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Shell’s Van der Veer unable to predict upturn

Reuters

Fri Jan 30, 2009 2:56am EST

DAVOS, Switzerland (Reuters) – Royal Dutch Shell’s (RDSa.L) chief executive said on Friday he could not predict when the world economy or oil prices would begin to rally or whether both would fall further in the meantime.

“You don’t know how long it will last. We have to be prepared for everything. No bell will ring at the lowest point,” Jeroen Van der Veer told Reuters in Davos on Friday, with reference to financial weakness.

At last year’s World Economic Forum, he was among those who saw no reason to panic about economic downturn.

In the event, the onset of recession eroded oil demand, helping to pull the oil market down from a record of nearly $150 a barrel last July to around $40 now.

At current prices, Van der Veer said existing production was still profitable, but it would be challenging to begin new projects in the most costly areas.

“The oil sands in Canada are probably too difficult to start completely new projects,” he said.

As investment shrinks, he agreed with many other executives attending this year’s forum in Davos that oil prices would eventually rise, but could not say when that would be.

Lower prices have weighed heavily on Shell’s results. The oil major on Thursday reported a 28 percent fall in profits in the last three months of 2008.

Apart from reduced earnings, the company also faces security problems, notably in Nigeria, where militant violence has forced the shut in of production.

“The security problem is ongoing … Sometimes there are problems in regions as big as England … sometimes as big as Cornwall,” Van der Veer said.

The amount shut in was remarkably constant, he said, with some production recovering and then other taken off line.

Shell’s Soku gas plant, which was shut in November, was still closed.

“It is temporarily out of action,” he said, but did not give further details.

(reporting by Barbara Lewis)

 

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