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The Guardian: Shell makes £1.5m an hour and defends drilling in Arctic

· Company says it will not bow to environmentalists
· ExxonMobil blames lower gas prices for fall in profits

Terry Macalister
Friday July 27, 2007

Shell made profits of £1.5m an hour in the second quarter of the year and said it would not turn away from drilling in environmentally sensitive areas such as the Arctic or producing from carbon-intensive tar sands such as those in Canada, where governments give it the go-ahead.

Combined cycle profits – the common way of measuring an oil company’s financial performance – soared 20% to $7.6bn (£3.7bn) on the back of high refining margins. Shell’s larger rival, ExxonMobil which has a long tradition of beating analysts’ forecasts, shocked Wall Street with an unexpected fall in earnings, revenues and production.

The Anglo-Dutch group’s oil and gas output fell overall and there was little growth in its revenues. But even taking into account one-off gains due to asset sales of $660m, the profits were better than the City had predicted and contrasted with the tiny increase in combined cycle profits at BP reported earlier this week.

Shell raised its dividend 14% to 36 cents a share and gave an upbeat assessment of prospects. “We continue to see competitive growth opportunities based on our technological strengths by making disciplined capital choices in an industry landscape of both higher energy prices and higher costs,” said Jeroen van der Veer, chief executive of Shell.

But the Shell boss refused to bow to pressure from environmental groups to end its commitment to a controversial exploration programme in the Beaufort Sea, off Alaska, said to threaten polar bears and some whale species, which is being challenged in the US courts.

Mr van der Veer said he was “frustrated” by the last-minute challenge to the drilling programme and that he was confident it would be defeated. “We think we have good arguments and we are well prepared … we expect that drilling can begin this summer,” he said.

Mr Van der Veer said the company was committed to further investment in the tar sands projects of Alberta, Canada, which would play a major part in the future of the group. He said there was no contradiction between commitments to carbon-intensive schemes such as this and Shell’s corporate social responsibility in the face of climate change.

It was up to politicians not companies to decide whether to allow tar sands projects or agree nuclear power projects, he said. “Governments need business to help … but it is not Shell who can solve the CO2 problem in the world,” he said.

Mr Van der Veer said he was not ready to cave in to demands from some US pension funds that it should halt its assessment of oil and gas opportunities in Iran because of Tehran’s stand-off with Washington over its nuclear programme. There was “no point” taking a decision before an agreement was set to be signed, and that was at least 12 months away, he said.

Analysts at Citigroup said Shell’s figures showed it was “sitting in the sweat spot” of a benign oil and gas price environment, but warned the second half of the year would be tougher. Shell A shares closed down 32p at £19.37.

Meanwhile, ExxonMobil, the world’s largest publicly traded oil company, blamed lower gas prices for a 1% fall in second-quarter profits. Even so, its net income of $10.26bn was the fourth-largest quarterly profit ever recorded by a publicly traded US company. Revenue dipped to $98.35bn from $99.03bn a year ago.

Profits fell short of Wall Street forecasts and its shares fell 2.7% to $90.06 in morning trading, although revenues were higher than expected. ExxonMobil said earnings from its exploration and production arm fell 17% to $5.9bn, while overall production dipped 1% from a year ago.

ExxonMobil shares fell 4.2% to $88.87 on the New York Stock Exchange as analysts expressed serious disappointment.,,2135873,00.html and its sister non-profit websites,,,,,, and are owned by John Donovan. There is also a Wikipedia feature.

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