Royal Dutch Shell will boost its capital spending by 27% next year to about $19 billion, well ahead of the $15 billion it spent this year, to expand upstream activities and cope with rising oil service costs. The spending estimate pegs about $10-$11 billion for new projects around the world, including Canada and Russia, with another $4-$5 billion to be spent on existing projects.

Nearly a quarter of the increased budget is attributed to price inflation, including increases in oil field services costs such as contracting drilling rigs. The increase follows a massive restructuring, which the producer completed earlier this year (see Daily GPI, June 10). Shell disclosed it had overstated its oil and natural gas reserves in 2004 and sharply revised reserves numbers downward. Since then, management has been pressured to rebuild the upstream portfolio.

“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,” CEO Jeroen van der Veer said in a statement. Shell expects to spend at least $19 billion for the next several years to expand various projects.

In related news, Shell Exploration & Production Co. said it will move 1,000 employees back into New Orleans offices next year in two phases. About 200 employees will move from temporary facilities in Robert, LA in late January, and the remaining 800 will return in late February. Shell also has 374 employees in the New Orleans region who work offshore.

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