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Shell sets new oil production target

Reuters Africa

* Sets output target to be 12 pct higher in 2014 than 2010

* Sees 2011-2014 net capital investment of $100 billion

* Targets $1 bln in downstream cost reductions in 2011-12

* Shares down 1.5 pct, sector index down 3.4 pct

Tue Mar 15, 2011 10:18am GMT

By Greg Roumeliotis and Alex Lawler

AMSTERDAM/LONDON, March 15 (Reuters) – Royal Dutch Shell (RDSa.L: Quote) aims to produce 12 percent more oil by 2014 than it did last year, one of the highest growth rates in the industry, and will cut more costs at its refining business, it said on Tuesday.

The Anglo-Dutch group said it will be producing 3.7 million barrels of oil equivalent (boe) per day in 2014 after spending over $100 billion in net capital investment in 2011-14, despite the current volatility in oil prices.

The group has already invested more than $100 billion on exploration and production in the past five years.

Chief Executive Peter Voser said he saw unrest in the Middle East as a short-term issue which contributes to market volatility but does not detract from the macro-economic trends that are driving growth in Shell’s business.

“I look much more beyond the Middle East, and for that matter Japan, to the developments across the world, with a very strong rise in population and average living standards which normally demands more energy.” Voser told Reuters Insider.

Shell’s share price was down 1.5 percent at 2,089 pence in London at 1015 GMT, when the Stoxx 600 Europe oil and gas sector index was down 3.4 percent.

The firm also said it had development studies underway covering over 10 billion boe of resources, a rise of some 2 billion boe from 2009 levels, and was assessing over 30 new projects with production potential of over 1 million boe per day.

IMPROVING CASH FLOW

In its troubled downstream arm Shell set a new target for a further $1 billion in cost reductions in the next two years, having already cut more than $2.5 billion in 2009 and 2010.

But the company said on Tuesday downstream remained an important part of its business and the bulk of its 2010-12 downstream asset sales programme had been completed.

Shell also said it was on track to deliver its strategic targets by 2012 which call for a 50 to 80 percent increase in cash flow from operations between 2009 and 2012, based on a $60 to $80 a barrel oil price and an improved downstream and natural gas environment.

It added that asset sales proceeds exceeded $30 billion in the last five years and were expected to be up to $5 billion in 2011.

U.S. oil group Chevron Corp (CVX.N: Quote) said on Monday it is investing 20 percent more this year, at $26 billion, but is shrinking its refining and marketing arm, where it expects margins to stay soft this year. [ID:nN14143160]

Last week the world’s largest publicly traded oil company, Exxon Mobil Corp (XOM.N: Quote), said it planned to add 1.4 million boe of production per day by 2016. Its annual budget will range from $33 billion to $37 billion. [ID:nN09245829]

In February, BP (BP.L: Quote), still reeling from the financial fallout of the Gulf of Mexico oil spill, said it would increase significantly its investment in exploration and would seek new partnership opportunities. [ID:nLDE70U2GO]

(Editing by Alexander Smith and Greg Mahlich)

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