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Daily Mail: Reserves scandal still haunts Shell… signals readiness to sort out last remaining big lawsuit.

28 July 2006

Doing well: The oil giant’s rising fortunes have been prompted by the soaring price of crude

By Brian O’Connor
ROYAL Dutch Shell put a £270m price on settling a US legal action over the reserves scandal two years ago.

This is just an accounting provision, but signals its readiness to sort out the last remaining big lawsuit.

The provision is just a week’s profits for the oil giant, which made a record £3.4bn in the quarter to June, up 36pc, though its oil and gas production tumbled 13pc.

Chief executive Jeroen van der Veer has revised down forecast output for 2006 from between 3.5m and 3.6m barrels a day to 3.4m. Disruption in Nigeria cost 177,000 barrels.

With crude at $75, big oil is a giant money machine. The world leader, Exxon Mobil, made £5.6bn in the quarter, the second biggest US quarterly profit ever recorded.

Shell’s operating cash flow was £6.4bn. Debt is minimal. Dividends rose 9pc to 17.08p.

Van der Veer pressed the starting button on the huge Pearl project in Qatar, which turns gas into naphtha and kerosene. A big petrochemical plant in Singapore is also going ahead. Shell’s 2006 capital spending is £lO.1bn, with £11.3bn planned for 2007 – much higher than BP’s £8.3bn-£8.5bn.

Some fear Shell is reverting to type – splurging money on costly projects instead of improving its patchy record of finding oil. Van der Veer would only say exploration performance is ‘so far so good’.

The reserves scandal erupted because Shell manipulated figures to cover up poor performance. Van der Veer says it can boost output by bringing more of its vast resource base on stream, but some of this is expensive oil from shale and tar sands.

The Shell chief refused to comment on reports that BP had mooted a merger with Shell last year, saying: ‘Ask EP’.

After BP’s row over retirement age, he must have relished pointing out that Shell was more flexible on this issue.

Shell’s UK quoted B shares rose 41 to 1981p. Peter Hitchens at broker Teather & Greenwood expects £12bn full-year profits and says: ‘Good figures. The concern is that some future production growth comes from high-cost projects’. and its sister non-profit websites,,,,,, and are owned by John Donovan. There is also a Wikipedia feature.

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