Shell cuts growth forecasts amid growing concerns of a global economic slowdown

Production

Shell slashed its production growth forecasts yesterday and warned that oil output next year would be flat amid growing fears that the terrorist attacks on America will spark a global economic slowdown.

Shell slashed its production growth forecasts yesterday and warned that oil output next year would be flat amid growing fears that last week's terrorist attacks on America will spark a global economic slowdown.

The Anglo-Dutch oil giant said production growth over the five years to 2005 would average 3 per cent a year compared with its previous forecast of 5 per cent. Shares in Shell fell 5 per cent as analysts pointed out that other oil companies were managing to maintain 5 per cent growth targets.

Walter van de Vijver, the chief executive of its exploration and production arm, said Shell will meet its growth target for this year by pumping 3.8 million barrels of oil a day but production in 2002 is not expected to rise.

Mr van de Vijver blamed the reduction in growth partly on the fact some reserves were proving more difficult to access and development fields were taking longer to bring on stream. Mature fields in the UK and US were also declining faster than before.

He denied that last week's outrages had influenced Shell's production targets, saying it was too early to say what the impact of the attacks on New York and Washington would be.

But it is clear the deteriorating world economic outlook has had a large bearing on Shell's production plans. When the Shell chairman Phil Wattsgave the first hint last month that its growth targets were likely to be lowered, he said it would be "foolhardy" not to take into account the fragile global economy and the uncertainty over the confidence of US consumers.

Despite the reduced growth forecasts, Shell said it remained confident of achieving a 15 per cent return on capital. The group added that capital investment would remain in the region of $7bn to $8bn (£4.8bn to £5.5bn) a year until 2005, by which time it expects current development projects to be producing 1.2 million barrels of oil a day.