Shell reassures on reserves as oil finds outstrip production

OIL major Royal Dutch Shell yesterday moved to quell fears over its level of reserves.

The firm, which was hit by a crisis in 2004 when it overstated reserves by a fifth, said its net reserves were unchanged at 11.9 billion barrels of oil at the end of last year.

Shell has been hit by rebel attacks on its Nigerian operations as well as the sale of part of its stake in Russia's vast Sakhalin 2 field, leading to concerns over reserve levels.

But the company said yesterday that its reserves replacement ratio – the measure of how well it "replaces" the oil it takes out of the ground with new finds – was 109 per cent, after the impact of acquisitions and sales.

The group has also increased its estimates of its overall oil and gas resources to 66 billion barrels of oil – lasting 55 years – reflecting an improved exploration performance.

Chief executive Jeroen van der Veer said the company was "rejuvenating its portfolio" for a world of higher and more volatile oil prices, which reached a new record of nearly $112 a barrel yesterday before falling back.

The company, which plans about $25bn (£12.3bn) on capital expenditure this year, has projects under construction capable of producing more than ten billion barrels of oil.

Shell said that would help the business achieve long-term growth of between 2 per cent and 3 per cent a year.

Projects include the Pearl offshore natural gas project in Qatar, and the Perdido project in the Gulf of Mexico, which will be the deepest subsea production project ever.

Van der Veer added: "Shell has a substantial set of growth opportunities. We have the largest investment programme in the industry."

The update from Shell came just weeks after it reported full-year profits of $27.6bn – a record for a UK company. The profit figure sparked calls for a windfall tax on the profits.

CAIRN TO CUT INDIA STAKE

CAIRN Energy is to cut its stake in its majority-owned Indian subsidiary after a private share transfer.

In a release to the Bombay Stock Exchange, Cairn India said it planned to raise $625 million (£311.6m) via the share placement. The company's board has approved issuing 113 million shares to Petronas International and the Orient Global Tamarind Fund.

Shareholder approval will be sought at a meeting on 16 April. If successful, the Edinburgh-based parent group's stake would fall from 69 to 65 per cent.

Cairn Energy was catapulted into the big time on the back of major discoveries in western India.