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Shell hits a £14bn high and runs into protest
Robert Lea, Evening Standard1 Feb 2008
Shell smashed all-time British company profit records today, posting 2007 earnings of $27.5 billion (£13.8 billion), and immediately ran into a storm with union leaders, who are demanding the Government hits the oil giant with a windfall tax.
Shell's profit surge - it is now making a staggering $75 million a day - on the back of a booming oil price that touched $100 a barrel this winter, were labelled as "obscene" by Tony Woodley of Unite, the UK's largest trade union, as Britons struggle with soaring energy costs.
"Shell shareholders are doing very nicely while the rest of us are paying the price and struggling," said Woodley. "There are no problems with profits, but consumers should question the excessive mega-profits of the oil companies in the light of UK companies and hauliers saying they are being pressed on high fuel and energy costs, pensioners struggling to pay energy bills and motorists struggling to fill their petrol tanks."
Shell angrily rejected the claims, arguing that a windfall tax in Britain would be illogical because the vast amount of its business is done around the world.
The company also claimed it is as good as matching its annual profits with huge investments - between $24 billion and $25 billion of capital expenditure this year - to find new energy sources.
"We are investing a lot of money to have the energy production to satisfy the energy demand of the world," said finance director Peter Voser. "We are investing for the future of society so that people can live the life they want. That is our job."
Despite the surge in full-year profits, up 9% from 2006, there was disappointment with the figures in the City. Analysts had been pencilling in under-lying "clean" profits for the fourth quarter of more than $5.8 billion, but the figure came in at $5.7 billion.
Upstream production, which accounts for more than half of profits, averaged out at 3.315 million barrels of oil or their gas equivalent a day, just squeezing in to the forecast of between 3.3 million and 3.5 million.
That itself had been a major downgrade from the 3.8 million Shell had previously predicted. The company today said it expected production levels to fall again in 2008.
The biggest issue for Shell is the shutout from wells it has been co-producing on in Nigeria - potentially 800,000 barrels a day - where local militia continue to harry Big Oil, and demand that the world's major companies quit the Niger Delta.
Jeroen van der Veer, the chief executive of Royal Dutch Shell, said: "These are satisfactory results. We have made good progress in 2007, launched new projects upstream and downstream, and achieved exploration success."
The fourth-quarter dividend is up 11% at 36 US cents, and the company said it would be increasing this year's first-quarter payout by a similar amount to 40 cents.
More info...
Oil and gas major Royal Dutch Shell is reportedly set to spend $2.5 billion (£1.26 billion) on a natural gas plant in southern Iraq.
Shell is believed to have met Iraqi officials in The Hague last week to propose building a pipeline that would link the Basra region to a new facility on the country's coast.
The company would also build a facility that could freeze 16 million cubic meters of gas a day and ship it to Kuwait and the United Arab Emirates, an insider to the deal told Bloomberg.
He said Shell may complete its proposal in about a week, although the company could not be reached for comment.
Gas demand in the Gulf region is soaring, rising nearly 30% in five years.
Shell is eager for new sources as its oil and gas production falls.
Iraq has more than 3 trillion cubic meters of gas in reserves.
News of the new project comes after Shell warned that it is struggling for survival in Nigeria's troubled Niger Delta region amid militant attacks and community hostility.
Despite a presence in the country since 1958, Shell has been warned in a leaked internal memo that it is still operating below capacity after a 2006 shutdown following attacks.
The Nigerian government is also said to have failed to meet its funding obligations for Shell's joint venture, the Shell Petroleum Development company.
Reader views (4)
I find it odd to find it referred to as a British company when it is called 'Royal Dutch Shell'! The strange thing is that when a British institution, ICI, went into foreign ownership a few weeks ago nobody seemed to care. What a depressing place the UK is becoming.
- Michael, London, 31/01/2008 18:23
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The price of Brent crude today is under $95. I wonder when the prices at the pumps will reflect the drop.
- Bj, London, England, 31/01/2008 15:43
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The perennial ill informed remarks pour out based on ignorance and gross generalisations. The source of all our woes caused by high energy costs rest solely with this government and its policy of high taxation, particularly on fuel. Not on the efficiency of a well run company. If you want a windfall tax just look at the obscene profits made by banks who can expect to be bailed out by us when they get into financial difficulty.
- Albert Swift, Aberdeen, Scotland, 31/01/2008 14:59
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They are still making a lot less than the government on high oil prices - and no doubt a chunk of the MPs' pension fund is in Shell, so bully for them!
- Paul, London, 31/01/2008 14:55
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