Shell has been accused of “moral bankruptcy” by unions after unveiling a 54% rise in full-year profits less than a month after shutting its final salary pension scheme to new employees in Britain.
The oil company reported global annual earnings of $28.6bn (£18bn) – more than £2m an hour – while paying out $10.5bn to shareholders during 2011 and promising to raise dividend levels further in the coming months.
Peter Voser, Shell’s chief executive, said “there is more [good profit] to come” as he outlined a new programme of increased global investment as well as cuts that he said would provide even better returns for investors.
“We have worked hard to generate a strong pipeline of investment opportunities for Shell … All of this is supported by efficiency gains from our continuous improvement programmes,” Voser said.
But Europe’s largest oil group was attacked for displaying “predatory capitalism” by Len McCluskey, leader of the Unite union. “Shell reminds us of the moral bankruptcy of the corporate elite. The company is needlessly closing its final salary scheme while posting colossal profits,” he said. “Rather than provide security to its future staff and still make a profit, it has chosen greed. Shell is not alone: Unilever is needlessly slashing its employees’ pension benefits when there is no financial reason for doing so.”
Shell, which has also upset staff by unveiling plans to shut its major research and development centre at Stanlow in Cheshire after disposing of its refinery there, said it was surprised by the attack.
A spokesman pointed out that most government and private pension schemes paid in Britain were supported by Shell, which provides 12% of all dividends from the FTSE 100 index of leading firms.
The Anglo-Dutch group is riding high on the back of surging oil prices – which were more than $30 per barrel higher last year than in 2010 – and booming demand for gas, but says it is making most of its money outside Britain and makes barely 1p per litre out of petrol sales.
Voser pointed out that two thirds of the UK pump price went straight to the government as tax. He blamed near record prices for forecourt diesel on global crude market conditions and said Shell’s UK retail operations continued to come under “very heavy competitive pressures”.
Shell would continue to invest in the North Sea in oil projects such as those it has west of Shetland, but said there was a need for the right “tax structures to keep the oil and gas industry alive here”.
The company was doing “our bit for balancing the books” of the Treasury through paying a heavy tax burden, it said, while denying that its recent sale of the Stanlow refinery to an Indian group had any impact on the wider refining and distribution problems that have recently hit the south-east of England.
Shares in Shell rose 11% last year while arch-rivals such as BP saw no growth at all but on Thursday the Anglo-Dutch group’s stock market valuation fell slightly as the City was disappointed by the financial performance in the last quarter of the year.
Shell reported three-monthly earnings of $6.5bn, which was up on the same period last year but down quite heavily on the third quarter.
Total oil and gas production in the fourth quarter was lower, at 3.3m barrels of oil equivalent per day compared with 3.49m barrels a year ago. Shell said it would increase annual production to 3.7m barrels by 2014, helped by a $100bn investment plan which started in 2010.
The company said it would put much of its drilling efforts into the US and it now claims to have become the biggest driller – but not producer – in the deepwater Gulf of Mexico where BP used to reign supreme. Since the government moratorium on drilling in the Gulf, imposed following BP’s Deepwater Horizon spill, was lifted, Shell has obtained permission to drill five wells during 2012.
The company said it was treading carefully, meanwhile, in the Middle East in the wake of the Arab spring, but hopes to reveal soon how its exploration programme has been going in Saudi Arabia and when it plans to get back to similar work in Libya.
Shale hopes
Shell is hoping to turn the “shale gas revolution” sweeping north America into an export earner but also expects to see the controversial new energy source taking off in Europe once an “emotional” debate dies down.
The Anglo Dutch oil company is looking at possible plans to ship surplus quantities of the fuel, as liquefied natural gas or “gas-to-liquid” processed fuel, from the US.
Natural gas prices in north America have fallen to a 10-year low due to the discovery that gas can be extracted from shale rock using a technique known as hydraulic fracturing or “fracking”. It uses an assortment of chemicals to release gas with tiny explosions and has upset environmentalists and some politicians.
Peter Voser, chief executive of Shell, said $6bn would be spent worldwide on different kinds of shale gas operation, half of this in the US. The heavily populated nature of Europe versus the US made it more difficult to “frack” this side of the Atlantic, Voser conceded, but he said governments should “not take fast and emotional decisions” to restrict shale extraction. Shell expects Poland and even Germany to proceed with shale gas exploitation but it is also looking at operations in Ukraine and China.
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Introduction by John Donovan
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