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Shell Makes Record $23bn Profit
Published on Friday, February 3, 2006 by the Independent / UK
Shell Makes Record $23bn Profit
by Michael Harrison
 

The oil giant Royal Dutch Shell defended itself yesterday against charges of profiteering at the expense of motorists and householders after announcing the biggest profit in UK corporate history.

The Anglo-Dutch company increased profits last year by 30 per cent to $23bn (£13bn) on the back of surging oil prices, enabling it to pay out $17bn to shareholders. But Shell said it made little money selling petrol in the UK, describing it as "one of the toughest and most competitive markets in Europe".

Shell said the bulk of the $7.5bn profit made last year from its oil products division had come from refining and retailing operations in other parts of the world. It added that "significantly more" than 90 per cent of total profits had come from outside the UK and yet its UK tax bill had doubled last year to $1.2bn.

The bumper results led to renewed calls for a windfall tax on oil company profits and demands that Shell use its vast profits to cut fuel costs for the poor and protect the pensions of employees in companies which went bust. Friends of the Earth said Shell should pay a windfall tax because it was profiting from climate change and the environment was paying the price.

But Jeroen van der Veer, Shell's chief executive, rejected the idea of a special tax. He also denied claims that it had profiteered by overcharging UK motorists or domestic gas consumers. "That is incorrect. It is a very competitive market with small margins," he said.

The company said its huge profits had to be seen in the context of an investment programme which was almost as large, with capital spending due to rise by $4bn next year to $19bn. Last year, Shell took on nearly 1,500 extra engineers to help meet its expanded exploration programme.

Shell's performance follows the world record $36bn profit announced on Monday by Exxon of the US and will be mirrored by BP when it reports its 2005 results next week. Mr Van der Veer indicated that returns to shareholders would be even higher this year, with $5bn of share buy-backs and an increase in its $10bn dividend payments last year in line with inflation.

Shell, which was hit by a corporate scandal in 2004 over the misreporting of reserves, said it booked between 750 million and 850 million barrels of new reserves last year, enabling it to replace between 60 and 70 per cent of production, using the stricter definition demanded by the US Securities and Exchange Commission. The company aims to achieve a reserves replacement ratio of 100 per cent over the 2004-08 period.

© 2006 Independent News and Media Limited

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