November 21, 2008
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Shell announces £2m an hour profits

 by Terry Macalister

Shell stoked the furore over high petrol and wider fuel prices today by reporting profits of nearly $8bn (£4bn) in the second quarter of the year, equivalent to £2m an hour.

The figures were boosted by earnings from the company's controversial oil sands business in North America which increased their earnings by 74% over the last three months.

But Jeroen van der Veer, the Shell chief executive, warned that talk of windfall taxes against the energy companies would be unfair and counterproductive. "Let's hope it does not happen," he said. "I don't see why it will help consumers in the long term."

Shell argues that it is investing more heavily in new oil and gas production than ever before to meet soaring demand and a windfall tax would damage its ability to provide supplies into the future. The company also says that the British government should not tax profits made in other parts of the world.

Profits in Canada - from tar sands - should be invested in Canada, said Van der Veer. "I fail to see why the UK can tax that away," he added.

Van der Veer was speaking as Shell unveiled second-quarter earnings on a current cost of supplies basis of $7.9bn as against $7.6bn for the same period of 2007. But underlying earnings were estimated by the oil company at $8.6bn, up 26% on last year.

The company declined to say how much it had earned from British motorists at its network of petrol service stations but it insisted it was "one of the cheapest" suppliers and pointed out that its overall refining and marketing business had been having a rough period with big profits coming from exploration and production.

A doubling of the oil price to $120 per barrel across the quarter drove those profits while Shell admitted that its overall oil and gas production fell slightly to 3.1m barrels of oil equivalent per day in the second quarter 2008, from 3.1m in the same quarter last year.

The company was hit by civil unrest in Nigeria and changes to its tar sands business but the carbon-intensive operation in Canada still produced earnings of $351m, up 74%. Van der Veer dismissed threats of boycotts by ethical investment funds over the tar sands operation saying they should be careful because failure to exploit unconventional sources of new oil could leave the world using more coal.

Shell said its spending on organic capital investment will increase to $30-31bn this year, up from a planned $28-29bn, and reflecting rising costs and the weak dollar. It also expects to spend $10bn on acquisitions.




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