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Royal Dutch Shell CEO says making cost savings

Reuters

Tue Jun 2, 2009 5:18am EDT

ABU DHABI (Reuters) – Royal Dutch Shell Plc said on Tuesday it had seen costs come down in the last few months as it renegotiated with project contractors.

“As far as projects are concerned and normal operating costs, we see a lot of our renegotiations … enter with lower costs at this moment,” Chief Executive Jeroen van der Veer said on the sidelines of an industry conference in Abu Dhabi.

Big oil suppliers, including those in the oil-exporting Gulf region, have driven down project price tags by billions of dollars as they force contractors to go back to the drawing board to factor in cheaper costs.

“I think at this moment we still have a lot of pressure on cost savings in projects. Renegotiation costs will come down,” van der Veer said.

“I think it’s early days to say how far,” he added.

Shell has pledged to continue investing despite a decline in crude prices from peaks of almost $150 a barrel last summer. The company plans to invest $31-32 billion in projects this year, compared with $30 billion last year.

Shell last month, like many oil companies, reported sharply lower first-quarter profits due to a halving of the price of crude to an average of around $44 a barrel in the quarter from $97/bbl a year earlier.

Oil prices have since recovered to just below $68/bbl on Tuesday.

Van der Veer will be replaced as chief executive by Shell’s current Chief Financial Officer Peter Voser in July.

(Reporting by Luke Pachymuthu, editing by Will Waterman)

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