Royal Dutch Shell plans to sink several billion dollars in deep and ultra-deep water projects off Angola, a senior company official said yesterday.

"Our focus in exploration and production will be on deep water and, for example, the ultra-deep water blocks like 34," Shell Angola managing director Luuk Karsten said.

"These are places where we have an advantage to use the technology that we have tried out elsewhere such as in the Gulf of Mexico," said Karsten who arrived in Luanda in August after a stint in Nigeria.

Deep and ultra-deep waters range in depth from 500 metres to 2,500 metres. Pumping crude from those crushing cold depths is at the leading edge of industry technology.

Discoveries in the tertiary-age sediments of the Congo basin in deep water blocks 14, 15, 17 and 18 account for nine billion barrels in estimated reserves - making Angola one of the world's leading exploration and production hotspots.

Angola's 750,000 barrels per day (bpd) output is second only to Nigeria in sub- Saharan Africa and expected to hit 850,000 in 2002 as the giant TotalFinaElf Girassol development comes on line.

Total production is expected to hit 1.3 million bpd by 2008.

The concessions for ultra-deep blocks 31-33 were awarded in 1999 with a total of about $900 million in signature bonuses to the government.

Shell operates no blocks in Angola, but has a 50/50 split with operator BP in block 18, a 10 percent interest in block 21 operated by Australia's BHP Billiton, and 15 percent of ultra-deep block 34.

"Block 18 looks exciting," Karsten said. The block's six discoveries, known as Greater Plutonio, will pump 250,000 bpd in a project to come on line in late 2005, early 2006.

The excitement may be tempered by plunging oil prices which fell around 20 percent last week to $17.45 a barrel, a two-year low. "Deepwater development becomes problematic when oil prices come close to single digit levels," Karsten said.

"Shell invests for the long term and has aspirations that are less volatile than the spot market. Future investments are tested against various oil price scenarios, some with considerably lower prices than the actual oil price of today," Karsten added.

Development costs should be kept under $4 a barrel for deepwater fields to be profitable, industry sources said.

Shell will be tapped for half of block 18's estimated $2 billion cost which will likely include a floating storage and production vessel, Karsten said.

The final stages of the front end engineering and design tenders have been sent out, he added. Some analysts thought in an attempt to spread industry risk Luanda would hand more than a 15-percent share of block 34 to Shell, the only western oil major not operating an Angolan block.

"Of course we would like to have had more," Karsten said. "If any farming (sub- leasing) opportunities develop we would be interested in those."

State oil company Sonangol with a 20 percent stake operates block 34 with 30 percent allotted to Norway's Norsk Hydro as technical adviser, 20 percent to U.S. Phillips and 15 percent to Brazil's Braspetro.

Costs in block 34 will be comparable to block 18, which puts Shell's input at $300 million. The partners were reviewing seismic data and were expected to begin drilling next year, Karsten said.

A recent well drilled by BHP in deep water block 21 in the southern Kwanza basin proved "a little disappointing," Karsten said.

Exxon-Mobil drilled a successful exploratory well earlier this year in block 24, but striking commercially-viable oil in the southern blocks has proven largely elusive.