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Daily Telegraph: Shell’s Iran venture to continue

Daily Telegraph image of Shell CEO Jeroen van der Veer

Jeroen van der Veer: final decision still 12 months away

By Russell Hotten, Industry Editor
Last Updated: 3:38am BST 27/07/2007

Royal Dutch Shell’s chief executive Jeroen van der Veer said there were no plans to halt preparatory work on possible investments in Iran, despite renewed pressure about the risks of operating in a country where America has imposed economic sanctions.

Speaking yesterday as he unveiled a 20pc rise in second-quarter profits, Mr van der Veer said a final decision about whether to embark on the huge gas project was still 12 months away, but work would continue.

Some US pension funds have written to Shell and seven other energy giants about the likely consequences of business links with Teheran at a time when worsening US-Iran relations could “impact companies doing business there”. It follows veiled warnings that any investment in Iran would earn Washington’s disapproval.

But Mr van der Veer said: “The final investment decision is at least 12 months away.” In the meantime, “our architects will continue to do their work there”, he said. “On the day that we come to make that decision we will take political considerations into account.”

In January, Shell and Spain’s Repsol signed a preliminary $10bn (£4.9bn) agreement with the Iranian government to develop two phases of the South Pars gas field.

Among the other companies to receive the two-page letter from the California Public Employees’ Retirement System, the New York State Common Retirement Funds, and New York City Pension Funds were Italy’s Eni, Russia’s Gazprom, and France’s Total.

The funds warned that tension between the US and Iran may lead to “tightening economic sanctions” and pointed out that historically “regional conflict has exposed facilities and infrastructure to the risk of attack”. Mr van der Veer said funds had “asked for information for clarification purposes”.

Shell unveiled a 20pc increase in second-quarter profits as better margins from refining operations and money from disposals offset lower output.

Current cost of supply (CCS) profits, which excludes the value of inventories, rose to $7.556bn. It took profits for the first half of the year to $14.5bn, up 17pc.

The company said production of oil and gas fell 2pc, to 3.178m barrels of oil equivalent per day (boepd). The fall was partly due to Nigerian fields being shut in because of security problems and a warm winter in north-west Europe, which hit demand for North Sea gas.

Earnings from the refining division rose more than 40pc. Analysts at Cazenove described the refining result as “very strong”.

Shell’s profits compare with big drops in underlying second-quarter earnings at BP, Eni, and Repsol, suggesting that the company has turned the corner after several years of problems.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/07/27/cnshell127.xml

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