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Shell to seek lower cost deals from service firms

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  • Reuters
  • Monday November 3 2008
*Shell seeks to capitalise on weak oil services climate
*Says companies may do deals in return for secure contracts
By Tom Bergin
ABU DHABI, Nov 3 (Reuters) – Oil major Royal Dutch Shell Plc said it may take advantage of the weaker climate for oil services companies to try and lock in lower costs, adding to signs the balance of power has shifted back toward the oil majors.
The companies which operate drilling rigs and build pipelines and petrochemical complexes have been among the biggest beneficiaries of the surge in oil prices in recent years as oil producers were forced to spent more to raise output.
However, the credit crunch and the collapse in oil prices from a record above $147/barrel in July to under $70 has hammered shares in the services sector as analysts predict demand may now slow and the fattening of margins may end.
Malcolm Brinded, who runs the oil and gas production unit at Shell, which invests more in developing oil and gas fields than any other listed oil company, said the weaker climate for service companies could be good for his company.
“You have to look at opportunities that may be around in this cycle,” told Reuters in an interview at the sidelines of an industry conference on Monday.
“Contractors who are interested in longer term contracts may be willing to discuss a different basis for those contracts. They may be interested in having more security of contracts”.
(Reporting by Simon Webb; Writing by Tom Bergin; Editing by Victoria Bryan)
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