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Financial Times: Shell raises production hopes for Niger Delta

By Ed Crooks andChris Hughes
Published: May 4 2007 03:00 | Last updated: May 4 2007 03:00

Royal Dutch Shell has sent teams into the turbulent Niger Delta in recent months to assess the state of its facilities, raising the prospect that it will be able to re-start production after more than a year.

Peter Voser, Shell’s chief financial officer, said there had been “some improvement in the security situation” in the Delta and the company hoped to restart production there gradually later in the year – if it was safe to do so. However, 20 oil workers were kidnapped by armed men yesterday in Nigeria, although some were later released, emphasising the volatility of the region.

Mr Voser was speaking as Shell reported a 14 per cent rise in first-quarter earnings to $6.93bn (£3.49bn) on a current cost-of-supply basis, and a 17 per cent rise in earnings per share to $1.10.

The figures were much better than those for BP, which last week posted a 17 per cent drop in first-quarter net income, and ahead even of ExxonMobil, the world’s biggest oil group, which reported a net income rise of 10 per cent.

Excellent results from the downstream businesses reflected healthy refining margins in the US and Shell’s investment in China, where the Nanhai petrochemicals complex opened last year. Earnings from oil products rose 12 per cent to $1.49bn and in chemicals they more than trebled to $480m. The result was also boosted by $404m of gains on the sale of equities from Shell’s in-house insurance fund, which is unlikely to be repeated.

Total production was in line with last year’s average at 3.51m barrels of oil equivalent a day, but Mr Voser said he expected it to come in at the bottom end of the predicted range of 3.3m-3.5m boe/d for the year.

Shell is committed to the biggest capital spending programme of any international energy company, investing $22bn-$23bn this year. It has said it plans to curb its share buy-back programme to fund that investment and to pay a higher dividend.

The first-quarter dividend will be 0.36 cents, up 14 per cent in dollar terms, although the rise is less in euro terms. Shell is paying dividends in dollars rather than euros from this year.

Copyright The Financial Times Limited 2007

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