In yesterday’s global strategy briefing Shell reiterated its commitment to build new upstream capacity, while managing the near-term challenges of the global economic slowdown.
Shell executives claimed its retrenchment to core business areas of oil and gas represents a ‘prudent approach’ as it shied away from renewables, provoking outrage from green lobbyists in the UK.
In the briefing, Shell’s leadership said that long-term oil and gas fundamentals remain positive, but the industry is facing a sharp downturn in energy prices at a time when costs are high by historical standards.
“These are testing times in the oil and gas industry. Whilst short-term measures are important, we keep our long-term perspective, and continue to believe that energy needs over the long term provide a positive context for Shell’s investment programmes today,” said Jeroen van der Veer, Royal Dutch Shell’s chief executive.
“The challenge in upstream is to produce new barrels to offset natural field decline, and to create new growth. The key to success sits with operational excellence, technology, project management and financial capacity, and I am pleased with the capabilities we have built in Shell,” he said.
Exploration drilling in 2008 added some 1.2 billion barrels of resources, at a finding cost of $2-3 per barrel. Acquisition activities also added over 1 billion barrels of resources in 2008 for Shell.
In what may be seen as the first green victims of the credit crunch, Shell will be pulling back investments in its renewables remit.
Linda Cook, who heads Shell’s gas and power business, said that wind and solar power “struggle to compete with the other investment opportunities we have in our portfolio”.
