Shell increases investment budget

Royal Dutch Shell added more than £2bn (€2.9bn) to its investment budget for next year today after warning it faced far higher costs.

The Anglo-Dutch company, which has been under pressure to improve its record in oil exploration, revised its capital expenditure budget from $15bn (€12.5bn) to $19bn (€16bn) for next year.

It blamed the increase of $4bn (€3.3bn) on “price inflation, exchange rates and increase in service costs, such as drilling rig rates”, as well as further investment in new projects.

Most of the investment – $15bn (€12.5bn) – will be spent “upstream” on exploration and production, while $4bn (€3,3bn) will be “downstream”, including at refineries and on clean fuels.

Shell chief executive Jeroen van der Veer said: “Global energy needs depend on the industry’s ability to sustain high levels of investment as the search for energy leads us to increasingly challenging and technically demanding environments.”

Shell also hit out at further tax increases on North Sea oil companies announced by Gordon Brown in his Pre-Budget Report last week.

Shell finance director Peter Voser said he was “disappointed” that the Chancellor had doubled the supplementary charge on North Sea explorers to 20% - sending total corporation tax to 50%.

Mr Voser said the company was still assessing the impact it would have on activities in the area.

“We are disappointed to have higher tax because we value a stable tax environment which is essential for long-term investment plans and projects” he said.

The initial supplementary charge of 10% was introduced in 2002 but was doubled to 20% by Mr Brown earlier this month.