Joining a growing list of companies lowering their forecasts, Royal Dutch/Shell Group, the second largest oil company in the world, has reduced its production growth estimate to 3% a year, down from the 5% a year it had targeted in 1998. The reduction applies to targets set through 2005.

Walter van de Vijver, CEO of Shell’s Exploration and Production division, said there were several factors that led to the company lowering its forecast, but he said the recent U.S. terrorist attacks were not included. “It is too soon to speculate on the consequences for the global economy, the oil industry and the Shell group. All we can say is that we face a more uncertain world.”

In written remarks, van de Vijver said, “This forecast has been lowered from our earlier targets, partly as a result of slower access than anticipated to major sources of reserves. In addition, some projects are taking longer to realize than first predicted, and some of our more mature fields, in the United Kingdom and the United States in particular, are declining faster than before.” He told analysts in a presentation at The Hague, Netherlands, the “problem is industry- wide,” and that high oil prices in the past year have led many of the governments of oil-producing countries to be less enthusiastic about developing new fields.

This year, Shell estimates its supplies will equal 3.8 million boe/d, pushed by new projects in the Gulf of Mexico and the Philippines. Production in 2002 is also expected to be about that level. Although Shell did not specifically cite the reason for “slower access,” several of its future projects are in Middle East nations, including Iran and Saudi Arabia, members of the Organization of Petroleum Exporting Countries. OPEC has been reducing oil production this year to support prices, and this week Saudi Arabia said members planned to keep their oil price target between $22-28/bbl as a benchmark price.

Capital spending to fund and produce oil and gas will be between $7-8 billion a year, in line with the $7.4 billion the company said it would spend last December, said van de Vijver.

Before the official news on the lower forecasts, Shell Chairman Phil Watts had warned analysts in August that the 5% growth in production would be “a challenge” (see NGI, Aug. 13). Watts took over in July, and in his first announcement, predicted the major’s production goals would be met through the rest of 2001, but admitted then that its future expansion could slow because of the sagging world economy.

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