"Upstream, we are committed to increase our production to 3.8-4.0 million barrels of oil equivalent in 2009, and we have record investments for our future in hand. Downstream, we are making selective growth investments, after a period dominated by disposals. Competitive cost performance and operational excellence are embedded in our strategy. Our downstream businesses should generate over $1.0 billion of further improvements by the end of this decade."
"These are exciting times for Shell. We are making investments and taking final investment decisions by the end of the decade, which together will open up some 20 billion barrels of oil equivalent resources. These resources, which are around one third of our discovered resource base today, include substantial long-life fields, which will underpin our profitability for many years to come."
He said the company is maturing around 50 major growth projects today, which should start up across 2006-09. "Around half are already under construction, in an unprecedented level of activity for Shell. Looking beyond 2009, Shell's portfolio is robust and growing, and the company is working on a larger number of further options, which underpin our aspiration for further production growth in the next decade."
"We see great potential in unconventional hydrocarbons, in plays such as oil sands and gas-to-liquids. These 'unconventionals', and Shell's technology, should help us drive full replacement of our production, on both a resources and reserves (1) basis, and sustain long term production growth." said van der Veer. Such unconventional resources, however, may not qualify as SEC proved oil & gas reserves, where the company has previously forecast an average 100% SEC proved reserves replacement ratio over 2004-08.
Van der Veer said "We still have a fair prospect of achieving that target. However, we do not want this target to drive the wrong business decisions, either in the timing of projects, or in the type of resources that we prioritise. The industry is seeing a very tight market for materials and contract rates. Our requirement for competitive returns means that we will probably hold back some of our longer-term projects, until the supply and contracting environment cools down. That in turn makes achieving our SEC proved reserves replacement forecast less likely than it was."
"We now see SEC reserves replacement across 2004-08 as an outcome of our investment choices, rather than a forecast. Our goal is to invest in the right projects, at the right time, within our framework of capital discipline, " van der Veer said.
Chief Financial Officer Peter Voser concluded "we are focused on competitive returns, disciplined capital allocation, and organic growth. We expect to average 20-25% gearing through-cycle, including off balance sheet items. Organic capital spending for 2006 is expected to be around $19 billion, as previously indicated, with around $21 billion of spending anticipated in 2007."
"Due to continued strength in oil and gas prices, and our capital discipline, we expect to exceed our previous guidance for up to $5 billion of share buy-backs in 2006. Share buy-backs will continue, subject to market conditions and the capital requirements of the group."
(1). Reserves meaning SEC proved oil & gas reserves, plus specific hydrocarbon categories that fall outside the SEC's current definitions, for example oil sands and other unconventionals. In such cases we will look to have high levels of confidence in our economic, technical and project maturity estimates.
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