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Iraq win gives Shell a boost

FINANCIAL TIMES

Majnoon win gives Shell a boost

By Carola Hoyos, Chief energy correspondent

Published: December 14 2009 20:54 | Last updated: December 14 2009 20:54

EXTRACTS

Royal Dutch Shell, in particular, is counting its blessing…

Shell, out of all of its peers, is struggling most to step up its production as old, profitable fields decline and new reserves are proving increasingly difficult to secure.

Moreover, the Anglo-Dutch oil group carries a very large extra burden. Shell has to fill the void left in 2004 when it was forced to cut its proved reserves by about a quarter after realising the company should never have booked those reserves with the Securities and Exchange Commission, the US regulator, in the first place.

Shell has since tried to spend its way out of the gaping hole the error has left in its explorations and production portfolio. Shell has the sector’s biggest capital expenditure budget of between $30bn and $33bn (£20.6bn) this year. BP, Shell’s closest competitor and another entrant in Iraq, has capex of $20bn this year. On a per barrel basis, Shell spends more than twice as much as BP.

But Peter Voser, Shell’s new chief executive, has promised to rein in costs, making the task of finding new reserves and production even more challenging.

So it must have been with some relief that Shell on Friday found it had put in the winning bid to develop Iraq’s Majnoon oil field.

“Psychologically, Iraq was more important to Shell than BP because they [Shell] are really struggling to stabilise production, let alone grow it,” says Peter Hitchens, an analyst at Panmure Gordon in London.

FULL FT ARTICLE (SUBSCRIPTION)

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