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The Observer: Treasury cashes in on the UK's financial jiggery-pokery

Frank Kane
Sunday January 29, 2006
The front-page headline in the Financial Times last week was good news indeed. 'UK tops inward investment league,' it declared, going on to explain that Britain had attracted more cash than any other country in 2005. Hawk-eyed foreign investors had spotted the opportunities of the keenly competitive and efficient UK economy, and poured their money in – some $219bn of it. America, at $106bn, and China, with a meagre $60bn inward investment, were also-rans.
A great triumph for Gordon Brown's economic master-plan then, and so it was trumpeted. Des Browne, the Treasury Chief Secretary, said: 'Once again, we have shown that – even in the most difficult of years – the British economy remains resilient and competitive.' It was the highest figure recorded for a European country, and all the more impressive because the figures came from the United Nations Conference on Trade and Development – about as impartial and global as you could get.
But just read Unctad's small print: 'However, the increase was largely accounted for by the merger of Shell Transport and Trading with Royal Dutch Petroleum for some $100bn.' The rest of the increase was due to the high level of mergers and acquisitions business in Britain and the rest of the developed world, which totalled $2.9 trillion.
So rather than demonstrating Britain's resilience and competitiveness, the Unctad figures actually show how good we've all got at financial engineering, in particular a huge accounting item from a bit of Anglo-Dutch jiggery-pokery.
In fact, as the FT reported later in the piece, the level of total investment in the economy last year as a share of national income was the lowest on record.
What we are actually getting very good at is selling off the family silver in ever-increasing quantities, and smoke-and-mirrors financial accounting. I wonder if Browne is proud of that.
Parker shows how it should be done at P&O
If Browne, or Brown for that matter, wants to know about real inward investment, and value creation, he should study what has happened at P&O over recent weeks. This is most decidedly not a case of the family silver going abroad – most of the assets and employees are overseas anyway, and the company has long been a global player, beneath an ever-thinning veneer of British imperial tradition. It seems entirely appropriate in the 21st century that P&O's worldwide assets should be in the ownership of one of the great trading international centres, like Dubai or Singapore.
And if you are going to sell premium assets, you must demand a premium price, and there is no better man for the job than Sir John Parker. He has orchestrated the auction currently under way between DP World of Dubai and PSA of Singapore (owned by trading conglomerate Temasek) with all the finesse of a maestro. Last Thursday, when Dubai came back to top a recommended £3.5bn bid by Singapore, with a quickly recommended £3.9bn cash offer of its own, it was as good an example of value-creation as you could find.
Parker has successfully exploited the rarity value in P&O – there are no other international ports groups available. He admits that the current price, at 38 times earnings, is 'out of normal valuation territory'. It is a persuasive offer, but not just for shareholders – it becomes compelling when P&O pensioners are taken into account. Dubai has undertaken to put £125m into the estimated £200m pensions deficit now and make up the rest over five years. (Compare this with the meagre, but government-sponsored pensions element of the scandalous Qinetiq flotation.) The question Parker must now ponder is: can he do even better? Can he persuade the Singaporeans to come back with a higher offer, lifting the value of P&O well over the £4bn mark.
The PSA executives who flew home for the Chinese New Year – apparently without even knowing of the new Dubai bid – must decide exactly what price they are willing to put on P&O. They face bigger regulatory hurdles than DP World, but have said they will do whatever is required to get P&O. Backed by Hong Kong's Hutchison group, they have pockets just as deep as Dubai's. On the other hand, they may not want to be tied up in red tape for six months by Brussels.
I think in the end the unique nature of P&O's business will tempt them back. There is another twist to come in this tale, I believe, but it will only be for the good of P&O shareholders, employees and pensioners.
Is Sir Victor the black horse's white knight?
Sir Victor Blank has never been a man to decline a challenge. He had plenty of those in his time at Trinity Mirror, and for the most part rose to meet them. He will be less in the media spotlight at Lloyds TSB, but as chairman of one of Britain's most venerable financial institutions, he will be under even closer scrutiny from his real peers – the small but powerful circle of bankers who run the financial services industry and much of UK plc.
He will want to get his feet under the desk, of course, but he must already know intuitively that Lloyds cannot go on as it is. From being at the top in the 1990s, when it avoided the expensive mistakes on non-core banking suffered by its rivals, it has languished for years.
Its focus on UK banking – which looked so sensible back then – now makes it look like a laggard, too timorous to be entrepreneurial in a rapidly globalising business world.
The options are limited: Lloyds must either persuade the government to abandon its veto on British domestic banking consolidation, and then lead the next round of that process; or it must negotiate a successful exit for shareholders via a takeover by one of the big international groups that want to expand in Europe. Put bluntly, it must either merge with Barclays, or be bought by the likes of Bank of America or Standard Chartered.
Your move, Sir Victor. read more

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The Observer: Who's to blame for the big bang?

As families suffering from the multiple effects of the Buncefield oil depot blast wait for compensation, no one is accepting responsibility, reports Jon Robins
Sunday January 29, 2006

Sixty families who were injured or suffered damage to their homes in the Buncefield fuel depot explosion have begun legal action in the High Court against one of the oil companies operating from the site.
It's now seven weeks since the huge blast at the depot in Hemel Hempstead, Hertfordshire, registered 2.9 on the Richter scale but there has yet to be any acknowledgement of responsibility by the oil companies to their devastated neighbours.
Hertfordshire Oil Storage Limited (HOSL), a joint venture between Texaco and Total that operates on the site, told Cash last week: 'HOSL continues to work closely with the Health and Safety Executive [HSE] and the Environment Agency in their investigation to ascertain the cause of the incident and in the clean-up at the site. It is not possible to speculate about the cause of the incident or liability at this stage, and it is recommended that all people affected notify their own insurers, who will advise them on the most appropriate way to proceed.'
The British Pipeline Agency (BPA), a joint venture between BP and Shell, which also operates from Buncefield, issued a statement via City law firm Freshfields. It said its client 'has no reason to believe that it was responsible for the incident and refuses to accept any liability in this regard'.
Local homeowners, frustrated by the lack of positive response from the industry, lodged a litigation order again HOSL on Friday. Bill Burgar, managing director of a computer telephony company who has lived next to the site for 10 years, is one of those joining the legal action. 'We were woken up by what sounded like a jet engine, then a massive explosion,' he said. 'My immediate reaction was that there had been a terrorist strike.' About 2,000 people were evacuated after Britain's fifth-largest fuel distribution depot went up in flames. More than 100 families were rehoused. While, miraculously, only 50 people were injured, some residents claim to have been traumatised and many want to move on, but fear no one will want to live next door to the depot that became 'Britain's biggest blaze in peacetime'.
The explosion blew the plasterboard ceiling down on Burgar and his wife. They then went into 'autopilot', putting into effect an evacuation plan to make sure they and their two daughters, Alex and Charlie (five and seven), were out of the house quickly. Burgar had complained many times about the smell of petrol vapour and was so worried about safety at the depot that he was preparing to sell the house in the new year. As he ran to get the children, he saw the extent of the devastation, only 800 yards from the house. 'Flames were spread across half the horizon. I reckon they were already 400ft high. We were aware there were a lot more oil tanks, so another explosion was very likely. It was terrifying.'
The family have yet to return to the property for more than a day – they are living in a rented house a few miles down the road, paid for by their insurer, Norwich Union, while work is being done on their home, which Burgar estimates will probably take six months. But what about their plans to move? At the beginning of December their house was valued at £625,000 but a surveyor has just valued it at half that. 'We aren't going to be able to sell it now,' said Burgar. 'None of us are sleeping well and the slightest noise wakes us up. The children don't want to go home.'
Rachel Lampey, who works at Tesco, was diagnosed with post-traumatic stress and has been signed off work since 11 December. 'I've been suffering nightmares and undergoing counselling, as has my husband,' she said. 'The children have lost their appetite and had nightmares. Normally they are happy and independent, but it was only for the first time last week when I could leave them without them clinging on to me in tears and screaming.' She reckons somebody must be held responsible if only to make sure history does not repeat itself. 'This isn't the only depot in the country.'
Insurers, such as Halifax Home Insurance, sent staff to Hemel Hempstead within hours of the explosion to advise policyholders. 'We had many customers whose houses were uninhabitable and there was cover for alternative accommodation plus any damage that was the result of an explosion and subsequent fire,' said Martin Folds, senior manager in Halifax's claim team.
But what are the chances of compensation for the value of a house being halved or for an accident claim? 'Our policy can only pay for repair to any physical loss or damage resulting from the explosion,' said Folds. 'Obviously we sympathise, but the policy would not respond for loss of value like that.'
Des Collins, a solicitor acting for the 60 families, argues that the oil companies should accept liability under the law of nuisance. If landowners take something on to their land which is potentially dangerous they automatically bear responsibility for any damage, without the victim having to demonstrate negligence.
'People can't accept that the industry which blew their houses apart is fighting shy about saying whose fault it was or how they are going to be compensated,' said Collins. 'They have to accept responsibility.'
The BPA argues that the HSE has yet to report on its investigation into the incident and that it is, in the view of its lawyers, 'wholly inappropriate' to talk about liability at this stage.
Collins is calling for a public inquiry. 'We do not feel that the HSE is sufficiently independent, bearing in mind their role will also have to be subject to scrutiny. After all, they sanctioned the site being where it was in the first place and carried out a risk assessment and ultimately are responsible for it being there. That's a pretty big conflict of interest.' read more

royaldutchshellplc.com and its sister websites royaldutchshellgroup.com, shellenergy.website, shellnazihistory.com, royaldutchshell.website, johndonovan.website, shellnews.net and shell2004.com are all owned by John Donovan. There is also a Wikipedia article.

THE WALL STREET JOURNAL: OPEC Expected to Maintain Current Production Quota

A WALL STREET JOURNAL ONLINE NEWS ROUNDUP
January 28, 2006 11:49 a.m.
ALGIERS — OPEC will maintain its current production quota when it meets Tuesday in Vienna, Algerian Oil Minister Chakib Khelil said Saturday.
“There is a consensus with the member countries to maintain the current quota as there is enough oil in the market,” Mr. Khelil said in a press conference in Algiers. He predicted that economic growth in the world will continue, keeping prices high.
“I expect a barrel at $50 at least for the second quarter of the year,” he said.
The oil minister was asked whether the Organization of Petroleum Exporting Countries would put more oil on the market if Iran reduces exports, amid its nuclear dispute with the U.S. and European Union.
“OPEC is committed to help replace any lack of supplies as it did with Nigeria's production in 2003, but this still depends on the production capacity of its members,” he responded. The production quota for the 11-nation cartel of oil-producing nations is currently 28 million barrels a day, which is near capacity.
Regarding a recent price upsurge, Mr. Khelil said the situation is not due to a lack of supply. He ascribed high prices partly to market fundamentals, but the mostly to geopolitical uncertainties.
The situation is different than previous oil crunches, Mr. Khelil said. Price upsurges result from unexpected growing demand caused by economic growth in the United States and China, as well as to shortages in refining capacity, he said.
Speaking in Vienna, Nigerian oil minister Edmund Daukoru said Saturday that he expects four foreign hostages being held by kidnappers to be released within a week. The four oil workers — a Briton, an American, a Bulgarian and a Honduran — were kidnapped at a Shell oil platform in the oil-rich delta on Jan. 11. Militants who say they are holding the men are demanding the release of two tribal leaders and for Shell to pay local communities $1.5 billion in compensation for oil pollution.
Mr. Daukoru added that he doesn't see a need for OPEC to cut crude oil production if prices remain above $67 a barrel. read more

royaldutchshellplc.com and its sister websites royaldutchshellgroup.com, shellenergy.website, shellnazihistory.com, royaldutchshell.website, johndonovan.website, shellnews.net and shell2004.com are all owned by John Donovan. There is also a Wikipedia article.

THE WALL STREET JOURNAL: Nigerian Militants Warn Against Rescue Attempt

Associated Press
January 28, 2006 7:56 p.m.
LAGOS, Nigeria — Militants who claim to be holding four foreigners hostage in Nigeria's oil-rich delta warned the military Saturday against attempting to free them by force.
In a statement, the group claiming to hold the men accused the Nigerian government of planning military action with unidentified foreign countries “in a last ditch effort to release the hostages.”
“Any attempt to employ military force … shall be the greatest military mistake ever,” the statement said.
It was signed by Brutus Ebipadei, self-described leader of the Movement for the Emancipation of Niger Delta, which claims to be holding the hostages. The statement's authenticity could not be independently verified, but it came from an address used by the same group in the past.
Two Nigerian newspapers Friday published a photograph of the hostages for the first time since their Jan. 11 abduction from an oil platform.
The photos published Friday showed the four — Patrick Landry of Texas, Briton Nigel Watson-Clark, Bulgarian Milko Nichev and Honduran Harry Ebanks — sitting on white plastic chairs under palm trees. Behind them were several men, one sitting next to several automatic rifles mounted on tripods.
The four appeared to be in good health. On the ground before each was a transparent bottle containing orange-colored juice.
In exchange for the hostages, the militant group is demanding the release of Mujahid Dokubo-Asari, the oil region's best-known militia leader, who was jailed in September on treason charges. The group is also calling on Royal Dutch Shell PLC to pay $1.5 billion in compensation for oil pollution.
The group has also claimed a string of attacks on pipelines and oil facilities that cut oil exports by nearly 10% in Nigeria, Africa's leading oil producer and the fifth-biggest source of U.S. oil imports.
The militants have also said they want to secure local control of oil wealth for the impoverished ethnic minorities in the Niger Delta, who accuse bigger ethnic groups from other regions of denying them access.
Over the past two decades, oil companies in the Niger Delta have faced frequent disruptions to their operations, including protests, pipeline sabotage and kidnappings.
Most hostages, however, have been freed within days after ransom payments, and rarely harmed. read more

royaldutchshellplc.com and its sister websites royaldutchshellgroup.com, shellenergy.website, shellnazihistory.com, royaldutchshell.website, johndonovan.website, shellnews.net and shell2004.com are all owned by John Donovan. There is also a Wikipedia article.

The Observer: Oil delta burns with hate

Escalating violence means western firms are thinking of quitting Nigeria. China may be quick to fill the vacuum, writes Nick Mathiason
Sunday January 29, 2006
Levels of thuggery that once seemed acceptable to major oil firms operating in the Nigerian delta are now spilling over into widespread, vicious attacks. Will murder and kidnapping force them to pull out of the country altogether?
Fears are growing from investors, oil workers and agencies working in the Niger delta that the escalating violence may force the four major oil companies – Royal Dutch Shell, Chevron, Exxon and ENI – to close onshore operations.
Paul Horsnell, head of commodities research at Barclays Capital, said: 'There's always been low-level violence about not enough money trickling down or local difficulties, but this is different. There's a sliding scale of events that could happen and at one end it gets to the stage where it becomes impossible to continue operations in certain areas of the delta. There's no getting away from the fact that this is a possible outcome.'
And, in a new report out last week, Stakeholder Democracy Network, an anti-corruption campaign group active in the region, said: 'We, and most experts on the region, are gravely concerned by many strong indications that, despite the outward appearance of a year-long ceasefire, various factions are quietly arming as though for war… The most pessimistic assessments suggest Shell and foreign oil operators may have to go offshore altogether by 2008 as security and public order deteriorates.'
The report suggests that the crisis could worsen once the election primaries begin in a few months: 'This is far sooner than the 2007 horizon line … previously suggested by many analysts.' Attacks last week on Italian oil firm Agip resulted in the death of nine people. This followed the blowing up of a major pipeline and the kidnapping of four foreign oilmen working offshore.
Shell relies on Nigeria for 11 per cent of its global output. But it has suffered four attacks in recent weeks and had to cut production in the delta by 10 per cent. Now some Shell insiders are privately questioning how secure its operations are and to what extent it can rely on production there. Shutdowns would not only hurt the revenues of oil majors but also threaten a surge in oil prices.
The Niger delta is already classified by international agencies as a danger zone on a par with Chechnya and Colombia. The number of guns in circulation has increased dramatically since 2003, the year the last presidential elections were held. Those elections were widely condemned as being rigged, with armed gangs seizing ballot boxes and intimidating voters.
Since then hopes have dwindled that Africa's largest country, with a population of 129 million, would transform itself into a functioning democracy. The state has failed to protect its citizens from criminality and impose anti-pollution measures to curb the worst excesses of the oil industry.
Criminal gangs with international connections make billions of pounds by 'bunkering' – illegally siphoning off – a tenth of all Nigerian oil. Some say the oil firms must know oil bunkering happens but tolerate it so operations can continue. Bunkering gangs then launder their cash abroad and buy machine guns to bolster their criminal empires.
Then there has been the recent rise of the Movement for the Emancipation of the Niger Delta (Mend). The organisation claims responsibility for the kidnapping of Shell workers and is demanding $1.5bn compensation from the firm for the pollution it says Shell has caused.
'Mend has so far perpetrated the most brazen act of terror in the region for years and taken it on to a new level,' says an aid worker. 'There's a feeling of fear in communities near oil installations who are braced for government reprisals.'
Oil shutdowns in Nigeria would have serious implications as the light, sweet crude that lies beneath the delta is excellent for making gasoline. One analyst said: 'The Saudis have offered to make up for any loss of production but its oil is not of the same quality.'
In 50 years, Nigeria has earned more than $350bn from oil, but the consequent wealth has remained in the hands of a ruthless, corrupt elite. Former president Abaja moved several billion dollars out of the country and much of that cash went through banks in the Square Mile.
The country could have earned more: increased refining capacity would allow it to diversify its economy and charge more for oil exports.
Glasgow Labour MP John Robertson, chairman of the All-Party Parliamentary Niger Delta Group, led a Commons delegation to the region last year. He said signs of corruption were everywhere. Examples include roads of short distances costing several billion pounds that taper off into pot-holed dirt tracks. Ostentatious wealth – cars, jets, jewellery – taunt the majority of those living in poverty in the delta. But the dam appears to be breaking.
Meanwhile, the oil firms have lost credibility with communities, who blame them for failing to tackle gas flares and for the contamination of creeks and waterways that is ruining the fishing industry. The oil firms' attempts to engage with communities have been disastrous. Plans to provide facilities such as hospitals and schools have come to nothing. Empty buildings stripped of all valuable materials litter the countryside. And oil firms face accusations of paying militants to act as security for their operations, thereby fuelling the flames of gang rivalry.
Some suggest that the wave of violence will see oil majors sell out to Chinese firms desperate to secure oil supplies, who will come into the country with a clean slate. Two weeks ago, Cnooc, the state-owned Chinese energy company, said it would pay nearly $2.3bn to acquire a large stake in a Nigerian oil and gas field, one of the biggest overseas acquisitions by a Chinese company.
Others say that the Nigerian government has plans to take control of the oil industry in a tactic similar to that used by Russia's President Putin. One thing is clear, though: the oil supply from Nigeria is now far from secure – and it could not have come at a worse time for the global economy. read more

royaldutchshellplc.com and its sister websites royaldutchshellgroup.com, shellenergy.website, shellnazihistory.com, royaldutchshell.website, johndonovan.website, shellnews.net and shell2004.com are all owned by John Donovan. There is also a Wikipedia article.

Sunday Times: Shell and Exxon to smash transatlantic profit records

Tracey Boles
OIL companies on both sides of the Atlantic will gush record profits this week, with America’s Exxon Mobil posting the world’s biggest-ever profit, and Shell setting a new record for British companies.
Exxon is tomorrow expected to unveil a profit of about $32 billion (£18 billion) for 2005, according to Thomson Financial. It will be the largest single profit in the history of corporate America.
It shatters last year’s previous record for a company of $25 billion, set by Texas-based Exxon, the world’s largest listed oil company, and easily trumps the benchmark $22.1 billion made by Ford in 1998.
On Thursday Shell will top record-setting results with an estimated profit of $23 billion for 2005. This is up nearly a third from 2004, when its profits were $17.6 billion, at the time the biggest by a British company.
BP is expected to continue the trend on February 7 by revealing full-year profits estimated at $21.7 billion. This contrasts with earnings of $16.4 billion in 2004.
Oil-company profits, driven by the surging price of oil and gas, have drawn criticism as the cost of petrol remains high and domestic-heating bills soar.
Gordon Brown increased taxes on oil companies in his pre-budget statement in November. The tax rise, which came into effect this month, has already caused Shell to scale back its plans for exploration in the North Sea.
The bumper profits enjoyed by big British companies have caused several political outcries in recent years, especially those posted by Vodafone and HSBC.
In November American oil firms were forced to justify their bulging third-quarter profits to Congress, where they tried to dissuade the US government from imposing a windfall tax on their gains. Exxon has long been a focal point for criticism, not least because the $34 billion in its coffers could pay for the construction of more than a dozen refineries.
Shell, the world’s third-largest oil firm by market value, is still living down a reserves scandal that shocked investors two years ago.
The revelation that its oil and gas reserves were overstated hit Shell’s shares hard and forced changes in the way it is run.
The Anglo-Dutch company will announce the details of the 2006 share buyback programme alongside its results. Shell paid dividends of $10 billion in 2005, up from $7.2 billion in 2004, and bought back shares worth $5 billion, compared with $1.7 billion in 2004. read more

royaldutchshellplc.com and its sister websites royaldutchshellgroup.com, shellenergy.website, shellnazihistory.com, royaldutchshell.website, johndonovan.website, shellnews.net and shell2004.com are all owned by John Donovan. There is also a Wikipedia article.

Financial Mail, London, Week Ahead column

Daily Mail – London: KRTBN; Jan 29, 2006
Royal Dutch Shell is expected to make corporate history on Thursday when it announces the biggest profits from a UK company.
The figures, the first since the group merged its UK and Dutch sides last summer, are expected to show before-tax profits of GBP12.9 billion, up from GBP9.4 billion last year.
But Shell is unlikely to retain its record for long. Oil rival BP, Britain's biggest company, will release full-year figures next week, and some analysts predict pre-tax profits could top GBP18 billion. read more

royaldutchshellplc.com and its sister websites royaldutchshellgroup.com, shellenergy.website, shellnazihistory.com, royaldutchshell.website, johndonovan.website, shellnews.net and shell2004.com are all owned by John Donovan. There is also a Wikipedia article.

Daily Telegraph: Shell sets $20bn-plus profits record

By Sylvia Pfeifer (Filed: 29/01/2006)
Royal Dutch Shell, the Anglo-Dutch oil giant, is on course to set a British corporate record when it reports post-tax annual profits of about $23bn (£13bn) on Thursday.
Industry analysts forecast that Shell will announce adjusted net profits for the fourth quarter of $5.4bn, fuelled by high oil prices, which last week hit $66 a barrel. The forecast represents a 14 per cent rise from the $4.72bn Shell made during the same period last year.
Even if its earnings are half the level forecast, the oil giant is set to become the first UK-listed company to report annual profits above the $20bn mark and break its own record of $17bn last year.
The bulk of these record profits are likely to be reinvested as the industry struggles to find new oil and gas reserves. Last month the company raised its annual spending forecast by 27 per cent to $19bn, citing increasing costs and the need to find new reserves.
Jeroen van der Veer, Shell's chief executive, said the company would consider making acquisitions of up to $10bn (£5.6bn) in order to increase its proven oil and gas reserves.
“Even in times of high oil prices it's possible, but not sure, that you may do small acquisitions or swaps of up to $10bn,'' he said at the World Economic Forum in Davos.
He would not comment on possible targets, but the most likely strategy is for Shell to consider asset swaps or to buy oilfields because few groups in the industry are now worth less than $10bn.
Investors, however, are also in line to benefit from the profit bonanza. Last year Shell pledged to return $5bn to shareholders via a share buyback- at the higher end of previous expectations. Analysts expect the payout to remain at that level for the foreseeable future. At its third quarter results last year, the company also announced an interim dividend of €0.23 per share for the quarter.
Shell's stellar performance over the past 12 months is in marked contrast to the problems it faced two years ago when it admitted that it had overstated its proven oil and gas reserves.
The scandal led to the departure of its three most senior executives, including Sir Philip Watts, the chairman. It also acted as a catalyst for the wholesale shake-up of the group and prompted the historic merger of its two operating companies, Shell Transport & Trading and Royal Dutch Petroleum.
The company has paid more than $150m in fines imposed by US and British regulators over the reserves scandal. Last year it paid $90m to settle claims brought by its US employees, who also claimed that their pension fund had been hit by the reserves restatements.
Nevertheless, Shell is not out of the woods yet. Earlier this month, in a separate development, 26 mostly Dutch pension funds launched an action against the group for overstating its oil reserves between 1999 and 2003.
Led by ABP, Europe's largest retirement fund, the pension funds have withdrawn from a class-action lawsuit in the US and launched their own claim in a New Jersey court for several hundred million dollars.
read more

royaldutchshellplc.com and its sister websites royaldutchshellgroup.com, shellenergy.website, shellnazihistory.com, royaldutchshell.website, johndonovan.website, shellnews.net and shell2004.com are all owned by John Donovan. There is also a Wikipedia article.

The Scotsman: Shell to post UK record £13bn profit

IAIN DEY
CITY EDITOR
OIL giant Royal Dutch Shell is poised to unveil the biggest profit ever recorded by a British company this week, clocking up earnings of close to £13bn.
Soaring crude prices, which have been close to $70 a barrel for much of the year, are expected to have propelled the company's profits almost 40% higher.
The £13bn profit figure would see Shell edge past banking giant HSBC, which recorded the highest ever profits from a UK company last year with earnings of £10bn.
Although both HSBC and Shell's rival, BP, have still to report their 2005 results, City estimates indicate that neither of the other two contenders for the title will steal it back.
The oil price boom will also see US giant ExxonMobil set a new American record this week, with analysts expecting its profits to break through $34bn (£19bn).
With petrol prices and domestic fuel bills rocketing on the back of the crude price rises, the oil companies are likely to come under further fire from consumer groups and politicians.
The profits come in spite of the additional 10% tax that Chancellor Gordon Brown levied on North Sea oil in his pre-Budget report – which prompted Shell to slash its North Sea exploration programme.
Despite the record profits, all the oil majors are likely to come under fire in the City over their exploration performance – all are believed to be producing more oil than they are now able to find.
Shell chief executive Jeroen van der Veer revealed at the Davos economic forum last week that he may be willing to spend up to $10bn (£5.6bn) on acquisitions to help plug the gap in its reserves base. The company has been repeatedly linked to a possible bid for Edinburgh-based Cairn Energy.
Merrill Lynch analysts said in a research note: “Watch for another sub-100% replacement from Royal Dutch Shell, despite a pick-up in exploration performance. The company is paying the price for chronic under-investment over the past five years.”
Shell's fourth-quarter profits are forecast to hit $5.4bn (£3bn), a rise of about 14%. Production problems in the Gulf of Mexico caused by last autumn's hurricanes will make the fourth quarter its weakest period of the year, with profits likely to be marginally down on those seen in the third quarter.
Analysts predict that Shell's output will fall 8% to around 3.5 million barrels of oil equivalent per day (boepd) in the fourth quarter, from 3.8 million boepd in the final quarter of 2004.
The group's downstream business, which incorporates refining and petrol retailing, is expected to have performed better than many of its peers, including BP.
Following the reserves reporting scandal which rocked Shell to its foundations in 2004, the company has been increasing its exploration activity.
Analysts will watch closely the extent to which Shell managed to match the oil it pumped with new finds.
Oil firms try at least to match each barrel they extract with a new discovery over time – otherwise their business will start to shrink.
In 2004, Shell replaced less than half of its production with new finds and is likely to miss the 100% reserve replacement rate in 2005 as well. read more

royaldutchshellplc.com and its sister websites royaldutchshellgroup.com, shellenergy.website, shellnazihistory.com, royaldutchshell.website, johndonovan.website, shellnews.net and shell2004.com are all owned by John Donovan. There is also a Wikipedia article.
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