£13bn: Oil giant announces record UK company profits

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The Independent Online

Oil giant Royal Dutch Shell announced record profits for a UK company of £12.93 billion today.

The figure - which equates to almost £1.5 million an hour - was up nearly a third on last year, when it set a UK record with profits of 17.59 billion US dollars (£9.8bn).

It follows a year in which the cost of crude jumped from below 45 US dollars a barrel to hit a new record above 70 US dollars.

Shell made 5.4 billion US dollars (£3.04bn) in the last quarter of its financial year, against 5.22 billion US dollars (£2.94bn) in the same period last year.

The group said it expected to use some of the windfall to return up to five billion US dollars (£2.82bn) to investors through share buybacks in 2006.

The bulk of Shell's profits come from its "upstream" business - getting oil and gas out of the ground. This division has been boosted by the spiralling cost of crude oil, which rose sharply last summer on tensions in oil-producing countries and a particularly bad hurricane season in the Gulf of Mexico.

But the storms also disrupted Shell's production, shutting refineries temporarily and forcing it to spend significant sums on repairs.

Chief executive Jeroen van der Veer said: "Our good performance in the fourth quarter of 2005 gives us a solid platform to build on in 2006."

Production fell to 3.5 million barrels a day during the final quarter, down from an equivalent figure of 3.8 million barrels last time.

Shell said its reserves replacement ratio - which measures how successfully it replaces oil pumped out of the ground with new reserves - was expected to be in the range of 60% to 70% for 2005, on an underlying level.

This measure is closely watched by analysts following last year's grim news of successive reserves downgrades, which sent the figure down to 15% to 25%.

The group said it continued to target 100% over the 2004 to 2008 period - an achievement which would show it found as much oil as it pumped.

Shell's results come after Texas-based oil giant Exxon Mobil kicked off the oil reporting season with profits of 33.86 billion US dollars (£19.2bn) in its last financial year - the biggest surplus yet in corporate history.

UK rival BP is also due to report full-year figures next week, with analysts pencilling profits before exceptionals of around 21.6 billion US dollars (£12.2bn).

Tony Woodley, general secretary of the Transport and General Workers Union, said: "This year's extraordinary profits are due almost entirely to the very high price of oil.

"Part of this windfall should be handed back to the public through a one-off tax to help ease the pensions crisis facing thousands of workers."

Andrew Spence, chairman of the Fuel Lobby, which last year organised protests to galvanise the Government into bringing down tax on fuel, said: "It is ridiculous, absolutely ridiculous.

"Yet again the British motorist is being hammered by, if not excessive taxation, then excessive profiteering.

" We are getting hit on all sides. All we want really is - give us an alternative and we will use it."

Shares were 2% lower today.

Within the exploration and production division, earnings of 14.24 billion US dollars (£8.03 billion) for 2005 were 45% higher than a year ago, as higher oil prices were partly offset by lower volumes and higher costs.

Shell said its production outlook for 2006 was unchanged from earlier guidance, and in the lower half of the range of 3.5 to 3.8 million barrels a day.

It expected its Mars platform in the Gulf of Mexico to start production by the middle of 2006 following hurricane damage, with full production set to resume during the second half of the year.

The profits haul will provide a boost to UK pension funds as most funds have holdings in the oil giant.

Ann Robinson, director of consumer policy at switching and comparison service uSwitch.com, said: "Today's announcement of £12.9 billion profits from Shell is great news for shareholders but little comfort for the 1.8 million households that are currently victim to fuel poverty in the UK.

"We believe that organisations like Shell should be doing more to protect UK consumers, who are ultimately footing the bill for these profits.

"By doing more for those in fuel poverty in the UK, Shell could help the Government, which will struggle to eradicate this problem by 2016."

" There are more than 1.8 million households in fuel poverty in the UK. If Shell was to make a significant, positive impact on these households by donating £75 to each of them, it would only equate to 1.05%4 of its profits."

She urged lower income customers to check suppliers to ensure they were getting the best deal, and added: "In December, the Government committed to addressing the problem of fuel poverty by doubling North Sea oil taxation from 10% to 20%.

Although this is a positive step, its target to eliminate fuel poverty by 2016 is still highly unlikely and could be significantly aided by companies like Shell."