Royal Dutch Shell Plc sees oil prices increasing because supply from shale drilling in the US won’t be enough to meet increasing global demand.
The industry needs to find an additional 4 million barrels to 5 million barrels a day of supply every year to meet rising demand and replace depleted fields, Shell Chief Financial Officer Simon Henry said in an interview on Tuesday.
“Lower oil prices increase demand and reduce investment, and it already has,” Henry said. Global demand of about 93 million barrels a day is increasing by 1 million every year, he said in London.
Oil producers are delaying or canceling projects and cutting costs after crude slumped by about 40 percent over the past year because the Organization of Petroleum Exporting Countries gave up defending prices in favor of grabbing market share from US shale producers.
“Within three to four years there will be a recovery,” Henry said. “Whether it will take one, two or three years, that’s difficult. It will depend a bit on whether OPEC has cohesion or not and on the reaction in the U.S. on the shale and also other big investments.”
OPEC, which supplies about 40 percent of the world’s oil, probably won’t cut production at a meeting in Vienna this week because the rationale for the current policy remains in place, Henry said.
Shell, which in April agreed to acquire BG Group Plc for $70 billion, is seeking to complete filings for antitrust approval in the main jurisdictions, including Europe, China, Australia and Brazil, by the end of this week, Henry said.
“In every country so far the response has been neutral to good,” Henry said. “So far so good, still early days, and we don’t expect to complete before the early part of next year.”
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