View from City Road: Far-sighted moves from Shell

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The Independent Online
Thirty years ago oilmen looked down their noses at natural gas, burning it off as a valueless nuisance. Not those far-seeing roustabouts at Royal Dutch/Shell. Against conventional opinion Royal Dutch/Shell invested sizeable sums in recovering and selling natural gas and is now reaping huge benefits.

Natural gas is now all the rage with environmentalists, being seen as cleaner than alternative fuels. Volumes are rising fast, especially in Shell's strong Far Eastern markets. Last year Royal Dutch/Shell sold 7 per cent more gas than it did in 1992 while its oil output stagnated.

Natural gas, turned into equivalent oil units, accounts for about one-third of Royal Dutch/Shell's total production of oil and, analysts estimate, up to 50 per cent of the company's exploration and production profits.

Its support has been invaluable while other oil majors battle with a falling oil price. Gas prices will ease this year but volumes are set to rise even more sharply.

Another strategic winner for Royal Dutch/Shell has been its long-standing decision to invest outside the old world of North America and Europe and invest heavily in the new world of the Far East and South America.

Royal Dutch/Shell is gloomier than usual on oil prices and downbeat about economic recovery in the West.

But, aside from an ailing chemicals operation, gas and geography are in its favour and a 23p fall in Shell's London share price to 699p, reflecting mainly Dutch discontent with a low guilder final dividend increase, could be a good buying opportunity on a yield of 4.3 per cent.