Shell Said to Plan Oil Output Growth Out to 2020

Royal Dutch Shell Plc, vying with BP Plc to be Europe’s largest oil and gas company, will outline a plan tomorrow to increase output every year until 2020, a person familiar with the company’s strategy said.

Chief Executive Officer Peter Voser, due to brief investors at an annual strategy update in London, will say Shell has a pipeline of more than 20 projects with the potential to sustain low single-digit average annual production growth in the second half of the decade, the person said, asking not to be indentified because the presentation hasn’t yet been made.

Shell is seeking to revive oil and gas output with projects in Qatar, Malaysia and Brazil after production fell for a seventh consecutive year in 2009. The company, based in The Hague, hasn’t previously given annual targets beyond 2012, saying only its reserves will allow it to increase production in the second half of the decade.

“Production growth each year is something that should be within reach for Shell,” Peter Heijen, an Amsterdam-based analyst at Theodoor Gilissen Bankiers NV, said by e-mail. He has a “buy” rating on the stock.

Cost Savings

Voser has targeted $1 billion in cost savings this year and will cut 1,000 more jobs in an effort to weather the economic slowdown, which has reduced fuel demand in the U.S. and Europe. The Swiss CEO, who succeeded Jeroen van der Veer in July, will reiterate the need to cut costs and indicate capital spending plans beyond 2012, the person familiar with his strategy said. A spokesman at Shell’s press office declined to comment on the briefing when contacted by phone today.

Voser will say Shell expects gas-to-liquids and liquefied natural gas projects in Qatar, the BC-10 project in Brazil and Perdido in the Gulf of Mexico to be on schedule, the person said.

Shell and PetroChina Co. this month made a A$3.3 billion ($3.01 billion) bid for Arrow Energy Ltd., the Australian coal- seam gas producer. The acquisition would give Shell additional gas reserves to support multiple liquefied natural gas production units. Arrow may reject the offer, the Australian Financial Review reported today, without saying where it got the information.

Shell’s production fell 3 percent to 3.152 million barrels of oil equivalent a day in 2009 from 3.248 million barrels a day in 2008. The company’s London-traded shares have gained 17 percent in the last year, trailing a 35 percent gain for its closest rival BP Plc.

BP on March 2 announced plans to increase pretax profitability by $3 billion over the next two to three years by boosting production and making the refining and marketing business more efficient. BP intends to raise average annual oil and gas output by 1 percent to 2 percent through 2015. Shell has earmarked net capital spending of $28 billion this year, about $8 billion more than BP.

Shell in February started an ethanol venture with Cosan SA Industria & Comercio in Brazil, pushing biofuels as an alternative energy investment over wind and solar. Shell will contribute assets including 2,740 service stations and as much as $1.93 billion to the 50-50 venture. Cosan will provide $4.93 billion of assets, including plants able to crush 60 million tons of sugar cane a year, and control of an ethanol-trading unit.

source: businessweek