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Shell vows to pursue controversial Arctic drilling plans

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By Bob Davies: 1 November 2013

Shell vowed to press on with its controversial Arctic drilling plans, despite a warning that charges linked to the project would weigh on its already weak profits.

Pre-tax earnings slipped by 31 per cent to £2.65billion in the third quarter, amid rock bottom refining margins and a fresh charge on its troubled Nigerian operation.

Finance director Simon Henry warned the firm was also likely to take a £125million charge in the fourth quarter on its stalled quest to find oil in the Beaufort and Chukchi seas off Alaska. Shell’s Kulluk drilling rig ran aground in stormy seas on New Year’s Eve, putting its Arctic plans on ice indefinitely.

Henry said Shell would write off the value of the rig if the cost of repairing it exceeds the likely benefit. Shares fell 107.5p to 2076.5p following the warning, despite a 5 per cent increase in the dividend to 0.45 cents (28p) per share.

But while Henry could not predict for certain whether Shell will begin drilling next year, due to uncertainty over environmental permits, he issued a firm commitment to Arctic exploration.

He said the Arctic was ‘the most attractive single opportunity for the future’, adding that the Chukchi sea was ‘top of the list’.

Shell has also suffered major setbacks in Nigeria, where theft from pipelines has triggered costly shutdowns and forced it to put onshore oilfields up for sale. This cost the firm some £187million during the period, as it lost 65,000 barrels per day of production.

Third-quarter output was 2.9million barrels per day, down 2 per cent including the effect of its Nigerian woes but up 1 per cent on an underlying basis.


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