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The Scotsman: Shell may make swaps,acquisitions up to $10 bln

By Simon Webb
DAVOS (Reuters) – The chief executive of Royal Dutch Shell said on Thursday the oil company would consider making acquisitions or swaps worth up to $10 billion (5.6 billion pounds) to increase reserves.
“Even in times of high oil prices, it's possible, but not sure, that you may do small acquisitions or swaps of up to $10 billion,” Jeroen van der Veer told Reuters in an interview on the sidelines of the World Economic Forum.
Acquisitions or swaps of that magnitude could create value for shareholders of Shell, he said, but declined to comment on what possibilities the company might be pursuing.
Any larger acquisitions would be “very unlikely to work”, the Shell chief said.
Shell, the world's third largest listed oil firm by market value, is still living down a reserves scandal that shocked investors in 2004. The revelation that its oil and gas reserves were massively overstated sent Shell's shares tumbling.
Turning to Nigeria, where Shell ranks as the biggest foreign producer, van der Veer said his first concern was for the safety of four oil workers held hostage by militants.
A five-week campaign of sabotage and kidnapping by the Movement for the Emancipation of the Niger Delta has pushed world oil prices to four-month highs and shut in 221,000 barrels per day of Shell's output in Nigeria.
“I expect the government would like to sit down with (the oil) industry and talk about what can happen on security and keeping the oil flowing,” said the Shell chief.
The movement said it would make Shell suffer unless it paid $1.5 billion to delta villages in compensation for decades of oil pollution, which is one of its demands for releasing the hostages.
Van der Veer said repairs could not start on damaged oil infrastructure until discussions about ensuring security in the OPEC producer had taken place.
“When the situation is safe again, then you can restart production very quickly,” he said.
UNCONVENTIONAL
Van der Veer said Shell remained committed to increasing output of oil from unconventional deposits despite project cost overruns at its 155,000 barrels per day (bpd) Canada Athabasca oil sands project and a string of unplanned outages.
Shell has started a study for an oil shales project in Colorado, he said. It will test technology for heating oil underground there.
It is also looking at oil deposits in ever-deeper water, and analysing deposits of tight gas, or gas left in reservoirs after conventional drilling, he said.
Van der Veer said he was not concerned that increased exposure to unconventionals could erode Shell's profitability.
“On the contrary, I think we can build a very good company on unconventional oils. If we have technologies that allow us access to oil that nobody else has, then we have a very competitive position. That puts the company in a stronger position for the long-term.”
Van der Veer said that Shell's access to easy-to-exploit oil reserves was limited and its production has peaked, while there were still plenty of unconventional oil sources to be exploited.
He said that the ouptut from its 147,000 bpd Mars platform in the Gulf of Mexico should restart in the second half of 2006, as the company has previously stated. The platform was damaged by Hurricane Katrina last summer.
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