Business | Oil & Gas
It's useless forecasting oil price: Shell chief
Van der Veer optimistic of long-term profitability as investments in the industry are made for decades.
- By Charles Hudson, CNN
- Published: 22:59 January 31, 2009
Concern is rising among top energy officials that the oil industry is facing a deeper set of financial ailments and future supply problems.
According to industry estimates, around $100 billion (Dh367 billion) worth of oil and natural gas drilling projects - mostly in nations that aren't members of the Organisation of Petroleum Exporting Countries (Opec) - have been either delayed or cancelled over the past year because of the world's financial problems and weak oil prices.
Those reassessments may well hurt future energy supplies but they also have big implications for oil companies.
Charles Hodson CNN Anchor interviewed chairman and chief executive of Royal Dutch Shell, Jeroen van der Veer in Davos.
Charles Hodson: Difficult times, I think, for you. Were you surprised by how sharply the oil price fell?
Jeroen van der Veer: Yes. This last year, we had, as you said, a record year, but there's no reason to celebrate that because we are in absolute difficult business circumstances. I think it took us a full year to go to the very high oil prices, and it took us a few months to come to the relative low oil prices. So, it went very fast, and a very deep fall.
OK, but going forward, what do you think oil prices are going to do? Do you think they're going to stay at these levels, essentially below $50, or do you think we're going to see a spike up towards $100 again?
Over the years, I've become quite humble about it. I've not forecasted ... for $87 per barrel mid-2008. I have not forecasted that we would before the end of the year below $40, so I think even if I would say something, if you don't have any track record, it is useless.
Let's leave price on one side. What do you think will happen in demand? Because demand is going to fall this year - is falling, really, for the first time in a long, long time.
Yes. We think the most decline in chemicals, but destocking plays a role. We see - so far we have seen lower demand in the states and Europe, and of course less growth than expected in the east. That is what we see.
How that continue, we don't know, because you have to differentiate between destocking - everybody tries to use the last ... before you start to buy again, to load up again.
But putting all of this together, are you reasonably optimistic going ahead for your next full year that you will - well, maybe not match those enormous profits, but at least something respectable?
In our industry, we do our investments for decades. So, it sounds very strange if I look at the investment side of the company, if I look at the longer-term profitability and our strengths for that, this is not all about oil or gas prices today.
This is how you expect a longer-term energy picture. And we feel good about that.
Interesting you talk about the longer-term ethical - the longer-term energy picture.
I think oil and gas, you have to produce in a very responsible way. We can, for instance, go to Arctic areas, but then you have to make sure that there are all kinds of environmental sensitivities.
Shell, long-term, we try to advocate that carbon capture and storage could be helpful, but then we have to make it work.
And of course, we try to develop at least one renewable energy for our longer-term future into a big business, so not as a hobby, but ... a serious business.
When will growth return? ... When do you think? Do you think 2009, 2010, or 2011 or later?
I'm going to say '09. Yes?
- Gulf News in association with CNN brings you the latest from World Economic Forum 2009.
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