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Daily Telegraph: Shell’s $27.6bn profits ‘obscene’

Daily Telegraph image Jeroen van der Veer

Understatement: Shell’s chief executive, Jeroen van der Veer,
said the figures were “satisfactory”

By Russell Hotten, Industry Editor
Last Updated: 1:32am GMT 01/02/2008

Royal Dutch Shell has been forced onto the defensive after its announcement of record profits sparked calls for a windfall tax and complaints from motorists about soaring pump prices.
While investors fretted about whether the $27.6bn (£13.9bn) profits based on the current cost of supply masked deep problems facing the world’s second largest non-government oil company, Shell received a barrage of complaints that its earnings were “obscene”.

The annual profits, which were up 9pc, are a record for a European listed company and were driven by last year’s soaring oil price, which averaged $90 a barrel for the last three months of 2007.

The company’s chief executive, Jeroen van der Veer, said the figures were “satisfactory”, but the Unite union and the AA motoring organisation said the government should skim off some of the oil giant’s profits.

Unite joint general secretary Tony Woodley called the profits “obscene”, adding: “Greedy oil companies should be asked to contribute for the common good.” The AA said some of the windfall profits should be used to improve conditions for the motorist.

Mr Van der Veer pointed out UK Treasury taxes account for well over 50pc of the price of petrol at the pump, and that the vast bulk of the Anglo-Dutch company’s profits were made outside Britain. Most of its earnings come from exploration and production, not from UK petrol sales.

The chief executive said big profits were needed to match big investment plans. “If you get additional taxation, in the end it means you can invest less. The money has to come from somewhere and over time it will impact on our production.

I think that you should not only look at the profits size, but at the size of the companies and the huge investment tasks we have to do for the future of our companies,” he said.

Shell’s profits in the fourth quarter were up 11pc at $6.68bn, but were still lower than most analysts’ forecasts. The big rise in crude prices has helped cushion Shell against a 4.5pc drop in oil and gas production – a more than 10pc rise in the cost of labour and equipment – and a 40pc drop in refinery margins.

The loss of assets from the Sakhalin 2 project in Russia, and problems in Nigeria and Canada will continue to weigh on Shell this year, the company said.

“I’m modestly disappointed,” said Jason Kenney, an analyst at ING. “The risk is to the downside with Nigeria. You’ve got a lot of unknowns on the horizon and refining margins are going to be quite low this year.” From now on, said James Neale, of Citigroup, “Shell may find the going somewhat tougher.”

Shell did not publish its reserves replacement ratio – the rate at which it is replenishing oil being pumped – but will instead release the data at the end of March. This has sparked concern that reserves data will be weak.

Shell said that 1bn barrels of resources were added in 2007, compared with more than 2bn in 2006. The shares closed up 2 at £17.91. A fourth-quarter dividend of 36 cents a share will be paid on March 12. and its also non-profit sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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