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Lloyds List: LNG lifts Shell earnings by 29%

Lloyds List: LNG lifts Shell earnings by 29%

Martyn Wingrove

Apr 29, 2005

RECORD sales of liquefied natural gas and higher output from three LNG projects helped boost Royal Dutch/Shell’s earnings by 29% to $5.5bn in the first quarter.

The Anglo-Dutch oil supermajor had a 15% rise in LNG sales volumes to 2.88m tonnes in January-March as it raised output from projects in Australia, Malaysia and Nigeria.

‘We continued to build our leading position in LNG in the first quarter with LNG sales growth of 15% to a record level,’ said Royal Dutch’Shell’s chief executive, Jeroen van der Veer.

His company also gained approval for LNG production projects in Nigeria and Qatar, plus it received the green light from the US Maritime Administration for the Gulf Landing import terminal.

Shell’s oil and gas production in the quarter was 2% lower at 3.847m barrels of oil equivalent per day due to operation problems in the North Sea and the loss of a Middle East gas contract.

But since mid-2004, Shell has started production from new fields in the UK, including Goldeneye, Howe and Scoter, plus the Jintan field in Malaysia and Holstein in the US Gulf of Mexico, to offset decline in mature fields.

The oil group passed milestones on several LNG projects in the first quarter, including signing an agreement with Qatar Petroleum to build the Qatargas 4 LNG train, which will pump out 7.5m tonnes per annum from 2010.

Shell also agreed, with Nigeria’s state oil firm, to build an LNG plant with two 5m tpa trains as part of the Olokola project.

The London-listed group added new sales contracts for the Sakhalin II and Tiga LNG plants, plus it saw progress on the Australian Gorgon LNG project.

After the reserves scandal of last year, the group has been forced to make changes to its corporate structure, with a report to be published in May outlining how the double boards will be unified by July.

Shareholders get to vote on the plans on June 28.

Royal Dutch’Shell’s earnings were $5.55bn in the first quarter compared with $4.33bn for the same period last year.

Its cash from operations was $8.1bn and it made $1.1bn from divestment’s.

‘The first quarter was an excellent start of the year with strong financial performance across all of our businesses,’ said Mr van der Veer.

‘On the business fundamentals we have momentum with continued good downstream operations, production at the higher end of our expectations and LNG volume growth.’

Shell said it had exploration success in Egypt, Malaysia, Norway, Nigeria, the Netherlands, Oman, the UK and US, plus it gained new blocks in Alaska, the Gulf of Mexico, Canada and Algeria.

‘Looking ahead we continue to focus on our strategy of improving operation performance and project delivery, plus reshaping our portfolio,’ said Mr van der Veer.

The most stark change in the portfolio is Shell auctioning its interest in the Auk, Fulmar and Dunlin production platforms in the UK North Sea.

As with other oil companies, Shell has seen its capital expenditure climbing due to higher rig lease rates and rising equipment and steel prices.

Its total investment this year is set to rise to $15bn, with $12bn spent on upstream projects, including $8.5bn on field developments and $1.5bn on exploration operations.

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