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Shell vows to stay on in Australia

Herald Sun News Au: Shell vows to stay on


Mathew Charles

03 June 2004


SHELL Australia has pledged to keep its Australian refineries open as part of the industry-wide move to develop cleaner fuels by 2006 amid cheaper Asian imports.


Chairman Tim Warren said yesterday Shell would continue to make multi-million dollar investments into its two refineries, in Geelong and Clyde, New South Wales, to meet the new fuel standards by the 2006 deadline.


He said the Geelong refinery would start producing new fuels late this year, putting it well ahead of schedule. But he warned other companies were likely to close their doors as ExxonMobil did at its Port Stanvac plant last year.


“Will there be further rationalisation?” he asked. “Possibly, but it’s not going to come from Shell.”


Instead, Mr Warren said Shell’s refineries were “essential building blocks” for the company’s future.


Last year Shell poured $178 million into its oil product business — most of which was spent producing the cleaner fuels. But record high oil prices and sales failed to translate into record profits for the company.


The Australian dollar’s high value, declining oil production and charges associated with its Coles Myer discount fuel deal all weighed on profits.


For the year to the end of December, Shell Australia reported an $815 million profit before interest and tax compared with $866 million the year before.


An outpost of the Royal Dutch/Shell group, the unlisted Shell Australia would not release a net profit.


But at an extensive media briefing Mr Warren said improved margins and the Coles Myer alliance underpinned 20 per cent growth in underlying profits.


He said Shell was “absolutely delighted” with the national rollout of its offer with Coles Myer.


While the alliance led to 30 per cent stronger sales volumes, management said it would take another year before its level of success was known.


Mr Warren also said there “was room in the alliance” to further expand the partnership.


About midway through last year Shell split its production and exploration business, upstream operations, from its marketing and retail arm, known as the downstream business.


The upstream business, based in Perth, reported $632 million profit before interest and tax compared with last year’s $663 million.


The Melbourne-based downstream division reported $183 million on the same basis, down from last year’s $203 million.


As well as the Coles tie-up, Mr Warren said margins had improved “about a dollar or two” an oil barrel.


But consistently high oil prices were bad for business, he warned.


While the record prices benefit Shell’s upstream business, the downstream operations are hit at the petrol pump as consumers tighten their spend.

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