KUALA LUMPUR, 14 June 2005 — Oil prices will suffer more volatility in the year ahead, Royal Dutch Shell Chief Executive Jeroen van der Veer said yesterday, warning that the energy sector is not “shock proof” from world events.

Van der Veer told the Asia Oil and Gas Conference that the world’s existing energy capacity was very low, and he called for greater exploration of unconventional oil sources.

“In the world oil system there is hardly any spare capacity. That means that the whole system is not shock proof at this moment. If something happens the market will react,” he said in an opening address.

“You may expect more volatility because every day something may happen.”

The Shell chief declined to forecast energy prices, saying the elasticity of energy demand was unclear at present, but predicted growing industry investment in energy projects will keep prices high.

“It is reasonable to expect longer-term increased prices for oil and gas, otherwise you can’t justify the projects,” he said.

While Van der Veer said fossil fuels will continue to make up a large part of energy supplies for the foreseeable future, he identified major challenges for the energy sector.

Key among them are economic growth in Asia and its demand for energy. By 2030, three quarters of Asia’s energy needs will be imported, he said, noting that relatively more energy was being used to create one unit of GDP because of urbanization and infrastructure developments in Asia. With oil production maturing in existing areas, the energy sector has to look further afield to accommodate growing demand, he said.

“We still have a lot of oil and gas to be found, but to find those giants which were very easy to produce, those days may be relatively over,” he said.

Van der Veer said new unconventional sources, such as Shell’s oil sand mining project in Athabasca, Canada, as well as new technologies to exploit them, would propel the industry.

“As yet there are enough reserves in the world, if you include unconventionals. It is all getting access to those reserves, having the technology, the project basis and the commercial conditions to develop them,” he said.

The challenge will also be to develop resources while keeping environmental concerns and community concerns in mind, he said.

“Can we make clear to the public at large that we do the right things to supply the energy for the world?” he said.

Van der Veer underlined the need for increased investment in energy exploration and development.

“The International Energy Agency thinks we have to invest in the coming 30 years $6,000 billion,” he said, adding that Royal Dutch Shell alone spent $12 billion annually on upstream activities.

“Large projects increase all the time in scale, in scope, in complexity and in sensitivity,” he said, saying the industry also needed an infusion of younger talent.

Greater integration between international and national oil companies in both upstream and downstream activities will also help to address challenges facing the energy sector, he said.

“We need to have the ability to work with all stakeholders,” he said.