Shell Sets 2006 Capital Investment Program at $19 Billion

Royal Dutch Shell announced a capital investment program for 2006 of around $19 billion in support of its strategy of more upstream and profitable downstream. Planned 2006 Upstream investment is around $15 billion, including approximately $2 billion for Exploration and excluding the minority share of Sakhalin. Downstream investment is planned at over $4 billion.

Jeroen van der Veer, Chief Executive for Royal Dutch Shell said, "We have a substantial pipeline of projects for development. The increase in investment will grow and mature our resource base, increase production, build on our strong position in integrated gas and unconventionals and enhance our leading position in the Downstream. Global energy needs depend on the industry's ability to sustain high levels of investment as the search for energy leads us to increasingly challenging and technically demanding environments."

Highlights of the 2006 program include:

- $10-$11 billion in Upstream growth projects

- 55% of the increase in Upstream investment relative to 2005 targeted to development and ramp up of new projects and increase in exploration.

- 20% of the increase in Upstream investment relative to 2005 to the development and redevelopment of existing fields.


The 2006 capital investment contributes to bringing on stream facilities that are expected to unlock 13 billion barrel of oil equivalent (boe) of resources by end 2009 and mature 5 billion boe of resources to final investment decision by end 2009.

Major projects at various stages of maturation include:

- Existing oil and material new oil: Salym, Bonga, Ehra, Kashagan, Deimos and Great White

- Integrated gas: Qatar LNG and Pearl GTL, Nigeria LNG, Ormen Lange, and exploration, production and LNG activities in Libya, Sakhalin and Australia.

- Unconventionals: Athabasca Oil Sands expansion.

Development costs for typical major Upstream projects are in the range $4-$8 per boe on a total resource basis (excluding LNG and GTL facilities costs). These metrics and related risks may vary significantly across different geographies, projects and operations.

The majority of the Upstream capital investment, some $10-$11 billion, will be dedicated to growth projects, defined as projects not yet on stream and including Sakhalin and the Athabasca expansion. This includes approximately $2 billion in Gas & Power predominantly in LNG and approximately $2 billion for exploration. The remainder of the $15 billion for Upstream, some $4-5 billion, will be invested in ongoing field development and redevelopment, asset integrity and other activities.

Of the increase in Upstream capital investment in 2006 relative to 2005 approximately 55% is attributed to initiation and/or ramp up in the construction and development phase of new projects and to increased exploration. Some 20% of this increase is for investment in the development and redevelopment of existing Upstream assets. An estimated 25% of the increase is due to price inflation, exchange rates and increase in service costs, such as drilling rig rates.


The Downstream continues to focus on operational excellence, integration opportunities between Oil Products and Chemicals and expanding in growth markets for its main lines of business - Manufacturing, Supply and Distribution, Retail, Business to Business, Lubricants and Chemicals. Capital investment is distributed between attractive growth opportunities and clean fuels (combined around $1.7 billion), alternative energy, technology infrastructure opportunities, capitalised turnaround activity and base maintenance of core assets.

Jeroen van der Veer said, "We will continue to exercise strict discipline to prioritise our projects for investment and assure appropriate resources, technology and project management capabilities are applied. We add to our investment in long lived, low decline, high plateau Upstream projects which will profitably contribute to the world energy needs. With strong operational performance and high prices we generate significant cash, enabling high levels of investment in these organic growth opportunities while returning cash to shareholders via dividends and buy backs. We expect to continue with our closed period buy back program in January and will provide an update on our 2006 buy back program with the full year results announcement in February."


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