"Shell, bruised by big bets, warns of profit miss."

WSJ: “Ben van Beurden toiled in Royal Dutch Shell PLC’s chemical-making unit for years, supporting an unpopular idea at the oil and gas company. He said Shell should be wary of “elephant projects” that cost billions of dollars and dominated the company’s growth strategy. The steep costs of oil and gas development from Canada to Kazakhstan, sometimes with little to show for the giant investments, came back to haunt Shell on Friday when it announced its first profit warning in 10 years”
“The Anglo-Dutch company said it now expects fourth-quarter earnings of $2.2 billion, down about 70% from $7.3 billion a year earlier. Full-year earnings are expected to total about $16.8 billion, down from $27.2 billion in 2012. “Our 2013 performance was not what I expect from Shell,” said Mr. van Beurden, who took over as Shell’s CEO just three weeks ago.
The bad news is the latest sign of profit pressure squeezing the world’s largest oil firms, including Shell, ChevronCorp and Exxon Mobil Corp. All of them invested heavily on remote projects in places like deep water, frozen tundra and mountainous jungles. A surge in development costs and flat oil prices have made it harder to justify the costs of such projects, and the industry’s giants arrived late to the shale boom in North America, overpaying for assets.
But some of the company’s investments are struggling. Shell owns a stake in a Kazakh oil field that has cost more than $30 billion and is more than eight years overdue. Shell wrote down by more than $2 billion last year the value of its shale assets in North America. Sea ice and an oil-rig crash hurt an Arctic exploration project after an investment of more than $4 billion.
….Shell revved up its capital spending after chronic under-investment led to a 2004 scandal over how Shell reported its oil and gas reserves. Shell paid $150 million to the U.S. and U.K. governments, and several top executives left the company.
New Chief Executive Jeroen van der Veer wanted Shell to recover from the scandal by taking advantage of its engineering skill and huge bank account.
“If you are good in technology, you’re better applying it to something big than to something small,” Mr. van der Veer told executives at a strategy meeting in 2005 at Shell’s headquarters in the Hague, people who heard the comment recall.
That meant Shell would tackle what Mr. van der Veer called “elephant projects” too big or engineering-heavy for competitors. The company poured tens of billions of dollars into Canada’s oil sands and a giant plant in Qatar that converts natural gas into synthetic diesel. Shell says the plant has been successful, but it had to reduce production recently for maintenance.”