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Guardian Unlimited: Shell finance chief sees continuing high oil prices

Reuters Saturday December 22 2007

GENEVA, Dec 22 (Reuters) – Energy prices will remain high next year, driven by demand from developing countries, but energy companies face massive cost pressures, Royal Dutch Shell chief financial officer Peter Voser was quoted as saying on Saturday.

Voser told Swiss newspaper Finanz und Wirtschaft he did not expect a global recession next year, but growth would slow down, and the credit crisis would weigh on the economy in the United States and Europe, although less so in Asia.

“Energy prices will remain high … Our concern is the development of costs. Financial spending for modernising our production plans is rising rapidly and cost inflation reduces profits,” he said.

Voser said costs rose at Shell by 10 percent this year against an industry average of 20 percent.

Oil rose 2.4 percent on Friday after a report showing a jump in U.S. personal spending relieved some concerns about the economic health of the world’s top oil consumer.
U.S. crude traded up $2.19 to $93.25 a barrel by 1850 GMT. London Brent crude gained $1.53 to $92.41.

Shell expects to get a green light to drill for oil in Alaska next year, despite resistance from environmentalists, he said.

“We are very interested in the Alaska project because we expect to find large reserves there and the United States is the biggest market,” he said.

Voser said Shell’s liquefied natural gas and crude project in Sakhalin, in Russia’s far east, would start to contribute to the company’s production growth in 2009.

The project was originally led by Shell but last year Shell agreed to sell control to Russia’s Gazprom after Russia’s environmental watchdog agency threatened to strip it of production licences for breaking ecological rules.

In September, the project, Sakhalin Energy, said it would delay year-round exports of crude to 2008 from the end of 2007.

It said on Monday it would complete its LNG plant in late 2008, effectively delaying supplies to Asia by at least few months. Industry sources said the delay, arising from slow construction work could be extended to spring 2009.

Voser said the financial impact on Shell from disruption to oil operations in the Nigeria’s Niger Delta, where it lost an average of 185,000 barrels per day in 2007 through unrest, was minimal.

This was because Shell achieves a margin of only $2-4 a barrel in the Niger Delta, against $20 in the United States and $10-12 in the North Sea, he said. (Reporting by Jonathan Lynn, editing by Mike Peacock) and its sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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