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Times Online: Royal Dutch Shell reserves steady but refuses to set targets

March 17, 2008
Lilly Peel and Agencies

Royal Dutch Shell today reassured investors over its oil and gas reserves after expectations had grown that the Anglo-Dutch oil giant would report a decline.

The group said net oil and gas reserves in 2007 were 11.9 billion barrels of oil equivalent (BOE), in line with the level at the end of 2006, while the overall reserve replacement rate was above 100 per cent.

Shares in Shell added 7p to £17.22 in early trading. However, Shell refused to set short term growth targets, stating instead that it expects production to increase by 1-2 per cent up to 2010 and 2-3 per cent beyond that date.

Last month, Shell refused to disclose its reserve base while reporting record-breaking annual profits of $27.6 billion (£13.9 billion).

The profits broke European company records and prompted calls by environmental groups for a windfall tax on “obscene” oil profits.

However, the results, which were boosted by surging global crude prices, masked a 6 per cent slump in daily oil production last year to 3.3 million barrels, down from 3.5 million in 2006.

The company also faced a 10 per cent rise in costs and a steep drop in both refining margins and cashflow.

Shell said this morning that organic reserves additions for 2007, excluding acquisitions, divestments and year-end price effects, were 1.5 billion BOE, compared to 1.2 billion BOE of production, and reserves replacement was 124 per cent.

Organic reserves replacement for the year, including year-end price effects, was 109 per cent, it added.

The City has been particularly sensitive about the issue ever since Shell mis-stated its reserve figures in 2004. The company was forced to pay out more than £200 million in fines and compensation to settle the scandal.

Shell said it is building over 50 large projects that will underpin new cash flows for decades to come. It added it has over 10 billion boe of resources under construction which will add around 1 million boe per day of production.

Jeroen van der Veer, chief executive at Shell, said: “This is an unprecedented phase of activity for the company… We are creating new heartlands for Shell in a new energy landscape.”

http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article3566582.ece

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