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Lloyds List: LNG lifts Shell earnings by 20%

Martyn Wingrove
Published: Jul 27, 2007

HIGHER refining margins and liquefied natural gas sales have boosted Royal Dutch Shell’s second quarter earnings by 20% to $7.56bn.

The Anglo-Dutch company’s strong downstream operating performance bucked the industry trend of falling earnings and beat analysts’ expectations.

Shell’s positive result compares well with its European rivals BP, Repsol of Spain and Eni of Italy which have all reported lower second quarter profits.

‘We have delivered another set of competitive results, driven by operating performance,’ said Shell’s chief executive, Jeroen van der Veer. ‘I am pleased with our progress in downstream and exploration.

‘We are rejuvenating our portfolio with sustained investment in legacy assets and disposals, upstream and downstream. We see growth opportunities based on our experience and technologies.’

Shell’s oil and gas production was down 2% year-on-year at around 3.178m barrels a day in the period April to June as operations were restricted in Nigeria due to security problems and North Sea gas output was lower.

High refinery utilisation of 92% meant Shell’s oil product sales were up 1%, but its biggest gains were in liquefied natural gas sales.

Rising output from the Bonny LNG plant in Nigeria helped to boost Shell’s volumes to 3.25m tonnes in the quarter.

‘We are the largest seller of LNG,’ said Mr van der Veer.

‘There will be more, as we have five new trains under construction, including Qatargas 4 and Sakhalin II.’

Shell’s quarterly income was up 18% year-on-year at $8.67bn. Its upstream earnings were 17% lower at $3.3bn but LNG and power earnings increased 52% to $780m and downstream earnings climbed 42% to $2.94bn.

During the quarter the company gained $6.3bn in divestment proceeds and spent $5.8bn on capital projects.

In April, Shell divested half of its interest in the Sakhalin II project in eastern Russia to Gazprom, diluting its stake to 27.5%, in a $4.1bn deal. It also sold North American and European downstream assets to focus refining and chemicals activities in the Far East.

Shell’s second quarter results include higher earnings from North America as the world’s second largest oil company acquired the remaining shares in the affiliate Shell Canada at the end of March.

During the first half of this year Shell made four sizable offshore discoveries including Aghata in Nigeria, Persephone and Prelude in Australia and one in Malaysia.

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