Shell chief warns of oil crunch without more investment
"Supplying the world's energy needs will be extremely tough," Mr Voser will say in a speech in London. "Our first priority must be to invest heavily in new supplies, and to maintain it through economic and political turbulence. Failing to do so would be a sure path to another crunch and major price volatility."
Mr Voser's comments come amid concern a pullback in investment by some resource and energy companies after the global financial crisis could result in supply shortfalls if economic activity should pick up quicker than previously expected.
Oil prices peaked at $US147 a barrel in 2008 amid concerns over the world hitting peak production and Iran shutting off supplies from the Persian Gulf.
"The cornerstone of this investment must be a sound balance sheet," Mr Voser will tell industry delegates attending the annual Oil & Money conference in London. "One strong enough to withstand volatile energy prices and revenues, and flexible enough to underpin billions of dollars of investment in new energy sources."
Demand for energy will double over the next 50 years, Mr Voser will say, spurred by rapid industrialisation in China and across Asia. At the same time, world energy supply is struggling to keep up with prospective demand. The International Energy Agency forecasts crude oil output from wells producing in 2011 will have dropped by almost two-thirds by 2035.
"The coming decades will see a historic change in human society and the global economy," Mr Voser will say. "Billions of people are emerging from poverty in China, India and other emerging economies. They're buying fridges, cars and washing machines, and all the consumer goods we take for granted in the West."
Analysts have complained that earnings at Europe's biggest oil companies such as Shell and Italy's Eni have failed to keep pace with oil prices consistently above $100 a barrel. Citigroup warned in August that higher costs in the upstream production business and the capital intensity of big production projects had eroded profitability
In his speech, Mr Voser will defend Shell's commitment to a number of high-risk energy projects such as the Sakhalin-2 liquefied natural gas scheme in Russia and a $19 billion gas-to-liquids project in Qatar.
Frequently Asked Questions about this Article…
In a speech in London, Shell chief executive Peter Voser warned that the global energy industry must keep investing heavily in new production projects to avoid another oil crunch and major price volatility. He said supplying the world’s growing energy needs will be extremely tough without continued investment through economic and political turbulence.
Heavy investment matters because a pullback could lead to supply shortfalls if economic activity picks up, driving price spikes and volatility that affect company revenues and stock performance. The article highlights concerns that under-investment after the financial crisis could create such risks for markets and investors.
The article notes oil peaked at US$147 a barrel in 2008 amid peak-production worries and regional supply concerns. That historic spike shows how supply constraints and geopolitical risks can push prices sharply higher — a scenario Voser says more investment is needed to avoid.
Voser said energy demand could double over the next 50 years, driven by rapid industrialisation in China and across Asia as billions of people buy consumer goods. The International Energy Agency is cited as forecasting significant declines in output from currently producing wells by 2035, which could amplify future supply-demand pressure.
Voser stressed the 'cornerstone' of investment must be a sound, flexible balance sheet able to withstand volatile energy prices and underpin billions in new projects. For investors, that means firms with strong finances may be better positioned to fund costly production projects through downturns.
Analysts have complained that earnings at Europe’s biggest oil companies, including Shell and Italy’s Eni, haven’t kept pace with oil prices above US$100 a barrel. Citigroup warned that higher upstream costs and the capital intensity of big projects have eroded profitability — a factor investors should watch when evaluating oil stocks.
Voser defended Shell’s commitment to high‑risk, capital‑intensive projects such as the Sakhalin‑2 liquefied natural gas scheme in Russia and a US$19 billion gas‑to‑liquids project in Qatar. These large projects can drive future production but also tie up capital and add execution and geopolitical risk that investors should consider.
The article suggests two key implications: continued investment is needed to avoid future supply-driven price shocks (which could benefit producers), but high costs and capital intensity can erode profitability, increasing risk and volatility for shareholders. Everyday investors should therefore monitor companies’ project exposure, balance-sheet strength and cost trends — without taking the article as financial advice.
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