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Lloyds List: Bumper profits for Shell as global oil costs soar

Exploration and production successes lifted group to record highs, writes Martyn Wingrove
HIGH oil prices and strong liquefied natural gas production boosted Royal Dutch Shell's profits to record highs in 2005, but capital expenditure continues to climb.
The Anglo-Dutch oil and gas group reported yesterday a 30% rise in profits to $23bn with the biggest gain coming from a 45% jump in exploration and production earnings to $14.23bn.
Shell's oil and gas production fell almost 7% to 3.5m barrels per day due to the impact of hurricanes, divestments and low entitlements in production sharing contracts.
'Our good performance in 2005 gives us a solid platform to build on in 2006,' Shell chief executive Jeroen van der Veer said.
'We delivered record cash and earnings, success in exploration and gained access to new resources.'
In 2005, Shell spent $17.44bn on projects, up from $15.3bn in 2004. This included $2.1bn on exploration, which added 2bn barrels of oil equivalent to its resources, more than offsetting total production of 1.3bn boe last year.
Excluding $1.8bn spent on the Sakhalin II project in Russia, Shell spent $15.6bn, $600m more than its own expectations.
This year, it expects to boost investment to $19bn, excluding expenditure on the Sakhalin II project.
'We continue to expand our portfolio of integrated gas, unconventional resources, oil projects and new energy technologies,' Mr van der Veer said. 'We expect to invest around $19bn in 2006.'
Shell kept its position as the leading equity producer of LNG with a 13% rise in production capacity during 2005 to 12.4m tonnes per annum.
This is consistent with the group's target to deliver 14% average annual growth in LNG capacity from 2004 to 2009.
Last year, Shell's LNG production benefited from a ramp up in output from the fourth train at the North West Shelf plant in Australia.
This year's production will grow as two trains are coming on line in Nigeria as part of the Bonny plant expansion, plus new volumes will come from the Qalhat project in Oman.
In December, Shell took the final investment decision on the Qatargas 4 project, which will transport LNG to the Elba Island terminal in North America, where the London-listed group has gained additional regasification capacity.
Mr van der Veer also said the Sakhalin II project in eastern Russia was on track as according to its July 2005 schedule and negotiations with state group Gazprom are continuing on a swap deal that involves other Russian fields.
Shell managed to meet its 2004-2006 divestment target a year early with total proceeds of $14.3bn so far, of which $6.6bn came from last year's sales.
It also highlighted new investments in renewable and alternative energy including offshore wind farms, hydrogen plants and biofuels.

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