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Daily Telegraph: Our reserves are healthy, insists Shell

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Shell oil pipeline near Warri, Nigeria. The company claims it has made progress with security and funding problems at its onshore facilities

By Sophie Brodie
Last Updated: 12:07am GMT 18/03/2008

Oil giant Royal Dutch Shell has reassured the market that it can replace reserves faster than they are being depleted, but warned that there is no clear reason why the oil price remains so high.
Chief executive Jeroen van der Veer said that last year Shell replaced more than 100pc of its reserves and that net proved oil and gas reserves amounted to 11.9bn barrels of oil equivalent (boe) – the industry measure. This is the same as at the end of 2006.

The company managed to increase reserves despite having to dispose of half of its 55pc stake in Sakhalin-2, the controversial Russian gas project, estimated to cost $20bn (£10bn).

Mr van der Veer dismissed concerns that the company’s relationships in Russia continued to be difficult. He said: “We feel good about our prospects in Russia and talk regularly with Gazprom and Rosneft.”

In Nigeria, the company has made progress in combating security and funding problems at its onshore facilities, he said. However, some operations remain suspended to ensure the safety of Shell staff.

Asked if the oil price would continue to remain high, Mr van der Veer said: “Physical flows are continuing around the world and there are no major bottlenecks, which makes it difficult to understand why the price is so high.” However, he pointed to little spare capacity and a flight to commodities as possible factors.

Shell expects energy demand to grow by 50pc by 2025 thanks to emerging economies such as India and China.

Excluding acquisitions and disposals, the company increased reserves last year by 1.5bn boe, set against production of 1.2bn barrels and amounting to a replacement rate of 124pc. However, under Securities and Exchange Commission rules, the company achieved an oil and gas replacement rate of just 17pc in 2007, down from 158pc the year before due to the withdrawal from Sakhalin-2.

The company plans to sell more refinery assets and re-invest the cash in exploration and production to counter investor concerns that it is short of reserves after being forced to re-state them in 2004. Last year, it sold a refinery near Los Angeles and has three French operations up for sale. It is also looking at its African and Caribbean businesses.

As well as increasing production from new sources such as oil sands, Shell plans to spend some of the proceeds on alternative energy such as wind farms in the US, liquid natural gas and biofuel technology. It has 50 large projects under way which should produce 10bn boe. and its also non-profit sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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