Shell to update on investment plans amid turmoil

Royal Dutch Shell will update investors on Tuesday on its exploration and production pipeline as continuing political unrest in the Arab world clouds the short-term outlook in the oil market.

Shell has been generating more cash after investing more than USD 100 billion in exploration and production over the past five years, so the focus is on how much it plans to invest after 2012 and the level to which it expects production to rise.

"We will be looking for reassurance that anticipated growth in oil and gas production to 2012 is on track and that the upstream business can continue to grow from 2014," Royal Bank of Scotland analyst David Cline said in a note on Monday.

Investors who are worried political unrest in the Middle East could take hold in Saudi Arabia, the world's top oil exporter, will also be looking out for the company's latest assessment of the global oil market.

The recent spike in the price of oil was not expected to affect Shell's long-term plans.

"What is happening now with the oil price will not make a difference. Oil majors plan long term. The focus is on production growth beyond 2012," ABN AMRO Bank analyst Paul Andriessen said.

After ploughing USD 23.7 billion into net capital investment in 2010, the company is aiming for USD 25 to USD 27 billion in 2011.

Shell is aiming for 2012 oil and natural gas production to be 11% higher than in 2009 and has said this will lead to a 50% to 80% increase in cash flow from operations, measured at USD 60 to USD 80 per barrel.

Investors will be looking for new projects after Shell started up six upstream and downstream schemes in 2010 and saw first offshore gas production at its Qatargas 4 LNG facility earlier this year.

Shell reported a positive total cash flow of USD 3.725 billion in 2010, after investment activities absorbed less than in 2009, when it posted a negative total cash flow of USD 5.47 billion.

"I am looking for more detail on projects from 2015 to 2020. I do not think there is enough detail on the projects after this bunch," said David Stedman, head of corporate research at Daiwa Capital Markets.

After its fourth-quarter profit was hit by weak refining and downstream results, Shell may also announce plans to lower refining capacity and limit exposure to retail markets.