February 2nd, 2006:

Thursday, February 2, 2006; Posted: 3:58 a.m. EST (08:58 GMT)
Shell's result follows record earnings at larger rival Exxon Mobil earlier this week.
LONDON, England (Reuters) — Royal Dutch Shell posted a record profit for a UK-listed company on Thursday, helped by high oil prices and strong refining margins.
The company reported a 3 percent rise in fourth-quarter current cost of supply (CCS) net profit to $5.395 billion, in line with forecasts,
Excluding a net gain of $34 million related to exceptional items, the result was in line with a Reuters poll of 10 analysts which gave an average forecast of $5.385 billion, and up around 13 percent from the post-exceptionals result last year.
Shell said production fell to 3.5 million barrels of oil equivalent per day (boepd) in the quarter from 3.84 million boepd in the same period of 2004.
Full-year CCS net profit for 2005 was $22.94 billion, a record for a UK-listed company, analysts said.
The world's third-biggest listed oil firm by market value said it expected to return $5 billion to shareholders by repurchasing stock in 2006, in line with last year's share repurchases.
Shell said its reserve-replacement ratio — the rate at which it matches the oil it pumps with new finds — was 70 to 80 percent, including mineable reserves from Athabasca Oil Sands and year-end pricing impact and acquisitions and divestments.
Companies target a rate of at least 100 percent to avoid depletion of their asset base and the suggestion their business is eroding.
Shell is under pressure from investors for its poor reserve-replacement rate after achieving a ratio less than 50 percent in 2004. Analysts believe this shows Shell will struggle to grow its upstream oil and gas production business in coming years.
Shell said it would pay a dividend of 0.23 euros per share for the fourth quarter.
Shell's result follows record earnings at larger rival Exxon Mobil earlier this week. read more

AFX News Limited
Saint-Gobain, Royal Dutch Shell to develop glass-film solar panels
02.02.2006, 03:31 AM
PARIS (AFX) – Saint-Gobain SA said it has formed a partnership with Royal Dutch Shell PLC to develop a new technology of solar panels consisting of thin films of copper indium selenide (CIS) on glass, instead of traditional silicon wafers.
Shell has been developing the CIS technology over the past four years, and Saint-Gobain will contribute its experience with film deposits on glass, acquired from years of operating in the automobile and building markets.
Financial details of the partnership were not disclosed.
'This partnership will strengthen Saint-Gobain's competitive advantages in its technical business through innovation, which is consistent with the group strategy of increasing its research and development effort in the high performance materials and flat glass sectors,' the company said.
Shell previously announced this morning that as part of its focus on CIS technology, it has sold its silicon solar panels activities to Germany's SolarWorld AG.
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AMSTERDAM (FD.nl/Betten) – Hier volgt een persbericht uitgegeven door Shell inzake alternatieve energie:
MEETING THE ENERGY CHALLENGE – SHELL'S COMMITMENT TO ALTERNATIVE ENERGY
New developments in Biofuels, Wind, Solar and Hydrogen announced
Royal Dutch Shell plc provided an update of its activities in alternative energy including Biofuels, Wind, Solar and Hydrogen. Shell has now invested over US$1 billion in alternative energies, making it one of the world's leading companies in the sector.
“In Shell, we aim to develop at least one alternative energy such as wind, hydrogen or advanced solar technology, into a substantial business,” commented Shell CEO Jeroen van der Veer. “In addition, we continue our efforts to further expand our position as the largest marketer of Biofuels. The actions announced today are consistent with this long-term vision.”
Shell has an established position as the world's largest marketer of Biofuels, as well as a leading developer of advanced Biofuels technologies. Biofuels are fuels derived from biomass such as plant crops like oil seed, or plant wastes like straw. They can be used either pure or blended with standard automotive fuels dispensed at today's filling stations with the potential for much lower CO2 emissions.
In partnership with Iogen of Canada, cellulose ethanol Biofuels are being successfully produced from plant waste. By producing Biofuels from plant waste instead of food crops, the potential stress on the food chain is alleviated. The Iogen process produces a fuel which can be used in today's cars, cutting CO2 lifecycle emissions by 90% compared with conventional fuels. Shell recently announced a Memorandum of Understanding with Volkswagen and Iogen to explore the economic feasibility of producing cellulose ethanol in Germany. Shell Canada has been working with Iogen to develop a viable commercial framework for a facility in Canada.
These projects complement Shell's existing partnership with CHOREN Industries of Germany. CHOREN have a patented Biomass-gasification process that converts biomass – such as woodchips – into ultra-clean synthetic gas that can then be converted for use in diesel through Shell's Gas- to-Liquids technology. CHOREN is preparing construction for the world's first commercial biomass-to-liquids facility in Freiberg, Germany.
Wind is currently one of the most promising sources of renewable energy. Shell's share of wind energy capacity is currently greater than 350MW, and is expected to reach approximately 500MW in 2007. Included in this growth is the first Dutch offshore wind project, the 108MW Offshore Windpark Egmond aan Zee (Shell share: 50%). Full construction will begin on this project in March 2006, and first electricity production is expected around the end of the year. Progress has also been made with the development of the London Array offshore project in the UK (Shell share: 33.3%). This project has a potential capacity of 1,000MW, making it one of the world's largest planned wind farms.
In the United States, Shell is already one of the largest wind energy developers, and is actively progressing projects in Texas, Wyoming, Idaho, West Virginia, California, and Hawaii. Shell recently acquired the development rights to Mount Storm, a 300MW wind park (Shell share: 50%) in West Virginia – potentially one of the largest new projects in the USA. Progress has also been made in permitting the 200MW Cotterel Mountain wind project (Shell share: 50%) in Idaho.
Shell also announced a Memorandum of Understanding today outlining plans to explore the potential for wind energy developments in China in partnership with Guohua Energy Investment Corporation of the China Shenhua Group, a leading national energy supplier.
In the area of Solar energy, Shell has been progressing the next generation of technologies, including CIS 'thin-film'. Shell believes that non-silicon based technologies such as CIS are more likely to become competitive with retail electricity in the coming years. Shell's CIS technology is supported by four years of manufacturing and marketing experience. The technology recently achieved a 13.5% world record efficiency for thin-film products, and is supported by International Electrotechnical Commission certification.
Shell today announced the signing of a Memorandum of Understanding with Saint-Gobain, one of the world's leading producers of glass and other building materials, to further explore the Shell CIS technology and consider joint development. Saint-Gobain's expertise in glass processing and building material manufacturing provides an excellent fit for joint exploration of this technology.
In light of this focus on CIS 'thin film' technology, Shell decided to divest its crystalline silicon solar business activities to SolarWorld AG. Shell's silicon-based business has an annual production of approximately 80MW. Manufacturing facilities, sales and marketing, and silicon research and development activities in Germany and the United States (Washington state and California) will transfer to SolarWorld, including all 579 staff currently involved in silicon PV.
Shell will continue to provide solar energy to the developing world, and has signed a Letter of Intent with Good Energies Inc. with a view to further expanding the business.
Finally, Shell today announced that it will be opening at least two new Hydrogen stations in the U.S.A. in 2006, supporting continued efforts to demonstrate the viability of a future Hydrogen economy. Shell is also active in this area in Asia, and is supporting the recently announced Hydrogen station at Tongji University in Shanghai. Shell Hydrogen continues to take a leading role in joint government/industry discussions and partnerships to plan and develop hydrogen and fuel cell activities, including the EU Hydrogen & Fuel Cell Technology Platform, the California Fuel Cell Partnership and the Japan Hydrogen and Fuel Cell Demonstration Project.
(c) Het Financieele Dagblad in samenwerking met Betten Beursmedia News (contact: [email protected]/ 020-5928456 read more

Last Modified: 2 Feb 2006
Source: ITN
Shell has announced record-breaking annual profits of £12.93 billion – that's almost £1.5 million an hour.
The staggering figure is equal to that spent by the 27.7 million foreigners who visited Britain on holiday in 2004 or that of Sudan's Gross Domestic Product.
The profits are up nearly one-third on last year, when Shell set a UK record of £9.8 billion profits.
Shell's fourth-quarter CCS net profit excludes exceptional items such as asset sales and notional derivatives charges.
The company said production fell to 3.5 million barrels of oil equivalent per day (boepd) in the quarter, compared to 3.84 million boepd in the same period of 2004.
It follows a year in which the cost of crude jumped from below $45 dollars a barrel to hit a new record above $70 dollars.
Shell said its production outlook for 2006 is unchanged from earlier guidance, and in the lower half of the range of 3.5 to 3.8 million barrels a day.
It expects its Mars platform in the Gulf of Mexico to start production by the middle of this year following hurricane damage, with full production set to resume during the second half of the year. read more

February 2, 2006; Page A10
President Bush has seen the energy future, and he has two words of advice: wood chips. Somewhere in his cardigan sweater next to a fireplace, Jimmy Carter is smiling.
That gets to the uncomfortable heart of Mr. Bush's startling turn on energy policy Tuesday night. An Administration that once promoted drilling in Alaska and other ways to expand domestic oil and gas supplies is now lecturing the nation that it's “addicted to oil” and extolling the merits of cellulosic biomass, a k a wood chips. This may not be as bad as 1970s-style price controls, but it's also a long way from a sensible energy policy.
If there is an unhealthy addiction right now, it may be the White House fixation on polls showing Americans are anxious about gas prices. This, and only this, could explain the decision to co-opt Democratic energy ideas in order to deflect their political attacks in the run-up to mid-term elections. Karl Rove may believe he needs to do this to save a Republican Congress in November, but nobody should think it's going to do much for energy supplies or prices.
For starters, this perpetuates the myth that America can somehow swear off oil. Mr. Bush was careful not to use the words “energy independence,” though his promise to replace more than 75% of oil imports from the Middle East by 2025 is as big a leap of faith. As the nearby chart shows, all sources of “renewable” energy combined supply just 3.3% of U.S. energy needs. There are limits on what solar or wind energy can provide or how much ethanol we can produce. Save for a miracle in cold fusion, fossil fuels including Mideast oil will be with us for decades to come.
Mr. Bush's proposed subsidies may be small, but he has started a political bidding war that will prove very costly before it's done. Every energy lobbyist with a K Street address will be lining up for another tax or spending subsidy: synthetic fuels, biodiesel, wind farms and, the granddaddy of them all, ethanol. That subsidy used to be limited to corn farmers, but Mr. Bush opened the door to make the fuel from cane sugar and switch grass. And this for a fuel that has been heavily subsidized since the 1970s and still can't pull its own market weight.
Mr. Bush's comparison of oil to a narcotic was especially inapt, as if Americans who drive SUVs are somehow sinners. Those are his own exurban voters Mr. Bush is talking about. The truth is that America is twice as energy efficient as it was 50 years ago, and some of the greatest gains have come during periods of high oil prices. Yet some of the same politicians calling for limits on oil use now are those who happily basked in 80-cent-a-gallon gasoline in the 1990s.
The market is similarly working to increase supply, at least where the government allows. One overlooked energy story is the extraordinary capital the oil industry is sinking into new production. Oil sands in Canada's Alberta province hold 175 billion barrels of proven oil reserves, second only to Saudi Arabia's estimated 260 billion. Shell Canada chief Clive Mather recently suggested there could be as many as two trillion barrels. Today's high prices make it economical to extract oil from sand, and Canada's oil sands are already producing a million barrels a day. Yet, remarkably enough, Mr. Bush made no reference at all to the limits that Congress has imposed on drilling in the Arctic, or in the Outer Continental Shelf, where there are vast non-Mideast oil and gas reserves.
About the only idea Mr. Bush didn't steal from the liberal playbook was a call for greater fuel efficiency standards. But give it time: The “addiction” line will surely jumpstart calls for precisely those types of limits on consumer choice. Such rhetoric will also add to the political clamor for another gas tax, although with today's high prices this has so far been a political non-starter.
At least Mr. Bush bothered to mention nuclear energy, which is the only realistic substitute to fossil fuels short of a technological breakthrough. Then again, this country hasn't built a new nuclear plant since the 1970s, and the recent flurry of companies seeking licenses for new reactors has sent environmental activists around the bend. Companies have faced similar difficulties building new terminals to import liquified natural gas, a substitute for home heating oil.
The truth is that many green groups, and the political liberals who follow them, don't object to imported oil because it comes from the Middle East. They are opposed to fossil fuels, and nuclear energy for that matter, on principle. They want to live in a world that runs on wood chips, and it's hardly useful to have a conservative President telling the country he agrees with them. read more

Fuel from 'Cellulosic Ethanol'
Is Costly, Hard to Dispense;
Broad Political Support
Enthusiasm From Detroit
By JOHN J. FIALKA and JEFFREY BALL
Staff Reporters of THE WALL STREET JOURNAL
February 2, 2006; Page A1
With oil prices stuck at more than $60 a barrel, President Bush is touting “cellulosic ethanol” as a 21st-century panacea for the U.S.'s addiction to oil. In his State of the Union address Tuesday, Mr. Bush said energy made from “wood chips, stalks or switch grass” could be available at gas pumps in six years and could supply nearly a third of the fuel needed to keep Americans on the road.
The plan is the latest in a long line of promises from Washington to back new forms of alternative energy, going back to President Carter's promotion of synthetic fuels. It offers some intriguing new technology and the possibility of widespread support from environmentalists, farmers and auto makers.
Like earlier promises, most of which failed, Mr. Bush's surprise promotion of cellulosic ethanol also faces huge hurdles. For one, the budget-constrained White House is offering little money to back up its rhetoric: just $150 million next year, hardly enough to revolutionize a multibillion dollar energy market.
The fuel also faces distribution problems and a lack of properly equipped vehicles. And an unpopular gas tax might well be needed to make ethanol a competitively priced product at the pump.
The proposal marks a switch in emphasis for a politically weakened president. The administration previously has said the route to energy independence lay in encouraging domestic oil and gas drilling, including opening the Arctic National Wildlife Refuge. Such proposals, which have repeatedly died in Congress amid bitter political wrangles, were notably absent in this year's speech.
By contrast, cellulosic ethanol can draw support from a surprisingly diverse political coalition. Scientists, investors and policy makers say it is increasingly viable to make fuel from farm waste, also known as “biomass.” For one, it is cheaper than corn-based ethanol, the fuel that has been a heavily subsidized favorite in Washington. Private-sector investors — from Virgin mogul Richard Branson to Canada's Iogen Corp. — are putting money into the concept in hopes of seeing an ethanol boom in the U.S. similar to one in Brazil.
Environmentalists like the idea because burning the fuel doesn't pollute as much as conventional gasoline. Defense hawks, notably Reagan Secretary of State George P. Shultz and Clinton Central Intelligence Agency Director James Woolsey, promote it as a way to boost national security. Struggling U.S. auto companies like it because they have a competitive advantage over the Japanese on so-called flexible-fuel vehicles that can switch between gasoline and alternatives.
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• Full Text: Read the complete prepared text of the address.
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And because the fuel can be made from a wide range of agricultural products, it draws backing from a geographically diverse range of politicians, from New York Republican Gov. George Pataki to a bipartisan group of elected officials in California. The fuel is even popular in farm states such as Iowa that tout conventional corn-based ethanol, since it can make heavy use of corn stalks.
Many experts say conservation or a gas tax is the best way to dent import demand. Mr. Bush has rejected these approaches as conflicting with his free-market bent and has preferred throughout his term to focus on new drilling and new technologies. The White House estimates the president has provided $10 billion in spending on new energy technologies since taking office in 2001.
Beyond ethanol, Mr. Bush's new “Advanced Energy Initiative” includes spending for research on hydrogen cars and hybrid-car batteries that can be recharged overnight, as well as money for solar and wind energy. His grand goal, as he stated in his national address, is “to replace more than 75% of our oil imports from the Middle East by 2025.”
Significant Departure
That would mark a significant departure from the future the government now predicts. The Energy Information Administration says the U.S. will import more crude oil and finished petroleum products, not less — more than 70% of projected oil use in 2025, compared with 62% last year. Mideast imports are expected to become more important, rising to 30% of U.S. crude-oil and refined-product imports in 2025 from 21% last year.
The EIA soon will release new data ratcheting down the expected U.S. reliance on imports, based on the rise in oil prices, which the EIA reasons will spur higher conservation and domestic production. Nonetheless, Mr. Bush's plan would mark “quite a change,” says John Conti, director of the office of integrated analysis forecasting at the EIA. It is “a very aggressive goal.”
John Felmy, chief economist at the American Petroleum Institute, the oil industry's main trade group, says the goal is “achievable,” but not without big changes. He says it would likely require a boost in domestic drilling, a major conservation effort or an increase in U.S. oil imports from other parts of the world, none of which is under way.
Nearly half of the oil consumed by the U.S. is burned in cars and trucks. Over the years, the U.S. has debated toughening federal fuel-economy requirements, created in the mid-1970s in the wake of the Arab oil embargo. Still, the average fuel economy of cars and trucks has been flat for more than a decade. One reason: Sport-utility vehicles and pickup trucks, which Americans snapped up when gas prices were low, aren't subject to the toughest fuel standards.
Some auto makers argue that improving fuel economy won't reduce oil consumption: Consumers whose vehicles go farther on a gallon of fuel will simply drive them more.
Hence the appeal of alternative sources. One concerted effort, which ratcheted up amid high oil prices in the early 1980s, was a government-sponsored research program to convert coal into synthetic natural gas. The project succeeded in the lab but “synthetic fuel” didn't make much of a market impact after oil prices subsequently fell.
In the 1990s, the auto industry talked up the potential of battery-powered cars, largely as a way to meet clean-air regulations in California, the nation's biggest auto market. That effort fizzled in part because of the cost and difficulty of producing batteries that lasted long enough.
A few years ago, proponents began talking enthusiastically about cars that would run on fuel cells powered by hydrogen. President Bush promoted the technology in his 2003 State of the Union address. Though he still touts it, some of the euphoria has subsided. The most realistic way to produce hydrogen is from a fossil fuel — natural gas. There also is no viable infrastructure for delivering hydrogen to filling stations.
Some vehicles run on compressed natural gas — another fossil fuel but one that burns more cleanly than does gasoline or diesel. But it also isn't widely available at gas stations and its use is limited to fleets, such as buses and taxis, which can be refueled at central locations.
Biggest Barrier
Now comes the focus on cellulosic ethanol. The biggest barrier to its widespread use is cost. The International Energy Agency, a Paris-based energy watchdog for industrialized nations, estimates that cellulosic ethanol costs about $3.40 a gallon to produce, according to Pierpaolo Cazzola, an IEA analyst. That is far higher than the current average U.S. price of regular, unleaded gasoline of $2.35 a gallon, according to AAA, the motor group, and doesn't even include a markup. Other experts, however, say the cost could be lower.
Car makers periodically argue that only by raising gasoline taxes, a politically unsustainable proposal, will consumers make the switch to more fuel-efficient vehicles.
Even if ethanol costs come down, distribution remains tricky. Ethanol can be transported along existing pipelines as long as it is blended with petroleum products in concentrations of less than 10%, Mr. Cazzola says. Any more than that and ethanol can corrode pipelines. How to manage the distribution of ethanol is “a bit of debate,” he says.
About five million vehicles that can use gas and ethanol are on the road now, but many of those drivers don't know their vehicles are capable of using ethanol. Only 600 filling stations offer E85, a blend of 85% ethanol and 15% gasoline, and they are mostly concentrated in the Midwest. That number could quadruple this year, but it still would be a fraction of the 170,000 fueling stations in the country. Michigan, home to the American auto industry, has only a handful of E85 stations.
Some auto companies — notably the Japanese, who haven't invested much in the technology — remain cautious. Toyota Motor Corp. sells flex-fuel vehicles in Brazil, but not in the U.S. Bill Reinert, national manager of Toyota's U.S. advanced-technologies group, is skeptical of corn-based ethanol because of the huge amounts of land and water required to grow the corn. Made in large quantities, he says, cellulosic ethanol holds more promise.
Still, he has questions: How does it perform in the car? What might future production look like? What are the environmental issues associated with that production? “There's no real silver bullet out there,” Mr. Reinert says. “Each fuel has its own particular problems.”
A Success Story
Brazil is the main success story touted by ethanol enthusiasts — it gets half its motor fuel from ethanol. The country's effort was launched in 1975, but ethanol in Brazil only became competitive recently after gasoline prices rose sharply. It also took years of government subsidies totaling at least $16 billion, plus tax breaks that cost several billion dollars more. Brazil mandated that the fuel be available at 29,000 filling stations — a cost borne by state-run oil giant Petrobras.
Bush officials are optimistic their efforts can push the technology over the hump. The $150 million they are seeking for the year starting Sept. 30 — up from $90 million this fiscal year — would go to research on enzymes and yeast that can break down materials including wood chips and “switch grass,” a grass that grows quickly without much fertilizer. The process is similar to making bootleg whiskey.
According to Doug Faulkner, acting assistant secretary for energy efficiency, the Department of Energy's researchers had a breakthrough in 2004 when they figured out how to drastically cut the cost of producing sugar from corn stalks. Now, he says, they can produce ethanol from corn waste for $2.30 a gallon, well below the IEA estimate.
The Energy Department has received unverified reports from outside researchers that the cost could be as low as $1.30 a gallon.
Congress last year authorized loan guarantees for companies that want to start cellulosic-ethanol plants. If the money is approved, the loans would cover as much as 80% of the cost of the first four cellulosic-ethanol plants built in the U.S., up to $250 million each.
Officials say once production costs fall, other hurdles should disappear. “The marketplace will take care of that,” Allan Hubbard, head of the White House National Economic Council, told reporters. “Once the product is available, the distribution system will respond quickly.”
In the private sector, the front runner is Iogen, a closely held Ottawa company. It has attracted powerful partners, including Royal Dutch Shell PLC, to help build industrial-scale plants to produce the fuel.
'A Good Signal'
“The President's speech was a good signal,” says Jeff Passmore, Iogen's executive vice president. He says the company is looking at sites in southwestern Idaho and in the Canadian provinces of Alberta and Saskatchewan for its first plants and is preparing to break ground at one of them in the summer of 2007.
Mr. Passmore said Iogen has signed contracts with 300 Idaho farmers to take 400,000 tons of their wheat and barley straw a year. The lead sponsor of the loan guarantees was Idaho Republican Sen. Larry E. Craig, who has been pushing to get Iogen to locate a plant in his state.
Mr. Bush's push for cellulosic ethanol gives a small helping hand to General Motors Corp. and Ford Motor Co., who both are suffering from significant financial woes. While Toyota has shunned ethanol, those companies see it as a way to improve their environmental image, which is tainted from pushing SUVs.
“Ethanol can provide relief for customers at the pump and lessen America's dependence on foreign oil,” said Bill Ford, chairman and chief executive of Ford, in a written statement yesterday welcoming the White House initiative.
GM is spending tens of millions of dollars on an ethanol-awareness campaign: “Live Green Go Yellow.” It is set for an expensive launch during Sunday's Super Bowl in both pre- and post-game advertising spots. This year, GM plans to send a letter to the one million owners of its flex-fuel vehicles, including those who might not know they run on ethanol. It will offer them a free, yellow gas cap that can be installed at their local dealer to remind drivers the car can run on ethanol.
–Karen Lundegaard in Detroit, David Luhnow in Mexico City and Bhushan Bahree in Vienna contributed to this article.
Write to John J. Fialka at [email protected] and Jeffrey Ball at [email protected] read more

By CHIP CUMMINS
Staff Reporter of THE WALL STREET JOURNAL
February 2, 2006 3:00 a.m.
Royal Dutch Shell PLC said its fourth-quarter earnings fell 4%, partly as a result of a big, one-time gain in the year-earlier period.
Soaring oil and natural-gas prices boosted the bottom-line at Shell, but the Anglo-Dutch energy giant continued to struggle with declining output and an inability to replace all the oil and natural-gas reserves it depleted last year through production.
Shell said net income for the quarter ended Dec. 31 was $4.37 billion, or 66 cents a share, down from $4.57 billion, or 68 cents a share, a year earlier. The results reflected a net gain for special items in the latest quarter of $34 million, compared to a net gain in the fourth quarter of 2004 of $499 million.
Shell's revenue fell 1% to $75.5 billion from $76.3 billion in the year-earlier quarter. Shell's numbers conform to international financial-reporting standards, which differ from U.S. generally accepted accounting principles.
Shell said total oil and gas production fell 9% to 3.5 million barrels of oil equivalent a day from 3.84 million a day a year earlier.
For the full year, Shell said it earned $25.31 billion, 37% higher than for 2004. The large annual profit comes as governments around the world ratchet up the pressure on oil companies benefiting handsomely from today's sky-high energy prices. In addition to threats by some U.S. lawmakers to push new taxes on oil companies, countries as diverse as Britain and Bolivia have signaled they plan to ratchet up their take of oil revenue at the expense of companies. Despite a handful of sharply higher tax regimes around the world and sharply escalating costs for everything from drilling rigs to engineers, high oil prices have more than made up the difference for Shell and other large oil companies.
The company said it expects its closely watched reserve-replacement ratio – the rate at which a company finds new reserves of oil and gas to replace the energy it pumps out of the ground each year – would be between 60% and 70% in 2005. Companies typically try to achieve 100% reserve replacement to satisfied investors worried about future production growth.
While other companies have struggled recently replacing reserves, Shell has been one of the industry's biggest laggards. It spent the last two years recovering from a devastating disclosure that its reserve base was much smaller than it had been telling investors.
Write to Chip Cummins at [email protected] read more

By Bryce Elder and agencies
Shell announced record profits for a quoted UK company, with the oil giant reporting earnings of $22.94 billion (£12.93 billion).
The figure — which works out at nearly £1.5 million an hour — was up almost a third on last year’s profit of $17.59 billion. It is equivalent to just over 1 per cent of Britain’s gross domestic product, or the entire GDP of Sudan.
The group said it expected to use some of the windfall to return up to $5 billion to investors through share buybacks in 2006.
The record number comes for a year when oil prices rose from around $45 a barrel to reach a record of $70.85 on Aug. 30, a day after Hurricane Katrina struck the Gulf of Mexico and damaged production facilities.
The bulk of Shell’s profits come from its “upstream” business – getting oil and gas out of the ground. This division has been boosted by the spiralling cost of crude oil, which came as tensions over the safety of supplies from oil-producing countries and the damaging hurricane season.
But the storms also disrupted Shell’s production, shutting refineries temporarily and forcing it to invest on repairs. Production fell to 3.5 million barrels a day during the final quarter, down from an equivalent figure of 3.8 million barrels last time.
Chief executive Jeroen van der Veer said: “Our good performance in the fourth quarter of 2005 gives us a solid platform to build on in 2006.”
For the final quarter of 2005, Shell said profit rose 3 per cent to $5.395 billion on a current cost of supply (CCS) basis. That matched City expectations, which were centred at around $5.385 billion.
Shell's results come in the same week that Exxon Mobil, the world’s largest oil company, revealed $33.86 billion profits in its last financial year — the biggest so far in corporate history. That result beat investor expectations.
Jaap Barendregt, an analyst at FBS Bankiers, told Reuters that Shell’s results “are as expected, but the result in itself is a bit disappointing. We could have expected somewhat more given the surprise we saw with Exxon.”
In early deals on the London Stock Exchange, shares of Shell were down 34p to £19.71. They are up about 60 per cent over the last year.
BP is expected to continue the trend of record profits next week by revealing full-year profits estimated at $21.7 billion. This contrasts with earnings of $16.4 billion in 2004.
Oil-company profits, driven by the surging price of oil and gas, have drawn criticism as the cost of petrol remains high and domestic-heating bills soar.
Gordon Brown increased taxes on oil companies in his pre-budget statement in November. The tax rise, which came into effect this month, has already caused Shell to scale back its plans for exploration in the North Sea.
The bumper profits enjoyed by big British companies have caused several political outcries in recent years, especially those posted by Vodafone and HSBC.
In November American oil firms were forced to justify their bulging third-quarter profits to Congress, where they tried to dissuade the US government from imposing a windfall tax on their gains. Exxon has long been a focal point for criticism, not least because the $34 billion in its coffers could pay for the construction of more than a dozen refineries. read more

You bet daily
Royal Dutch Shell is expected to have increased profits by 26pc to $23billion. But the oil giant faces a number of questions. Is it right to presume that reserves are now a problem of the past? What plans does Shell have for future exploration? Are Nigeria's problems containable?
Since October 2005 Shell's B share price has risen from 1,775p to 2,006p. Cantor Index offers a March contract related spread of 2,006p-2,017p.
www.cantorindex.com

Our economic system is unsustainable by its very nature. The only response to climate chaos and peak oil is major social change
Robert Newman
Thursday February 2, 2006
There is no meaningful response to climate change without massive social change. A cap on this and a quota on the other won't do it. Tinker at the edges as we may, we cannot sustain earth's life-support systems within the present economic system.
Capitalism is not sustainable by its very nature. It is predicated on infinitely expanding markets, faster consumption and bigger production in a finite planet. And yet this ideological model remains the central organising principle of our lives, and as long as it continues to be so it will automatically undo (with its invisible hand) every single green initiative anybody cares to come up with.
Much discussion of energy, with never a word about power, leads to the fallacy of a low-impact, green capitalism somehow put at the service of environmentalism. In reality, power concentrates around wealth. Private ownership of trade and industry means that the decisive political force in the world is private power. The corporation will outflank every puny law and regulation that seeks to constrain its profitability. It therefore stands in the way of the functioning democracy needed to tackle climate change. Only by breaking up corporate power and bringing it under social control will we be able to overcome the global environmental crisis.
On these pages we have been called on to admire capital's ability to take robust action while governments dither. All hail Wal-Mart for imposing a 20% reduction in its own carbon emissions. But the point is that supermarkets are over. We cannot have such long supply lines between us and our food. Not any more. The very model of the supermarket is unsustainable, what with the packaging, food miles and destruction of British farming. Small, independent suppliers, processors and retailers or community-owned shops selling locally produced food provide a social glue and reduce carbon emissions. The same is true of food co-ops such as Manchester's bulk-distribution scheme serving former “food deserts”.
All hail BP and Shell for having got beyond petroleum to become non-profit eco-networks supplying green energy. But fail to cheer the Fortune 500 corporations that will save us all and ecologists are denounced as anti-business. Many career environmentalists fear that an anti-capitalist position is what's alienating the mainstream from their irresistible arguments. But is it not more likely that people are stunned into inaction by the bizarre discrepancy between how extreme the crisis described and how insipid the solutions proposed? Go on a march to the House of Commons. Write a letter to your MP. And what system does your MP hold with? Name one that isn't pro-capitalist. Oh, all right then, smartarse. But name five.
We are caught between the Scylla and Charybdis of climate change and peak oil. Once we pass the planetary oil production spike (when oil begins rapidly to deplete and demand outstrips supply), there will be less and less net energy available to humankind. Petroleum geologists reckon we will pass the world oil spike sometime between 2006 and 2010. It will take, argues peak-oil expert Richard Heinberg, a second world war effort if many of us are to come through this epoch. Not least because modern agribusiness puts hundreds of calories of fossil-fuel energy into the fields for each calorie of food energy produced.
Catch-22, of course, is that the very worst fate that could befall our species is the discovery of huge new reserves of oil, or even the burning into the sky of all the oil that's already known about, because the climate chaos that would unleash would make the mere collapse of industrial society a sideshow bagatelle. Therefore, since we've got to make the switch from oil anyway, why not do it now?
Solutions need to come from people themselves. But once set up, local autonomous groups need to be supported by technology transfers from state to community level. Otherwise it's too expensive to get solar panels on your roof, let alone set up a local energy grid. Far from utopian, this has a precedent: back in the 1920s the London boroughs of Wandsworth and Battersea had their own electricity-generating grid for their residents. So long as energy corporations exist, however, they will fight tooth and nail to stop whole postal districts seceding from the national grid. Nor will the banks and the CBI be neutral bystanders, happy to observe the inroads participatory democracy makes in reducing carbon emissions, or a trade union striking for carbon quotas.
There are many organisational projects we can learn from. The Just Transition Alliance, for example, was set up by black and Latino groups in the US working with labour unions to negotiate alliances between “frontline workers and fenceline communities”, that is to say between union members who work in polluting industries and stand to lose their jobs if the plant is shut down, and those who live next to the same plant and stand to lose their health if it's not.
We have to start planning seriously not just a system of personal carbon rationing but at what limit to set our national carbon ration. Given a fixed UK carbon allowance, what do we spend it on? What kinds of infrastructure do we wish to build, retool or demolish? What kinds of organisational structures will work as climate change makes pretty much all communities more or less “fenceline” and almost all jobs more or less “frontline”? (Most of our carbon emissions come when we're at work).
To get from here to there we must talk about climate chaos in terms of what needs to be done for the survival of the species rather than where the debate is at now or what people are likely to countenance tomorrow morning.
If we are all still in denial about the radical changes coming – and all of us still are – there are sound geological reasons for our denial. We have lived in an era of cheap, abundant energy. There never has and never will again be consumption like we have known. The petroleum interval, this one-off historical blip, this freakish bonanza, has led us to believe that the impossible is possible, that people in northern industrial cities can have suntans in winter and eat apples in summer. But much as the petroleum bubble has got us out of the habit of accepting the existence of zero-sum physical realities, it's wise to remember that they never went away. You can either have capitalism or a habitable planet. One or the other, not both.
· Robert Newman's History of Oil will be broadcast on More4 next month
· [email protected] read more

It's oil to play for in the battle to keep the wheels of global industry – and economy – turning. One argument predicts doom within a decade as supplies peak and begin to runrun out, the other is slightly more optimistic, writes MICHAEL HARRISON
Feb 02, 2006
As the oil price hovers around the $69 per barrel mark, on heightened concerns about disruption to supplies from Iran and Nigeria, a small group of geologists, economists and commodity traders met in London in recent weeks to consider a more fundamental question: when will the world begin to run out of oil?
That moment is known as 'peak oil' – the point at which production stops increasing and goes into inexorable decline. Some commentators believe that moment may be as little as two years away, some reckon we do not need to worry for another 20 years and some think the peak of production is so far in the distance that it is pointless to even try to put a timescale on it.
But one thing that all shades of opinion are agreed on is that when peak oil does happen, its impact on the world economy – and the consumer lifestyles so many of us take for granted – will be profound. Chris Skrebowski, editor of the Energy Institute's Petroleum Review, believes peak oil will occur in 2008, at which point the world will move into “a land without maps where we are all likely to be poorer”.
For oil is essential to almost everything we do – 90pc of world transport is oil-dependent; all petrochemicals are produced from oil; 99pc of our food relies on oil in some way, either to grow it or get the produce to market; and 95pc of lubricants are oil-based. And, in many cases, oil is not easily replaceable. There are no realistic alternatives to oil for fuelling aircraft and ships, producing petrochemicals or powering cars, without massive investments in technology such as hydrogen.
Given that world oil consumption has doubled since 1970 from 42 million barrels a day to 84 million, that poses a stark challenge. At present rates of depletion, five million barrels a day of new production will need to be brought on stream for the next 10 years just to keep world output rising.
The peak oil debate tends to divide into two camps. On the one hand there are geologists who argue it is almost upon us or shortly will be, based on analysing past production and discovery rates and field exhaustion and extrapolating into the future.
On the other hand, there are economists, political scientists and the oil majors who believe that oil producers – be they governments or companies – will always find a way to meet demand, whether through cleverer ways of finding and extracting oil or greater fiscal incentives to discover and produce more.
Yesterday's conference in London, organised by the Dutch investment bank Insinger de Beaufort, represented both strands of opinion. Mr Skrebowski says that the world's big five oil majors all produced less in 2005 than they did in 2004, while North Sea oil production is declining so rapidly that it will halve in the next seven years.
According to the University of Reading's Dr Roger Bentley, secretary of the Association for the Study of Peak Oil & Gas, the evidence is irrefutable. He points out that 64 of the world's 100 or so oil-producing countries are already past the point of peak production and on the downward slope.
Although there may be a “mini-glut” as output is stepped up from Russia, the Caspian and Iraq and new sources come on stream such as deepwater oil and oilsands, he says the trend is unmistakable.
Dr Bentley believes that non-Opec production will reach a peak within the next 30 months while global output will start to decline between 2010 and 2015 or 2020 at the latest, depending on the contribution from non-conventional sources such as oilsands. “Alongside global warming, this is one of the two extraordinary challenges facing mankind,” he says. “The numbers may slip a little but the fundamental underlying direction does not change.”
Dr Jeremy Leggett, an oil industry geologist-turned-environmental campaigner-turned-chief executive of a solar energy company, paints an even more apocalyptic scene. He believes that peak oil will occur some time this decade.
That will not only produce “horrible economic pain” as oil prices rise to choke off demand but it will also precipitate environmental disaster as oil-consuming countries switch to coal and hasten global warming. “The shortfall between current expectations of oil supply and actual availability will be such that neither gas, nor renewables, nor liquids from gas and coal, nor nuclear, nor any combination thereof will be able to plug the gap in time to head off economic trauma,” he warns.
What is his evidence? Dr Leggett points to the lessons of history. In 1956, a world-renowned geologist, M K Hubbert, predicted that US oil production would peak in 1971, much to the disbelief of almost everyone, including his employer Shell.
. . . the 'Hubbert curve' falls
smoothly to this day, pointing
to a peak between 2005 and
2010
He turned out to be wrong – peak production occurred a year earlier in 1970. Using the same methodology, the 'Hubbert curve' falls smoothly to this day, pointing to a peak sometime between 2005 and 2010. Despite the ingenuity of the oil industry in extracting oil from ever more hostile environments, it is, adds Dr Leggett, a quarter of a century since the world discovered more oil in one year than it produced. In 2000 there were 16 discoveries of giant fields containing 500 million barrels or more – in 2003 there were none.
Not all those attending yesterday's conference are sold on the idea of peak oil. Mike Lynch, an adviser to the US government who runs his own energy and economic research consultancy, is one of the biggest sceptics. He says that the study of peak oil is not a science and that those who advocate it are guilty of naivete, ignorance and plain manipulation of the data.
“There are a lot of zealots out there and a lot of claims are made which are not tested,” he says. “It is true that oil is finite but since 1989 people have repeatedly predicted the peak too soon and have had to keep on increasing their estimate of reserves. Just because a country's output has peaked and gone into decline, it doesn't mean that production can't rise again.” He cites the example of the fall in North Sea production in the 1980s which supporters of peak oil attributed to geological factors but which was, in fact, due to more stringent safety measures after the Piper Alpha fire.
Mr Lynch is one of the few pundits who forecasts that oil prices will begin to ease, but as even he jokes: “I have predicted nine of the last two price decreases.” read more

Feb 02, 2006
Tom Shiel
A 900m project to bring gas ashore from the Corrib Field was plunged into further crisis yesterday.
It followed the decision of the Rossport Five to withdraw from a mediation process claiming that a Government minister was interfering in the talks.
The men, who spent 94 days in jail for contempt of court last year arising from their opposition to an onshore pipeline, said Marine and Natural Resources Minister Noel Dempsey was involved in continued and direct interference with the mediation process.
They alleged that Mr Dempsey was instructing Government-appointed mediator, Peter Cassells, to source information on other gas projects in the country instead of confining his role to talks with Shell and the Rossport group.
But last night Mr Dempsey denied any interference and claimed that concerns about the safety of the project and what may happen in the future had been raised with him by local people.
In that context Mr Cassells, former Ictu general secretary, had spoken to him to see what the Government was doing and how these concerns might be met.
“I don't know how anybody could come to the conclusion that this process was going to be between five men in Rossport, Peter Cassells and Shell,” Mr Dempsey said.
Mr Cassells also called on the Rossport Five to return to talks.
He said that Mr Dempsey insisted he had made it clear from the start that he would request updates on the negotiations.
“Obviously as part of the mediation process it was necessary and clearly understood that these issues would be conveyed to me and that Mr Cassells would brief me on people's concerns,” said Mr Dempsey.
The mediator had sought a meeting with the five men to clarify their position and discuss the next stage of the mediation process, he said.
Defending the five men's withdrawal from the mediation process yesterday, Dr Mark Caravan, spokesman for the Shell to Sea protest campaign, said what happened did not constitute mediation.
The Rossport Five, Philip McGrath, Brendan Philbin, Vincent McGrath, Willie Corduff and Micheal O Seighin, allege that Mr Dempsey had continually contacted Mr Cassells and had publicly warned him there was limited time to achieve a resolution.
In a statement yesterday Shell E&P Ireland (SEPIL) urged all parties to support meaningful dialogue.
The company expressed disappointment at the Rossport men's withdrawal from talks but agreed, however, with their statement that “meaningful mediation is the way forward”. read more

By REUTERS
Published: February 1, 2006
Filed at 12:24 p.m. ET
WASHINGTON (Reuters) – The chairman of the U.S. Senate Judiciary Committee said on Wednesday that Congress would attempt to address growing concerns about rising fuel prices and soaring oil industry profits.
“We intend to do something about'' rising prices to consumers, Chairman Arlen Specter said at a hearing into whether oil industry mergers in recent years have made gasoline more expensive at the pump.
Specter, a Pennsylvania Republican, said he was shocked by the size of oil company profits, adding, “It just may be time to legislate in this field.''
After the hearing, Specter raised the possibility of modifying federal antitrust laws to impose tougher oversight on mergers in the industry and crack down on any abuse of market power.
Further investigation was needed before reaching any final conclusions, Specter told reporters, but the number of mergers in recent years has been “excessive on its face.''
“There are a lot of red flags out there,'' he said, referring to rising prices and record industry profits.
Exxon Mobil Corp. said Monday it earned $10.7 billion in the fourth quarter of last year and $36.1 billion for all of 2005 — bigger than the economies of 125 countries.
Some industry critics have called for an excess profits tax.
Sen. Mike DeWine, chairman of the committee's antitrust subcommittee, said the biggest reason for the spike in fuel prices to consumers was rising crude oil prices.
DeWine, a Republican from Ohio, called for conservation measures and use of alternative fuels. “Try as we might, we simply can't drill our way out of this crisis,'' he told the hearing.
President George W. Bush said the United States was ''addicted to oil'' in his State of the Union speech on Tuesday, and called for developing alternative energy sources, such as ethanol-blended gasoline and hydrogen fuel cells.
Officials from six major oil companies refused to testify at the hearing. Specter criticized their failure to appear and said he might seek subpoenas to compel their testimony.
The Judiciary Committee had asked representatives from Exxon Mobil, Chevron Corp., ConocoPhillips, Valero Energy Corp. and the U.S. units of BP Plc and Royal Dutch Shell Plc to tell their side of the story.
William Kovacic, a member of the U.S. Federal Trade Commission, told the hearing that most sectors of the petroleum industry remained unconcentrated or moderately concentrated.
The FTC is investigating whether oil companies manipulated gasoline prices and oil refining production levels. The agency plans to finish its probe and send its findings to Congress this May. read more

By REUTERS
Published: February 2, 2006
Filed at 2:43 a.m. ET
LONDON (Reuters) – Royal Dutch Shell posted a record profit for a UK-listed company on Thursday, helped by high oil prices and strong refining margins.
The company reported a 3 percent rise in fourth-quarter current cost of supply (CCS) net profit to $5.395 billion, in line with forecasts,
Excluding a net gain of $34 million related to exceptional items, the result was in line with a Reuters poll of 10 analysts which gave an average forecast of $5.385 billion, and up around 13 percent from the post-exceptionals result last year.
Shell (RDSa.L) said production fell to 3.5 million barrels of oil equivalent per day (boepd) in the quarter from 3.84 million boepd in the same period of 2004.
Full-year CCS net profit for 2005 was $22.94 billion, a record for a UK-listed company, analysts said.
The world's third-biggest listed oil firm by market value said it expected to return $5 billion to shareholders by repurchasing stock in 2006, in line with last year's share repurchases.
Shell said its reserve-replacement ratio — the rate at which it matches the oil it pumps with new finds — was 70 to 80 percent, including mineable reserves from Athabasca Oil Sands and year-end pricing impact and acquisitions and divestments.
Companies target a rate of at least 100 percent to avoid depletion of their asset base and the suggestion their business is eroding.
Shell is under pressure from investors for its poor reserve-replacement rate after achieving a ratio less than 50 percent in 2004. Analysts believe this shows Shell will struggle to grow its upstream oil and gas production business in coming years.
Shell said it would pay a dividend of 0.23 euros per share for the fourth quarter.
Shell's result follows record earnings at larger rival Exxon Mobil earlier this week. read more

THE spat between Ukraine and Russia over the price of gas not only threw into sharp focus our own dependence on gas but also the painfully slow progress in bringing the Corrib field on stream.
Ireland, much like the rest of Europe, is a net importer of gas and with supplies from traditional sources such as the North Sea now in decline, the question of security of supply has become paramount. Estimates suggest that the UK, which has enjoyed the benefits of North Sea gas for four decades, will this year become a net importer of the fuel. That may seem an academic question as far as Ireland is concerned, but like the Ukraine, it leaves us vulnerable in the face of an exceptional event, for instance if a spell of unusually cold weather forced up consumption in Britain or a disaster caused a breakage in the North Sea supply lines. Would our neighbours be content to continue supplying us if those supplies were needed at home?
It is for reasons such as these that the European Commission has taken a keen interest in the gas market. Three years ago it failed in a bid to secure powers to compel member states to hold reserves of gas – and if necessary to sell them to other countries. This proposal is now back on the agenda and thanks to events in Ukraine may get a more receptive hearing – from countries like Ireland at least.
Bord Gais pressed ahead with the building of a second gas interconnector between Ireland and Britain despite persistent claims that it would lie empty and idle. It was a brave decision in the circumstances but still does not guarantee our gas supply. The second interconnector does reduce the chance of an interruption along the Irish Sea route as the chance of simultaneous breaks in the two undersea pipelines is very remote. But the same cannot be said of the land line delivering those imports across the Scottish landmass.
The vast bulk of the island's gas supply still goes through a single onshore pipeline in Scotland, so desite the provision of a second interconnector, we are still vulnerable to an accidental or intentional interruption of supply.
For this reason the ESRI has suggested that consideration be given to the strengthening of the onshore gas transmission system in Scotland on which nearly all of our gas supplies currently depend.
It is estimated that 86pc of Irish energy is supplied by imported fuels. Our own natural gas reserves have declined, and our only other indigenous energy resources are peat and renewables. Peat production is in terminal decline, while the renewable energy industry is at a fledgling stage and is still some years away from making a serious contribution to our energy needs.
Irish energy consumption is projected to grow by 26pc over the next four years as demand for heat, electricity and transport fuels continues to soar.
According to the ESRI, the country is increasingly dependent on gas to supply its energy needs and by 2010 the bulk of electricity generation will depend on gas.
The development of the Corrib field is critical as it will enhance the physical security of Irish energy supply. But Corrib itself will only provide a part of the answer, and a dwindling part at that. When first discovered it was thought that Corrib contained a trillion cubic feet of recoverable gas. This was later downgraded to 850bn cubic feet and, due to difficult structures, the recoverable reserves could be lower still.
The stark reality is, according to oil industry executives, Corrib is a marginal field in economic terms. Shell and its partners can justify the huge capital outlay on the project – running at about $1bn – because the offshore licensing terms introduced by Ray Burke are exceptionally generous. In effect, they mean that Corrib will still bring a return to its owners, albeit a small one.
While Statoil's drilling on the Cong prospect, located quite close to Corrib, proved a major disappointment, there are others waiting to be drilled. Top of the list is the Inishbeg Prospect, located to the north of Corrib and, ironically, quite similar geologically. Drilling is scheduled to commence here this summer, while another well is scheduled to be drilled on the Old Head of Kinsale prospect in the Celtic Sea. read more

By Neil Dennis
Published: February 2 2006
European equities were poised for gains on Thursday following strong sessions in the US and Asia, while fourth-quarter numbers from Deutsche Bank and Royal Dutch Shell provided no nasty shocks.
Spread betters were expecting the three main European indices – London’s FTSE 100, Frankfurt’s Xetra Dax and the CAC 40 in Paris – to open between 15 and 30 points higher.
In New York overnight, the Dow Jones Industrial Average gained 0.8 per cent to 10,953.95 in a choppy session, driven by fluctuations in the price of oil. The Nasdaq Composite added 0.2 per cent to 2,310.56.
Royal Dutch Shell, the oil major, reported fourth-quarter earnings that came in line with market forecasts. A 3 per cent rise in net profit at the current cost of supply (CCS) to $5.395bn beat expectations of $5.385bn. Full-year CCS net profit was $22.94bn a record for a London-listed company.
Deutsche Bank’s full-year pre-tax profit beat expectations thanks to strong growth in trading revenues.
Alcatel, the French mobile phone equipment maker, announced a forecast-beating 16 per cent rise in fourth-quarter operating profit and provided an optimistic outlook on first-quarter sales and 2006 growth. The company said it would propose a dividend for 2005 of €0.16, its first payout since 2001. read more