Oil giant Royal Dutch/Shell has announced plans to boost investment in exploration and production, making the replacement of its reserves a top priority as it seeks to restore battered investor confidence.
Unveiling a keenly awaited strategy update this morning, Shell said capital spending levels would increase to $15 billion a year for the period 2004-2006, of which $11.5 billion a year will be dedicated to upstream operations.
The group said it would continue to dispose of non-strategic and underperforming assets, raising an expected $10-12 billion from 2004 to 2006. Cash proceeds from sales are set to exceed $4 billion this year.
The group also forecast daily production of 3.7-3.8 million barrels this year, and 3.5-3.8 million in 2005 and 2006. Output is expected to grow to 3.8-4 million in 2009.
Shell is seeking to win back investors' faith, which was severely dented after the group first admitted in January it had overstated its proved oil and gas reserves by 20%. Shell has since slashed its proved reserves by a total of 4.47 billion barrels to 14.4 billion.
'We are focused on improving our competitive position, strong cash generation and total shareholder returns,' Shell chairman Jeroen van der Veer said in the strategy statement.
'Replacing our reserves is a priority to support future growth. Operationally, we aim to deliver top quartile performance and adhere strictly to project milestones,' he said.
As expected, the Anglo-Dutch group did not give an update on its ongoing review on structure and governance, the outcome of which will be published in November.
But Van der Veer hinted that the group could meet investors' calls to merge its dual board of directors. 'We are focusing on a simplified organisation and standardised systems and processes,' he said.
