Shell: Weathering the downturn

Royal Dutch Shell executives sought to reassure analysts today that the company is moving ahead on major projects already approved, reining in costs and therefore well positioned to weather the global recession and oil prices at 2004 levels.
But CEO Jeroen van der Veer, who is retiring in June but up for election to the board as a non-executive director at the company’s annual shareholder meeting in May, said the company anticipates the downturn will last more than a year.
“I have to say I don’t expect costs to go back to 2004 levels. This is simply a reality that the projects today are often more complex and more expensive than in the past,” he said.
Executives said pullbacks include the already-announced postponement of an expansion of expensive oil sands operations in Canada, as well as “tight” natural gas operations in North America where natural gas is in thick rock that hinders its flow. The company also is working to simplify existing operations, which Malcolm Brinded, executive director of exploration and production, said was “top and center of everyone’s agenda.”
None of the executives specifically mentioned–nor did any analysts ask about–the year-plus delay in the target date for finishing the $7 billion expansion of Motiva Enterprises’ refinery in Port Arthur, a joint venture of Shell and Saudi Aramco. A Motiva spokesman confirmed the deal today.
Mark Williams, Shell’s downstream director, said the company has cut labor costs in that construction project by eliminating overtime.
Shell aims to spend $31 billion to $32 billion this year on capital projects, which is the same as 2008 spending and more than any other publicly traded oil major. Most of that is already committed to projects long since approved.
–Kristen Hays

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