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Shell to step up upstream investment in Middle East

23 October 2005

DUBAI -- Global oil giant Royal Dutch Shell said it would significantly boost investments in the Middle East's upstream sector following the recent signing of landmark business agreements in Abu Dhabi, Qatar, Oman and Libya.

"During the past five years, Shell Upstream alone has invested some $2 billion in the region, and this figure is set to increase significantly," said Raoul Restucci, Executive Vice-President for Shell Exploration & Production for the Middle East and the CIS.

In February, Shell revealed that it would be investing $12 billion in the Gulf region alone over the next eight years, in addition to $2.6 billion it had invested over the past five years in various oil and gas projects.

Ron van der Berg, Shell's Regional CEO, exploration and production, said the new investment underscored Shell's long-term commitment to the region.

"We are committed to the development of long term partnerships with governments and their national oil companies in this region. We are acutely aware of our responsibilities to the countries and communities in which we operate, and we are committed to maximising the employment, wealth-creation and technological transfer benefits of all our projects," he said.

Outlining Shell's position in the region, Restucci, who took up his new role in May, said the oil giant, which invested more than $10 billion in upstream projects worldwide in 2004, would build on the signing of an MoU with the Abu Dhabi-based Mubadala Development Company to explore partnership opportunities throughout the Middle East and North Africa.

Under the MoU signed in June this year, areas of cooperation will include the economic development of new existing hydrocarbon resources and the research and development of economically viable and environmentally acceptable energy solutions.

"Last year alone has seen a substantial increase in our landmark business agreements. Most notably, Shell is looking forward to major LNG and chemicals projects in Qatar (adding to the world-scale Pearl GTL project being established there), a major integrated gas deal in Libya and the renewal of a 40-year concession in Oman."

In the downstream sector, Shell has seen the regional expansion of co-operation through the signing of an MoU with Kuwait Petroleum International Limited and the enhancement of our long-standing partnership with Saudi Aramco, he said in the latest issue of "Shell in the Middle East."

Last year, Shell, which accounts for three per cent of the world's oil and 3.5 per cent of the world natural gas, recorded the highest net income in its history -- $18.2 billion, up 48 per cent on 2003 as a result of higher oil and natural gas prices, higher LNG volumes and prices, as well as higher refining margins and trading profits in oil products.

Higher volumes and margins in chemicals also contributed to this surge. Globally, its investments in 2004 surged to $14.9 billion up from $14.3 billion, of which more than $10 billion was in upstream business.

According to a Shell forecast, it would be producing between 3.5 and 3.8 million barrels of oil equivalent (boe) a day in 2005-06, and between 3.8 and 4 million boe a day by 2009.

Restucci said further advances carried out on gas projects this year included extensive seismic and other survey work carried out in Saudi Arabia for South Rub-Al Khali Company, a Shell/Saudi Aramco/Total joint venture -- a framework agreement for Persian LNG in Iran, and a farm-in agreement with Tharwa Petroleum Company, providing access to concessions in Egypt's Western Desert.

"In Syria, we continue to invest in our joint venture, Al Furat Petroleum Company, and in Egypt we are working to establish commerciality for Shell's North East Mediterranean Deepwater concession."

The agreement with Libya NOC is for the establishment of a long term strategic partnership in the upstream oil and gas industry. The agreement could lead to the development of world-class integrated upstream and LNG export projects in Libya.

In Egypt, where Shell has a partnership with Badr El Din Petroleum Company, it has interests in several gas distribution businesses and also has a network of 56 petrol retail sites across the country.

The oil major has also undertaken two projects -- feasibility studies on a reservoir and a gas master plan -- for the Iraq Oil Ministry. Stressing that the Middle East is a key growth area for Shell, Restucci said operations here would benefit from Shell's clear global exploration and production strategy.

"Key elements of this global strategy are to streamline and upgrade our portfolio through divestments and acquisition, to increase investment and to continuously raise the bar in terms of strategic positioning and performance, for Shell and for all our partners," he said.

"Shell is taking the long-term view in the Middle East, and we are continuing to learn from our history and from the invaluable experience of working with our partners in the region," he pointed out.

The Shell Group, which merged into a single entity in July to form Royal Dutch Shell pl, will ensure growth potential by exploring, or having access to, material hydrocarbon volumes with price upside. It also means tapping new resources, with more unconventional methods, and developing more integrated gas projects with exploration and production and gas and power working as one.

"We will also continue to bring to bear our global operating experience, extensive technology and ability to deliver large-scale integrated projects in order to work most effectively with host governments and national oil companies," Restucci said.

BY ISAAC JOHN

© Khaleej Times 2005