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CERA-Shell CEO urges industry to spend through slump

Reuters

Tue Feb 10, 2009 4:54pm EST

HOUSTON, Feb 10 (Reuters) – The chief executive of Royal Dutch Shell Plc (RDSa.L) said on Tuesday most of its projects are profitable at current oil prices and warned the industry against cutting investment too sharply during the downturn.

Jeroen van der Veer said oil and natural gas projects still needed serious investment even though weak demand and commodity prices, coupled with exchange rate fluctuations, would “hit bottom lines quite seriously.”

“The upturn in the economy will come,” he told the CERAWeek energy conference in Houston. “If the industry stops investing, I am convinced that we make the industry even more cyclical.

“Hamlet said ‘to be or not to be’ …. the second Hamlet question is to invest or not to invest,” he added. “At Shell, we are convinced that you keep on investing.”

The CEO, who will hand the reins of the Anglo-Dutch oil giant to his finance director on July 1, said $40-per-barrel oil was “sufficient” for his company if royalties and taxes adjust accordingly.

Yet on the other hand, Shell has been slowing its development of the Canadian oil sands, and Van der Veer said there was no way to start new projects there at current costs.

The Dutch executive, who first joined Shell in 1971, also said energy companies faced more than just a daunting macroeconomic challenge, but also a global political push to reduce carbon emissions.

“I think CO2 solutions will get delayed,” he said. “This is not a good climate to do a lot of expensive (carbon capture and storage) projects.

“CO2 is a huge problem. There is no silver bullet.”

(Reporting by Braden Reddall and Chris Baltimore; Editing by Christian Wiessner)

 

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