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Shell's record profits branded 'obscene'
Terry Macalister

Shell petrol pump. Photograph: David Sillitoe

Shell was today accused of making "obscene" profits at a time when pensioners, motorists and industry are struggling with higher energy prices when it unveiled annual earnings of $27.6bn (£13.9bn).
The oil major has made British corporate history with the record figures, which are equivalent to more than £1.5m an hour and come at the end of a three month period when crude prices have averaged over $90 a barrel.
Jeroen van der Veer, chief executive of Royal Dutch Shell, described the performance as "satisfactory" and admitted that overall production for the year had actually dropped 2%.
He said the company had benefited from launching new oil and gas projects but had suffered in the last quarter from weak refining margins.
"We are proceeding with the rejuvenation of our portfolio with investment in new legacy assets and through disposals. The execution of our strategy is on track."
But Tony Woodley, joint general secretary of Unite the union, Britain's largest trade union said a windfall tax should be imposed on "greedy" companies such as Shell whose profits are more than four times higher than retailer, Tesco.
"Shell shareholders are doing very nicely whilst the rest of us, the stakeholders, are paying the price and struggling," said Mr. Woodley. "Record profits of over thirteen and a half billion pounds at Shell and cumulative oil industry profits in excess of fifty billion in the last three years are, quite frankly, obscene. It is time the government acted."
A windfall tax would be the "right and proper" thing to do over and above the normal taxes the oil companies would pay.
"The oil companies can maintain their investment programmes, maintain their explorations, pay their normal taxes, maintain good returns to shareholders but still put their hands in their treasure chests and pay a windfall tax," he added.
Motorist organisations have already complained about pump prices soaring to over £1 a litre and although the government tax take makes up much of that price, the Road Haulage Association described Shell's profits as "absolutely scandalous".
Nigerian problems
Van der Veer denied that the company was profiteering on the back of motorists, arguing that Shell profits were mainly coming from the upstream side of the business "and not at the gasoline pump in the UK".
A large part of the petrol price could be attributed to taxation over which the company had no control and any cross-subsidy from one part of the business to another would be effectively "killing yourself".
While the company had made annual profits of $27bn, it had invested almost the same amount in developing new projects along with an additional $7bn on securing a larger equity holding in Shell Canada.
A windfall tax against the oil industry would be counter-productive, he argued. "Any additional tax - if significant - then we can invest less and over time it will impact on our production," he said.
Shell's total oil and gas output in 2007 fell for the fifth year in a row and the company laid the blame for the decline partly on Nigeria.
Van der Veer met the president of the country last week and admitted the company was suffering from escalating violence in the Delta region and problems obtaining funding from its state-owned oil partner.
Shell took a $716m charge in the last quarter of the year to pay for a downsizing and restructuring of the onshore side of the business. "The Nigerian government is slow funding their share of the costs," said van der Veer who has previously avoided being critical of the authorities there.
There is widespread speculation that the government wants a bigger slice of the action in a similar way to the resource nationalism being executed in Russia, Venezuela and elsewhere. Van der Veer admitted globally the competition from state-owned national oil companies was a dangerous trend.
Will it grow? "Yes, it will, especially if gas prices stay high. Does it impact the (Shell) strategy? Yes, it does," he added, saying oil companies such as Shell had to provide skills and technology others did not have.
The Shell boss said the company was facing a 10% annual increase in inflationary costs but shrugged off any reduction in energy demand as a result of any US of global economic slowdown. "We expect year 2008 to have higher energy demand in the world than in 2007," he added.
The full year profits at Shell were 9% up on last time whilst the last quarter figures were up 11%, but no details were provided of the profits made from petrol sales.
The Anglo-Dutch company has declared an 11% rise in the last quarter dividend and expects a similar increase in the first quarter dividend. It spent $4.4bn last year buying back its own shares and has spent $26bn on new oil and gas

Posted Date: 
31 January 2008 - 9:34pm