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Daily Telegraph: Shell profits soar on higher oil price

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A worker at a liquid gas site in Sakhalin

By Russell Hotten
Last Updated: 7:54am GMT 31/01/2008

Profits at oil giant Royal Dutch Shell soared in the final three months of the year as crude rallied strongly.

With crude averaging $90 a barrel for the final three months of 2007, Shell said today that fourth quarter profits rose to $8.47bn from $5.28bn a year earlier. Profits for the whole of 2007 soared to $31.3bn from $25.4bn.  

Shell is the first of the oil majors to report results and while most analysts are forecasting profits to be strong across the industry, 2008 may prove tougher.

The cost of getting oil out of the ground has soared and the rise in equipment and labour costs is well into double digits, fuelled by a worldwide lack of the engineers and the infrastructure needed to find and pump crude.

Oil companies are finding it increasingly difficult to bring new fields online fast enough to replenish their reserves.

There are also signs that margins in companies’ refinery divisions are coming under pressure.

Refining margins for the industry as a whole are estimated to have fallen 14pc to $5.72 a barrel in the Q4, down from $6.67 in the same period in 2006.

What oil companies can make from higher oil prices they can lose by having to pay extra for the crude going into their refineries.

Shell is not releasing key data on its reserves replacement, a decision that continues to upset the City. Shell says it will disclose the information – which measures how fast it replaces the oil that is pumped – in May.

The results from Shell came as it emerged that the accounting scandal that forced resignations and fines at the companyl in 2004 looks like returning to haunt the company, with lawyers pursuing legal action on behalf of US shareholders about to step up their campaign for compensation.

Following years of wrangling, key Shell executives involved in the 2004 “oil reserves” affair appear ready to give sworn statements to the lawyers about their role in what was the biggest crisis in the company’s history.

Frank Coopman, then finance director in Shell’s exploration and production unit, is understood to have given a deposition yesterday.

Former chairman Sir Philip Watts, and possibly ex-finance director Judy Boynton, may give evidence over the next couple of weeks.

Lawyers at the US firm Bernstein Liebhard & Lifshitz see the depositions as a breakthrough in their claims for compensation that could run into hundreds of millions of pounds.

Shell has already paid fines and compensation of £360m after admitting that it inflated the amount of oil reserves recorded in its accounts.

However, investigations by financial regulators in Britain and America have already concluded that the individuals have no case to answer.

Mr Coopman, whose emails exposed the practice of inflating reserves, is thought to have been interviewed by the lawyers in The Hague, where Shell is based.

Sir Philip’s lawyer declined to comment, and representatives for the other two former executives could not be reached. Shell said it would not comment on ongoing legal action. and its sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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