By SUMMAR SAID and ALEXIS FLYNN
Investment in shale gas won't be sustained if US natural gas benchmarks stay at their currently depressed levels, Shell chief executive Peter Voser said.
"The current prices of gas are obviously are not a price which long-term will drive development in shale gas... so current prices are not attractive from an investment point of view," Voser told Dow Jones in an interview that also touched on his outlook for 2012 oil demand.
Shell's CEO - who in 2010 oversaw the Anglo-Dutch major's $4.7 billion acquisition of East Resources and its US shale gas assets - said he remained convinced the long-term price outlook for the commodity remained a good one.
"Personally, I think long-term pricing in the US will go up," said Voser.
US natural gas prices have fallen to their lowest point in a decade as new technologies allow producers to access vast untapped gasfields in Pennsylvania and Texas.
And the world's biggest energy firms have been quick to snap up any available assets: companies like Shell, ExxonMobil and BHP Billiton have all spent billions of dollars harnessing vast acreage positions in the country.
However, many of these investments require sustained gas prices of $3 to $4 per million British thermal units to cover their costs.
Natural gas futures Friday fell 2.5 cents, or 1%, to recently trade at $2.580 mBtu on the New York Mercantile Exchange.
If this level were to be sustained, it could increase pressure on producers to scale back output in a bid to stabilize prices.
However, the long-term investment thesis of companies like Shell is that global demand for natural gas will continue to rise as developed and developing economies increasingly switch from coal and oil.
Separately, Voser said the world's oil needs would likely be matched by supply in 2012.
"Oil demand this year will be under pressure, and growth will clearly be lower than last year or the year before, but at the end I see the long-term oil demand still growing after 2012," said Voser.
While crude markets are supplied on the short term, in the long-term demand will outpace supply, said Voser.
"Oil prices are volatile, but I don't expect them to hit that [$147 a barrel]," he said.
When it comes to deciding whether or not Shell will spend money developing a major project, the company assumes an oil price of $50 to $90 a barrel.
"I think prices need to stay at certain level in order for us to invest," said Voser.
Dow Jones Newswires