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Shell CEO: Projects Profitable At Current Energy Prices

February 10, 2009: 04:37 PM ET

HOUSTON -(Dow Jones)- The head of Royal Dutch Shell PLC(RDSA) said Tuesday that the Anglo-Dutch integrated energy major’s projects were profitable at current crude oil and natural gas prices.

“Nearly all of our projects will be profitable at present energy prices,” Chief Executive Jeroen van der Veer told an audience at the Cambridge Energy Research Associates’ annual energy conference.

The plunge in oil prices from their all-time highs hit last summer has raised questions about the economic feasibility of some exploration and production projects. But major integrated energy companies such as Shell operate under long time horizons and have kept their assumptions about oil prices conservative throughout the boom.

Oil prices recently have been trading in a tight range around $40 a barrel and on Tuesday ended at $37.55.

Shell operates the multibillion-dollar Sakhalin-2 oil and gas venture off Russia’s Pacific Coast, although it ceded majority control to Russia’s state- controlled natural gas monopoly in 2006.

For Sakhalin, $40 a barrel is “sufficient, provided royalties and taxes adapt, ” he said.

The precipitous fall in prices against the backdrop of a global economic downturn has spurred talk of possible consolidation among energy producers, along the lines of the mega-mergers seen at the turn of the decade.

Van der Veer, however, said that those transactions were conducted amid expectations that low oil prices would stay low. Although he declined to rule anything out, he said this time around, oil prices are expected to go back up.

The economic crisis will slow implementation of technologies to reduce carbon- dioxide emissions, Van der Veer said.

“CO2 solutions will get delayed,” he said. Carbon capture and storage projects “will be more difficult than we thought a year ago.”

He added that both a carbon tax and a system under which emissions limits are capped and then credits against those limits are traded can coexist.

Earlier Tuesday, BP PLC (BP) CEO Tony Hayward said a cap-and-trade system was the best option to address climate change concerns.

Exxon Mobil Corp. (XOM) has come out in favor of a tax on carbon emissions.

-By Angel Gonzalez, Dow Jones Newswires; 713-547-9214; angel.gonzalez@

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  02-10-09 1637ET
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