Shell CEO says to scale back on oil sands: report

Reuters 25 Jan 10;

LONDON (Reuters) - Royal Dutch Shell is slowing its expansion into high-cost Canadian tar sands and will in future focus on exploration, rather than expensive, capital-intensive projects, Chief Executive Peter Voser said in Monday's edition of the Financial Times.

Analysts said the decision to slow oil sands investment was no surprise given Shell's relative inaction in the field in the past year or so but questioned whether Shell could halt a 7-year slide in output with the drill bit alone.

Voser said Shell had scaled down plans to increase tar sands production to 700,000 barrels per day.

"Over the past two years and certainly over the past six to eight months, I've taken the pace out of that because we have enough other growth opportunities," he told the newspaper.

Instead, Shell planned to rely more on conventional oil and gas reserves for future growth, he said, adding that Shell had become better at finding new oil and gas reserves after investing heavily in exploration.

Many oil sands developments were canceled in the latter half of 2008 as crude prices tumbled from record highs.

Environmental groups have also waged campaigns on oil sands projects, protesting about their impact on air, land, water and communities, while some Shell investors have also worried about the potential impacts of climate change legislation.

Colin Smith, oil analyst at ICAP, said that the scale back was unlikely to mean Shell had given up on new oil sands investment.

"Given the scale of the resource base in oil sands, of some 20 billion barrels, that Shell has -- which represents almost a third of Shell's total resource base -- we would be surprised if there was not progress on developing that potential within the medium term," he said.

(Reporting by Victoria Bryan and Tom Bergin; Editing by Diane Craft and Jon Loades-Carter)