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Shell expects the Americas to have big role

Marvin Odum of Shell’s U.S. division says “there is a real focus on this part of the world.” (Photograph: Nick de la Torre: Houston Chronicle)

By BRETT CLANTON Copyright 2009 Houston Chronicle

Nov. 12, 2009, 8:16PM

Royal Dutch Shell sees a bigger role for North and South America as it seeks to boost global output of oil and natural gas in coming years, said Marvin Odum, president of the company’s U.S. division.

Going forward, the region should be a “disproportionately growing part of Shell” as new projects come online in deep waters of the Gulf of Mexico and Brazil, the Canadian oil sands and natural gas fields in the U.S. and Canada, Odum said in an interview with the Chronicle this week.

“There is a real focus on this part of the world inside of Shell,” Odum said, adding that while North and South America account for about a quarter of the company’s production today, investment will be “much higher than that” in the future.

Even so, he still expects hundreds of Shell layoffs in Houston, where Shell employs nearly 13,000, under a recently announced re- organization plan that will ax 5,000 Shell jobs globally by year’s end.

New Shell CEO Peter Voser launched that plan after the global economic slowdown gutted demand for energy and sent oil and gas prices plunging from record-high levels in July 2008.

Shell, based in The Hague, with U.S. headquarters in Houston, said profits in the third quarter slid 62??percent to $3.25 billion. It also reduced its 2010 capital spending budget to $28 billion from $31 billion this year.

But Odum said the reorganization is not simply a reaction to the difficult economic environment. “The goal here is restructuring to a much more streamlined, effective company,” he said. “It’s not about how many jobs can we cut to cut costs.”

Such moves, along with rising commodity prices, recently led Credit Suisse to strike a more positive tone about major oil companies despite dismal earnings in recent months. “The risk-reward on the sector now looks better than it has for some time,” the investment bank said in a Nov. 2 report.

Voser, however, cautioned last month that “the outlook remains very uncertain, and we are not expecting a quick recovery.”

Shell still projects it will grow oil and gas production 2 percent to 3 percent annually through 2012.

Brazil, Canada, Alaska

In the Americas, Shell will see growth in the deep water from its massive new BC-10 project offshore Brazil, as well as its soon-to-open Perdido platform in the Gulf of Mexico. A 100,000 barrel-per-day expansion in the Canadian oil sands is also coming in the next couple of years, Odum said. And Shell hopes to win final approval soon to drill offshore Alaska.

Shell also has amassed a significant portfolio of natural gas opportunities in the U.S. and Canada, he said.

South Texas position

A 2007 partnership with Calgary-based Encana gave Shell access to Louisiana’s Haynesville shale, while a nearly $6 billion deal last year to acquire Duvernay Oil Corp. provided entry into gas fields in Alberta and British Columbia. Shell also has a position in the U.S. Rockies and South Texas, as well as others it won’t yet reveal.

“We could be drilling at twice the rate we are today,” Odum said.

But at the moment, Odum and many in the oil and gas business are keenly focused on the outcome of climate change legislation in Congress, which they worry will burden the U.S. industry with extra costs and force job cuts.

Shell supports a cap-and-trade system that would place limits on greenhouse gas emissions and create a market for trading pollution permits.

More jobs

But Odum said any climate bill should also allow for greater production of oil and gas, nuclear and other traditional energy sources, rather than narrowly focusing on renewables, which are still many years away from being able to meet the nation’s vast energy needs.

“The truth is, if we want to improve the balance of trade, we want more jobs in the U.S., you need to do more oil and gas in the U.S., and you need to do more renewable and alternative energies,” he said.


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