore for new reserves and improve the production and transmission process.
“Upstream, we are committed to increase our production to 3.8 to 4.0 million barrels of oil equivalent in 2009, and we have record investments for our future in hand,” the Shell boss said. “Downstream, we are making selective growth investments, after a period dominated by disposals.
“These are exciting times for Shell. We are making investments and taking final investment decisions by the end of the decade, which together will open up some 20 billiion barrels of oil equivalent resources. These resources, which are around one third of our discovered resource base today, include substantial long-life fields, which will underpin our profitability for many years to come.”
As he embarked on the ambitious production and resources plan, Mr van der Veer nevertheless plaid down the chances of Shell meeting its target of an average 100 per cent SEC proved reserves replacement ratio over the years 2004 to 2008.
This Shell strategy update came as the oil and gas group increased first quarter profits to $6.088 billion, up from $5.455 billion over the same period last year, largely due to the surge in the price of oil and gas.
The oil price has been touching $72 a barrel over recent months, having more than doubled over the past 12 months. The high price of gas on the wholesale markets has been good news for Shell and other natural resources companies, but has hit domestic consumers hard with household gas bills rising by as much as 25 per cent in some cases.
However, production slipped by 3 per cent to 3.746 million barrels of oil a day as a result of attacks on pipelines by militants in Nigeria and a hurricane last year off the Gulf of Mexico.
Shares in Shell added 17p to 1,965p in early deals, valuing the group at nearly £53.8 billion.
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