* Shell's reserve life drops below 8 years
* Investors have shifted focus away from reserves to profits
By Ron Bousso
LONDON, Jan 30 (Reuters) - The number of years of production
left in Royal Dutch Shell's oil and gas reserves fell
for the sixth year in a row in 2019 to below eight.
But there was little reaction from investors to the steady
decline in what was once considered a key metric for gauging the
strength of the world's major oil and gas companies.
There is a growing perception the world holds enough oil and
gas to meet demand many times over, especially against the
backdrop of a gradual shift away from fossil fuels because of
concerns about climate change. https://reut.rs/2GBtBvC
"The days of companies having 15 years of reserves have
largely gone," said Redburn analyst Stuart Joyner. "With the
energy transition you would expect reserve life to come down."
Shell was rocked in 2003 when it revealed it had inflated
its oil and gas reserves for years, leading to the sacking of
its chairman and chief financial officer.
The company's so-called reserve life last increased in 2013
to just below 12 years but it has been on a downward trend ever
since and hit 7.9 years in 2019.
The reserve life of several of the world's biggest oil and
gas companies, including BP and Total, has
dropped in recent years but Shell's is now significantly below
the industry average in 2018 of about 11 years.
Investors closely monitored oil and gas companies' reserves
for decades, especially during the rapid growth in Chinese
demand from the turn of the century.
But after the 2014 oil price crash, the focus shifted to
companies' profitability, leading many to sell assets to raise
capital, which in turn led to a decline in reserves.
Shell Chief Executive Officer Ben van Beurden told analysts
on Thursday that the decline in reserve life, "doesn't represent
the truly integrated and diverse portfolio we have or our focus
of value over volume".
The low reserve ratio could nevertheless prove to be a
problem for Shell as it is seeking to sell more oil and gas
assets to lower its debt burden and pay for a $25 billion share
buyback programme, Joyner said.
To partly offset any concerns over the decline, Shell plans
to tap third-party reserves from developments such as Canada's
giant liquefied natural gas (LNG) project, he said.
(Reporting by Ron Bousso; Editing by David Clarke)
BP (BP.)
