AMSTERDAM (Bloomberg) - Royal Dutch Shell plc., Europe's largest oil company, said reserves were little changed last year after it was forced to cede a stake in a Russian venture to state-controlled OAO Gazprom.

Net reserves as of December 31, including oil sands, were 11.92 billion barrels of oil equivalent, compared with 11.94 billion barrels at the end of 2006, The Hague-based Shell said in its annual report published yesterday.

Shell and partners last year sold Gazprom a controlling stake in the Sakhalin-2 oil and gas venture after Russia threatened to halt development because of environmental violations. The company has also seen output drop in Nigeria, and is in talks with the government over production terms as the nation demands a greater share of the resources in its territory.

"It still remains to be seen whether they can achieve real growth," Antoine Leurent, a Paris-based analyst at KBC Securities, said in an interview. Mr. Leurent has an "accumulate" rating on the stock. The statement on reserves and long-term projects is "relatively reassuring."

Shell's A shares fell 1.9 percent to close at 1,683 pence in London. The stock is down 20 percent this year, compared with a 17 percent drop for BP plc., Europe's second-biggest oil company.

Output fell for a fifth consecutive year after Shell's Sakhalin stake was cut to 27.5 percent and militant attacks in Nigeria kept fields off line, Shell said on January 31. The company plans to "rejuvenate" production through so-called unconventional projects including a gas-to-liquids venture in Qatar and oil sands in Canada.

About 140,000 barrels a day of Shell's Nigerian output remains shut in, Malcolm Brinded, head of exploration and production, told a press conference in London yesterday. In some areas security has improved, he said, declining to comment on when Shell may return to full production in the country.

In 2006, the company added to proven reserves for the first time since 2002.

"We are not obsessed by volume, as we are building a solid platform for future production growth with new long-life low- declining projects," Mr. Brinded said. In the long term, about 75 percent of Shell's output will come from these projects, he said.

"I remain sceptical whether they will be able to deliver," Herman Bots, an Amsterdam-based analyst at Theodoor Gilissen Bankiers NV, said yesterday in a telephone interview. Higher costs may hamper delivery on Shell's long-term projects, according to Mr. Bots, who has a "buy" rating on the stock.

State-backed oil and gas companies have claimed bigger stakes in projects as crude prices have more than tripled since 2002, touching a record $111.80 a barrel in New York yesterday. Shell's CEO Jeroen van der Veer said in January that state-run companies are demanding better terms when negotiating energy deals and that this trend will continue.

The company replaced 124 percent of the oil and gas it pumped last year with new discoveries, it said today in a statement. The so-called reserve replacement ratio fell from a restated 152 percent in 2006. The figure excludes acquisitions and divestments and was calculated according to US Securities and Exchange Commission (SEC) standards. Shell replaced 109 percent of reserves including year-end price effects, it said.

Average development costs at Shell's projects are about $7 a barrel, chief financial officer Peter Voser told the press conference.

The company forecasts annual production growth of two percent to three percent from 2010, according to the annual report. Output this year is expected to decline "slightly" from 2007 should insecurity in Nigeria continue, Shell said.

Mr. Van der Veer, who is scheduled to step down as CEO next year, got a total compensation of $8.96 million last year, including pension benefits and share option gains, according to the annual report. The CEO's salary, including a bonus, was $6.47 million.

In 2004, Shell said 41 percent of the reserves on its books had been improperly recorded. The announcement triggered regulatory probes in the US and the UK, fines and the ouster of three executives, including chairman Phil Watts. Earlier this month, Shell agreed to pay $89.5 million to settle a lawsuit by US-based investors and raised its total payout in a European settlement to $470 million.

The company added 1.4 billion barrels of oil equivalent to its non-proven resources, which now total 66 billion barrels, Shell said in the statement. The company has more than 10 billion barrels of oil equivalent under construction that may add about 1 million barrels a day of production, it said.

BP said on February 27 that it replaced 112 percent of oil and gas output last year, while Exxon Mobil Corp., the world's biggest oil producer, replaced 76 percent.

Under SEC guidelines, energy companies cannot classify discoveries as proven reserves unless they have committed to invest in the field, year-end prices are high enough to make the project commercially viable and existing technology is capable of extracting the petroleum.

Shell's full-year oil and gas output, including oil sands, fell to 3.32 million barrels of oil equivalent a day in 2007, from 3.47 million barrels a day the previous year, the company said on January 31.

Fourth-quarter net income climbed 60 percent to $8.47 billion, boosted by crude prices that approached $100 a barrel last year. Profit excluding inventory changes and one-time items missed analysts' estimates.