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Daily Express

Story ImageJeroen van der Veer says oil firms face a challenge

Friday January 30,2009

By Andrew Johnson

ROYAL Dutch Shell is to invest more than $30billion (£21billion) this year as the company comes under pressure from tumbling oil prices and falling demand.

Outgoing chief executive Jeroen van der Veer said the company had “learned the lessons of the past” when it cut investment as prices fell, leaving it unable to ramp up production when they rose again.

He added the company still aimed to grow shareholder dividends after returning more than $13billion to investors. Payouts for the first quarter will rise 5 per cent as a “sign of confidence” in the company’s prospects. Shell shares rose 10p to 1716p.

Van der Veer was speaking as the company unveiled a 14 per cent increase in full year profits to $31.4billion, a UK corporate record, on the back of last year’s soaring prices.

But the City was more concerned about a 28 per cent drop in profits to $4.7billion for the last three months to December after oil prices fell. The company also suffered as demand for oil products, such as fuels and lubricants, shrivelled.


Van der Veer warned that the industry faced “significant challenges” with oil prices falling to levels last seen in 2004, but with costs twice as high. “This is a hard landing,” he said. “It puts a lot of pressure on the industry.” 

The company’s investment programme is slightly down on last year. Van der Veer, who will be replaced by finance director Peter Voser this summer, said the group would slow some projects, such as the environmentally controversial and expensive Canadian oil sands projects.

He expected costs to start falling over the next year and half, and said there were signs that some items, such as oil rigs and steel, were already falling.

Oil prices have fallen from a high of $147 a barrel to around $41 in a matter of months. But van der Veer said he was hopeful on long-term prospects. “If you skip 20 years, what I don’t see is that energy will be very cheap,” he said. “I think it is just the opposite.”

Shell hopes there might be new opportunities in countries such as Iran because US president Barack Obama’s election is pursuing a less hard line with the country than George Bush. “Iran has some of the largest reserves of gas in the world,” said van der Veer.

He said conditions in oil-rich Iraq remained “difficult”.

Analysts said the global economic outlook meant Shell’s profits were likely to remain under pressure. 

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