Lloyds List: Investment concern as Shell earnings soar: Capital expenditure figure for year of $15bn excludes cost overruns on Sakhalin II, writes Martyn Wingrove: “STRONG oil prices have sent unified Royal Dutch Shell's earnings into a 26% rise in the second quarter, but there are concerns over rises in capital investments on Russian projects.”: Friday July 29, 2005
STRONG oil prices have sent unified Royal Dutch Shell's earnings into a 26% rise in the second quarter, but there are concerns over rises in capital investments on Russian projects.
The London-listed oil group reported earnings of $4.63bn in the second quarter compared with $3.66bn for the same period last year, but its capital expenditure climbed 20% to $4.13bn in the quarter, $2.4bn of this in upstream operations.
The Anglo-Dutch group has seen its oil and gas production fall since the first quarter to 3.5m barrels of oil equivalent a day from almost 3.85m in March, although it was flat compared with the second quarter last year.
Its liquefied natural gas sales were 2% higher due to a fourth train at the Australian North West Shelf coming on line late last year and despite plant closures in Oman and Brunei.
'Building on an excellent start of this year our second quarter results were good as we benefited from high oil prices and refining margins,' said chief executive Jeroen van der Veer.
'We continued to have exploration success and production was slightly above our expectations. We continued to grow our LNG equity sales and downstream had excellent cash generation.' Royal Dutch Shell confirmed that capital expenditure this year will remain at $15bn despite efforts to increase exploration spending to $1.8bn over the next two years.
This also excludes cost overruns on the Sakhalin II project, where the Shell-led group has doubled investment forecasts to $20bn.
Progress was made on LNG projects in the quarter with an agreement signed to redevelop and expand an LNG plant in Libya besides the start of engineering on the Gorgon LNG project in Australia and the sanctioning of a fifth train at the North West Shelf.
Shell is expecting two LNG trains to start in Nigeria before the end of this year and the Qalhat LNG plant in Oman is on schedule for first deliveries at the start of 2006.
The company confirmed it made two large oil discoveries in deepwater exploration blocks off Nigeria on the Bobo and Etan prospects this year.
These discoveries mean Shell has found hydrocarbons on five of its eight drilled 'Big Cat' prospects in Nigeria, Norway and Australia since January, each of these having more than 100m barrels of oil equivalent reserves.
In the second quarter, Shell made 12 discoveries in Australia, Malaysia, Netherlands, Nigeria, Egypt, Britain and Oman.
'This year we had 21 successful exploration and appraisal wells with a 62% success rate and continue to strengthen our acreage position,' said Mr van der Veer.
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