Shell says it has 55 years of reserves

Financial Times: Shell says it has 55 years of reserves

By Sheila McNulty in Houston
Published: April 21 2008 03:00 | Last updated: April 21 2008 03:00

Royal Dutch Shell has sought to calm concerns about diminishing oil reserves and access to new supplies, arguing that its existing resource base will provide 55 years of production at current production levels.

“We still have a lot of legacy [positions] from the past,” said Jeroen van der Veer, Shell’s chief executive, in an interview with the Financial Times.

Mr van der Veer’s confidence comes in spite of increasing uncertainty surrounding international oil majors, many of whom are finding it difficult to explore new sources of oil amid rising costs and increasing nationalism in oil-rich countries, which control more than 80 per cent of the world’s crude oil resources.

Shell has “20 per cent of [its] balance sheet”, or $30bn (£15bn), in projects under construction. That is more than anyone else has invested in organic exploration and production, Mr van der Veer said.

Nevertheless, Shell, like all the main oil and gas producers, is having to move increasingly into difficult, expensive and carbon-intensive unconventional fuels, such as Canada’s oil sands, where synthetic fuel is made from bitumen.

“What is unconventional today will be conventional tomorrow,” Mr van der Veer said. “I’m convinced the world needs oil sands. The world is energy hungry.” He noted statistics showing energy demand will double between now and 2050.

If the world is really concerned about carbon dioxide emissions, he said, it should price carbon with a cap and trade system. He hopes the world’s rules on carbon will be straightforward and unified. If the world is full of complex rules, it will work against affordable energy and the environment, he said.

Yet he struck a bullish tone even if the green drive weakens. “As a company we can live with it even if it is not the best solution for society,” he said.

Shell is already coping with project costs that have almost doubled since 2000 and a severe talent shortage as graduate recruitment has declined.

In spite of concerns raised by some energy consultants about the growing role of sovereign wealth funds in the energy sector, as evidenced by the revelations that a Chinese sovereign wealth fund has purchased a $2bn stake in BP, Mr van der Veer remains sanguine. “It doesn’t make me nervous,” he said, adding that the funds have always been active in the energy arena.

Copyright The Financial Times Limited 2008