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Shell remains committed to natural gas plan - CEO

05.22.2012  | 

Royal Dutch Shell believes rising natural gas demand will underpin its future profits, even though oil pricing still accounts for 80% of its margins, its CEO Peter Voser said on Tuesday. Despite a recent drop in US gas prices, the long-term pricing outlook for natural gas remains strong, he noted.

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By ALEXIS FLYNN

LONDON -- Royal Dutch Shell believes rising natural gas demand will underpin its future profits, even though oil pricing still accounts for 80% of its margins, its CEO Peter Voser said Tuesday.

The oil giant, which expects to produce more natural gas than crude oil for the first time this year, has invested heavily in gas assets in the US and Australia.

US gas prices have fallen to decade-lows as new production techniques have resulted in a glut of supply from shale rock sources.

But despite this, the long-term pricing outlook for natural gas remains strong, said Voser, as Asian-Pacific customers are increasingly switching from powering their industrial plants with oil to gas.

However "margins are driven 80% by the oil side," he said, referring to Shell's ability to transform gas into more valuable fuel products like diesel that sell at prices linked more closely to crude.

The company, the world's largest shipper of liquefied natural gas, is also able to benefit from the difference in regional gas prices.

Voser also said Shell remains committed to the fully-integrated operating model, where a single oil company extracts, transports, refines and sells hydrocarbon products.

While some analysts have argued that major oil companies like Shell should sell off their refining businesses to better realize high commodity prices, Voser said the long-term outlook for the model was good.

"We will drive an integrated philosophy because that is where the future growth will lie," said Voser, who was addressing Shell's annual shareholder meeting.


Dow Jones Newswires



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