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Shell eyes Russian opportunities as profits hit by energy prices

Royal Dutch Shell said it was eyeing opportunities to expand in a new “more open” Russia, as it unveiled a 25pc slump in profits, hit by lower energy prices.

Emily Gosden By , Energy reporter 7:00PM BST 26 Jul 2012

Royal Dutch Shell is eyeing opportunities to expand in a new “more open” Russia, its chief executive said today, as he unveiled a 25pc slump in the oil major’s profits, hit by lower energy prices.

Peter Voser confirmed that discussions were ongoing about future liquefied natural gas (LNG) projects in Russia.

The company is said to be in talks about joining the huge Shtokman LNG project in the Russian Arctic, with state-controlled Gazprom.

“We have a very successful venture with Gazprom in eastern Siberia. I think our credentials are clear,” Mr Voser said. “From a strategic point of view we are open to further investments in Russia and therefore are looking at opportunities either [in] oil or LNG. We have talked with the various players. Those talks include Gazprom.”

He welcomed Russian president Vladimir Putin’s recent focus on encouraging foreign companies to help develop Russia’s oil and gas reserves, including through changes to the tax regime.

“Over the years to come I see a more open Russia, in the sense that foreign investments are a strategy for the country. Shell will see what they can do with that.”

Mr Voser also confirmed that Shell was still evaluating options in East Africa, but said the decision to withdraw from the bidding war for Mozambique-focused explorer Cove Energy showed its “capital discipline”.

Mr Voser was speaking as he announced that Shell profits fell to $5.96bn (£3.85bn) in the three months to the end of June.

“Our profits have fallen with energy prices,” Mr Voser said. “Our industry continues to see significant energy price volatility as a result of economic and political developments.”

Lower oil and gas prices accounted for about $700m of the decline, with prices for natural gas in North America 52pc lower than in the second quarter of 2011.

About $500m of the decline was due to planned maintenance and a delay in receiving a dividend from a joint venture, Shell said.

These more than offset the benefits of a 4pc increase in oil and gas production, to 3.1m barrels of oil equivalent per day, and improved refining margins.

Prices for LNG were higher, but volumes fell due to maintenance work, and due the comparison against exceptionally high demand in 2011 as Japan switched from nuclear to gas generation following the Fukushima disaster.

Shell’s profits fell short of analysts’ expectations, sending the shares down 57p – 2.5pc – to £22.08.

Shell raised its dividend by 2.4pc, to $0.43 a share for the second quarter, payable on September 10.


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