Shell CEO says $80 oil supports energy infrastructure investment, even as steel quotas raise costs

Key Points
  • Royal Dutch Shell CEO Ben van Beurden says $80 oil is not "unreasonable" and will help fuel spending on oil and gas infrastructure after a period of underinvestment.
  • The Trump administration's steel quotas are beginning to impede some of Shell's construction projects in the United States, van Beurden said.
  • Shell has not yet canceled any construction due to the trade barriers, and it is driving down the cost of its offshore projects.
Shell CEO: $80 oil is not an unreasonable price

The Trump administration's steel quotas present a challenge to building new oil and gas infrastructure in the United States, but rising crude prices help fuel investment, Royal Dutch Shell CEO Ben van Beurden tells CNBC.

International benchmark Brent crude hit a nearly four-year high above $81 a barrel on Monday as the market braces for U.S. sanctions on Iran that threaten to wipe about 1 million barrels a day off the market. Brent's multiyear high came after OPEC, Russia and other oil producers declined to boost output to tackle rising prices.

While van Beurden says the market is not running out of oil, he believes supplies are getting tight as crude stockpiles fall to normal levels after several years of oversupply and as oil producers get closer to pumping at maximum capacity.

Oil buyers typically lament rising prices, but van Beurden says $80 oil is not "unreasonable" and could benefit the market in the long run.

"I think we need to have slightly elevated prices, to bring new supply on, which is going to be the main challenge," van Beurden said in an interview with CNBC's Brian Sullivan.

"We should be able to balance the market at that sort of oil price level, but of course bringing on new production is not a short-term event," he said. "It takes years to bring on new production."

Energy companies sharply pulled back capital spending in recent years during a prolonged oil price downturn. The lack of investment has raised concerns about supply shortfalls that will lead to another cycle of boom and bust for oil prices.

Shell CEO: Tariffs are impacting us

Van Beurden said the Trump administration's decision to impose tariffs on steel and aluminum imports are "generally not a good thing."

According to the CEO, quotas limiting imports of steel from Brazil, South Korea and Argentina are beginning to impede some of Shell's construction projects in the United States. However, he said the trade barriers have not forced Shell to cancel any future investments yet.

Shell is a major player in the Gulf of Mexico, where oil and gas companies spend billions on deepwater drilling infrastructure.

"We think we probably had the largest foreign direct investment in the country," van Beurden said. "I'm very, very acutely aware that the president appreciates us for that and doesn't want to harm, in that sense, our continued investments in the U.S. as well."

Shell has been able to drive down the cost of its offshore projects by as much as 70 percent by slimming down projects and focusing on tapping the most attractive parts of oil and gas reserves, van Beurden said. The company is now building a portfolio of projects that can break even when oil prices are as low as $40 a barrel, he said.