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Gulf-Times (Qatar): ‘Easy oil’ gone, say Shell, Total chiefs

Published: Sunday, 8 April, 2007, 08:47 AM Doha Time
 
Paris: The days of so-called “easy oil” are over, making it harder to meet supply targets without complicated and expensive projects, the heads of two of Europe’s largest oil companies said on Friday.

The International Energy Agency, an adviser to energy importing nations, estimates oil supplies will have to rise 39% to 116mn bpd by 2030 from about 84mn bpd in 2005 to meet world demand.

Meeting such targets with conventional oil sources will be “extremely difficult,” Christophe de Margerie, chief executive officer of Total, Europe’s third-largest oil company and its largest refiner, said at a conference in Paris on Friday. New supply will be based on “huge high-tech” projects.

Jeroen van der Veer, chief executive of Royal Dutch Shell, Europe’s largest oil company by market value, said countries no longer ask for Shell’s help with conventional reserves, such as oil or gas fields found onshore that are cheaper to develop than offshore fields.

“We can’t expect profits in easy oil,” Van der Veer said at the same conference. “If there is easy onshore oil, people don’t need Shell.”

He said there are enough opportunities for international oil companies to invest in complex, large oil projects using new technology.

Explorers are pushing further offshore as technology improves and fields onshore and in shallow water run dry.

Oil companies are expected to boost exploration spending by 9% worldwide this year, according to Lehman Brothers Holdings. Spending on exploration in deep water will rise 44% to $18bn by 2011 from $12bn in 2006, a report by consultants Douglas-Westwood said on Thursday.

Paris-based Total last month said it was pumping 200,000 bpd from a new field in Angola called Dalia, about 135km (83 miles) offshore in waters as deep as 1,500m, or nearly a mile down.

Developing that field cost $4.6bn, an increase of 53% from the $3bn spent to develop another offshore Angolan field called Girassol, de Margerie said.

By comparison, costs for Usan, a 160,000 bpd project off Nigeria, will cost $7bn, he said.

South Africa’s Sasol this month is slated to begin its first shipment of synthetic diesel made from Qatari natural gas.

Shell in February began a larger gas-to-liquids project Pearl, which aims to pump 140,000 bpd. Price escalation may push the final price tag on Pearl to as much as $18bn.

Shell in February said capital spending will reach as much as $23bn, about 10% more than last year.

Total expects to spend $16bn this year, 75% of that in exploration and production, up from $15bn in 2006.

Shell secured drilling rigs last year at 30% below market rates, saving $300mn on rig hires, Van der Veer said.

Total, which has had fields seized in Venezuela and is considering an Iranian gas project as that nation faces sanctions for its nuclear program, said reduced access to fields hurts.

“Governments need to take their share of the responsibility, don’t come crying when we are facing a shortage,” de Margerie. “We’re going to face huge challenges to bring additional capacity on stream.” – Bloomberg

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