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Shell voices long-term concerns over Europe as profits double

By Emma Rowley

EUROPE’S failure to cultivate growth is a bigger worry for oil and gas major Royal Dutch Shell than the region’s current sovereign debt crisis.

The Anglo-Dutch company has cut its support of European projects to just 15pc of its total investment spend, which it puts at $100bn (£62bn) over four years. Shell expects to keep reducing that share amid longer-term concerns about the region, according to Simon Henry, its chief financial officer.

“Europe’s macroeconomic position can only recover, and the sovereign debt crisis can only be addressed, through underlying economic growth, and we do not see the European Union creating the conditions for that – in fact, quite the opposite,” he said. “Most moves made by the Commission, one way or the other, tend to almost, either directly or indirectly, reduce the competitiveness of European industry.”

The warning came as Shell, Europe’s largest oil company in terms of market value, reported profits had doubled in the third quarter of this year, boosted by the climbing oil price. Earnings were $7.2bn (£4.5bn), up 106pc on a year earlier, on a current cost of supplies (CCS) basis, an industry measure stripping out changes in inventory.

Shell’s overall oil and gas production fell 2pc to 3.01m barrels of oil equivalent a day, but was rising when the impact of its programme to sell off non-core assets was taken out. Several major new projects should come on stream in the next few years.

Liquefied natural gas (LNG) performed well, with sales up 12pc. Shell is working on plans to export LNG from Canada to Asia, where prices are much higher and the problems with nuclear plants following the Japanese earthquake have boosted demand for other energy sources.

BG Group this week announced an $8bn deal to buy LNG to export from the US, a landmark in the country’s shift to becoming an exporter of gas now that technology means it can access its vast shale reserves.

Shell also said that it hoped to be able to return to Libya to resume its exploration programme.

Analysts welcomed the results and said Shell had hit a “sweet spot”. Its “B” shares closed up 11p – O.47pc – at £23.30, as the wider FTSE 100 climbed 2.89pc.

Separately, US rival ExxonMobil said quarterly earnings rose 41pc to $10.3bn as the high oil price offset falling production.

Published in the Business Section of the Telegraph on Friday 28 October 2011

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