Shell Chief Says `Psychology' Boosting Oil Prices
By Sonja Franklin
Sept. 12 (Bloomberg) -- Royal Dutch Shell Plc Chief Executive Officer Jeroen van der Veer said there is sufficient crude oil supply in global markets and that prices are driven by speculation.
``The supply and demand is pretty OK,'' he said at a briefing with reporters in Calgary today. ``What we do have is a lot of psychology in the price. We have to expect volatility in the oil price due to this psychological component.''
Crude oil rose to a record $79.29 a barrel in New York today after U.S. supplies dropped the most this year and OPEC yesterday said it would increase production less than some analysts expected. Prices have more than doubled since the start of 2004.
Van der Veer said producers like Shell, Europe's largest oil company, don't need oil prices of $70 a barrel to make their projects work. Unconventional assets, such as Canada's oil sands, need prices of more than $30 a barrel, he said.
Shell aims to raise long-term production at its Athabasca Oil Sands Project in northeastern Alberta to 770,000 barrels a day from 155,000 barrels. The company also plans to build in the province a second oil-processing plant, a so-called upgrader that turns the bitumen into refinery-ready crude.
Alberta's tar sands may contain the most oil after Saudi Arabia, according to the Canadian Association of Petroleum Producers.
Kashagan Discovery
Van der Veer declined to comment on negotiations between Italy's Eni SpA and Kazakhstan on the development of the Kashagan oil field, the world's biggest oil discovery in three decades, referring to Eni as the operator of the project.
The Eni-led venture, which includes Shell, risks having to cede a larger stake in the project to state energy company KazMunaiGaz National Co. Kazakhstan today gave Eni until Oct. 22 to negotiate a ``friendly'' deal.
When asked if nuclear power would be a feasible source of energy for future oil-sands production, Adrian Loader, president of Shell's Canadian unit, said the company is ``not currently pursuing a nuclear option.''
The company is evaluating a wide range of energy solutions and if a nuclear power plant were to be built Shell ``would look at that as an option bearing in mind economics, bearing in mind sustainable development,'' he said at the briefing.
Energy Alberta Corp. last month applied for regulatory approval to build a twin-unit reactor in northern Alberta to produce 2,200 megawatts of electricity by early 2017. State-owned Atomic Energy of Canada Ltd., the developer of nuclear plants in Canada, China, Romania and South Korea, is participating in the estimated C$6.2 billion ($6 billion) project.
To contact the reporter on this story: Sonja Franklin in Calgary at sfranklin6@bloomberg.net
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