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Shell highlights progress made West of Shetland amid Brexit uncertainty

ROYAL Dutch Shell boss Ben van Beurden has underlined the fact the company wants to grow in the UK North Sea even as he expressed concern about the prospect of a no-deal Brexit.

Speaking after Shell posted a 36 per cent increase in annual profits to a four year high of $21.4 billion (£16.3bn), from $15.8bn, Mr van Beurden said the oil giant believed a no deal Brexit would be “a very bad outcome” but had prepared for the possibility.

Indicating that even a messy Brexit would have limited impact on the company’s plans, he said Shell was very pleased with its UK business.

After slimming down its portfolio in the UK and slashing jobs in response to the crude price plunge, Shell wants to focus on growth.

Read more: Shell approves North Sea project as interest in area grows

The company believes there is a lot of life left in the United Kingdom Continental Shelf (UKCS).

Mr van Beurden’s comments will boost hopes the recovery in the UK North Sea is set to continue, although business leaders have complained uncertainty about what Brexit may mean is deterring firms from investing in the country.

Ahead of the UK’s planned departure from the European Union on March 29, Mr van Beurden said Shell would be prepared for every eventuality.

The Dutch executive said Shell had not been in favour of Brexit and would very much regret a no-deal scenario.

However, he told journalists: “In the bigger scheme of things … this is a relatively immaterial event for our portfolio.”

Asked about the company’ plans for its North Sea operations, Mr van Beurden said: “We’re actually quite happy with our position in the UK.”

Read more: North Sea oil and gas industry to generate £10bn surplus

He noted: “On the North Sea our focus has really shifted from high-grading and taking care of details to making sure that we have growth back in our business.”

The comments highlight the change in attitudes to the North Sea in the Shell boardroom, which has been encouraged by the partial recovery in the oil price since late 2016.

Shell sold off a raft of UK assets in response to the downturn triggered by the slump in the price between 2014 and late 2016.

Mr van Beurden noted the company had approved some significant North Sea investments last year. These include plans to revamp the giant Penguins field off Shetland.

While he did not rule out selling more North Sea assets as the company looks to focus investment on high margin projects, Mr van Beurden said the company remains committed to the UKCS.

Read more: $3.8bn Shell disposal puts North Sea in focus

“We continue to believe that it will have a lot of life in it, even under the challenging circumstances that we see today,” he said.

The company’s finance chief, Jessica Uhl, said Shell was very pleased with the performance of its slimmed down North Sea portfolio.

This includes stakes in huge developments West of Shetland on which the firm can achieve high margins on its output. Shell cited the start of production from the second phase of the Clair field West of Shetland in November as a highlight of the fourth quarter.

Read more: Production at giant Shetland oil field to ‘last for decades’

Ms Uhl said: “We’re very pleased with our business in the UK … We’ve reshaped the operational heart of our upstream business in particular. So it is a strength in our portfolio.”

The company said the increase in annual profits to a four year high partly reflected the increase in oil prices during 2018, although Brent crude has fallen from $85 per barrel in October to around $62/bbl yesterday.

The fourth quarter dividend was held at 47 cents per share.

Shell has returned $4.5bn to investors under a $25bn programme it will continue this year.

Alasdair McKinnon, lead fund manager at Shell shareholder the Scottish Investment Trust, said the annual results marked another milestone along Shell’s road to recovery.

“Cash flow and profits were ahead of expectation, the dividend has been maintained and another ($2.5bn) tranche of share buybacks announced,” he added.

Royal Dutch Shell A shares closed up £0.86 at £23.62.

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