Royal Dutch Shell has ruled out starting any new projects in Russia over the short-term following Vladimir Putin’s seizure of Crimea.
Simon Henry, chief financial officer, said the oil giant was yet to see “anything that impacts our current business” in Russia, where the company is a partner of state-backed Gazprom for the Sakhalin 2 liquefied natural gas operation.
He also defended the decision of Shell chief executive Ben van Beurden to meet the Russian president earlier this month at the 20th anniversary of Sakhalin’s opening. But, in a remark Shell later clarified, Mr Henry added: “I don’t think we will be jumping into new investments in the short-term.”
Shell sources stressed that did not imply the company, which has a 27pc stake in the Sakhalin project, had got cold feet on investing in a third production train at the plant.
“Russia is a country of great importance for Shell,” the source said, noting that the group was “one of the biggest direct international investors”.
Mr Henry was speaking as Shell hailed a return to more “robust” profits with a market-beating first quarter, despite a thumping $2.9bn (£1.72bn) write-off, mainly against its European and Asian refineries.
The oil group, which stunned the market with a profits warning in January, posted pre-exceptional earnings of $7.3bn, down 3pc year-on-year – well above market forecasts of about $5bn. The London-listed B shares rose 89p to £25.20.
Results were boosted by a record quarterly performance from its integrated gas operations, where earnings rose 30pc to $3.28bn lifted by last year’s $3.8bn acquisition of Repsol’s LNG business, and a return to profit in the US.
Upstream America swung to a $686m profit from a $784m loss in the last quarter of 2013, helped by the higher Henry Hub gas price and lower exploration charges.
But the figures were hit by chunky impairments, particularly a $2.58bn charge against Shell’s refining arm, with the bulk of the writedown coming against its Bukom oil refinery in Singapore. The refinery, though not the Bukom chemicals plant, has been written down to zero.
Mr Henry said Shell’s refining wing had been hit by “falling margins on liquids” in the face of the US shale revolution and a “sector switch away from gasoline to diesel”.
That, he said, had been exacerbated by the fact that “far too many of our competitors, particularly governments, are continuing to invest in capacity that the market doesn’t need”.
Excluding the write-off, downstream earnings fell to $1.58bn from $1.85bn, and this year Shell has already announced divestments in Norway, Italy, Australia and Denmark covering 181,000 barrels per day of refining capacity.
After the $2.9bn write-off, Shell’s reported earnings on a current cost of supplies basis fell from $8bn to $4.5bn.
telegraph.co.uk
Simon Henry, chief financial officer, said the oil giant was yet to see “anything that impacts our current business” in Russia, where the company is a partner of state-backed Gazprom for the Sakhalin 2 liquefied natural gas operation.
He also defended the decision of Shell chief executive Ben van Beurden to meet the Russian president earlier this month at the 20th anniversary of Sakhalin’s opening. But, in a remark Shell later clarified, Mr Henry added: “I don’t think we will be jumping into new investments in the short-term.”
Shell sources stressed that did not imply the company, which has a 27pc stake in the Sakhalin project, had got cold feet on investing in a third production train at the plant.
“Russia is a country of great importance for Shell,” the source said, noting that the group was “one of the biggest direct international investors”.
Mr Henry was speaking as Shell hailed a return to more “robust” profits with a market-beating first quarter, despite a thumping $2.9bn (£1.72bn) write-off, mainly against its European and Asian refineries.
The oil group, which stunned the market with a profits warning in January, posted pre-exceptional earnings of $7.3bn, down 3pc year-on-year – well above market forecasts of about $5bn. The London-listed B shares rose 89p to £25.20.
Results were boosted by a record quarterly performance from its integrated gas operations, where earnings rose 30pc to $3.28bn lifted by last year’s $3.8bn acquisition of Repsol’s LNG business, and a return to profit in the US.
Upstream America swung to a $686m profit from a $784m loss in the last quarter of 2013, helped by the higher Henry Hub gas price and lower exploration charges.
But the figures were hit by chunky impairments, particularly a $2.58bn charge against Shell’s refining arm, with the bulk of the writedown coming against its Bukom oil refinery in Singapore. The refinery, though not the Bukom chemicals plant, has been written down to zero.
Mr Henry said Shell’s refining wing had been hit by “falling margins on liquids” in the face of the US shale revolution and a “sector switch away from gasoline to diesel”.
That, he said, had been exacerbated by the fact that “far too many of our competitors, particularly governments, are continuing to invest in capacity that the market doesn’t need”.
Excluding the write-off, downstream earnings fell to $1.58bn from $1.85bn, and this year Shell has already announced divestments in Norway, Italy, Australia and Denmark covering 181,000 barrels per day of refining capacity.
After the $2.9bn write-off, Shell’s reported earnings on a current cost of supplies basis fell from $8bn to $4.5bn.
telegraph.co.uk
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