Shell vows to return to the Arctic as profits slide by 31 per cent

Oil giant blames weak margins in refining and disruptions and theft in Nigeria for the slump

Shell has pledged to return to the Arctic as soon as possible after revealing a further $200m (£125m) hit from the grounding of its Kulluk oil rig off the Alaskan coast on New Year's Eve.

The company has already spent more than $5bn (£3bn) on Arctic exploration, including costs relating to the Kulluk incident, but has yet to locate any oil-bearing rocks.

However, the FTSE 100 group's chief financial officer, Simon Henry, insisted Shell remained committed to producing oil in the Arctic. "It remains the most attractive single opportunity for the future … by far the biggest prize," he said, adding that Shell hoped to resume exploratory drilling there next year if it can secure permits and authorisations in time.

Mr Henry was speaking after Shell reported a 31 per cent slide in third-quarter profits to $4.25bn on the back of weak margins at its "downstream" refining business, as well as production disruptions in Nigeria, which knocked about $300m off its bottom line. The company's shares fell by 117.5p to 2,159p.

Business in Nigeria was hit by widespread oil theft in the Niger Delta region and a blockade of its liquefied natural gas plant – Nigeria LNG – after the country's Maritime Security Agency blocked ships from leaving the terminal in July because of a dispute over unpaid levies.

The chief executive Peter Voser, announcing his final results before retiring at the end of the year, said: "We are facing headwinds from weak industry refining margins and the security situation in Nigeria, which continue to erode the near-term outlook."

Refining margins have been hit across the industry, amid rising competition from super-refineries in Asia and the Middle East and weak demand for petrol and diesel in the West.

Shell said its downstream profits for the period fell 49 per cent to $892m, two days after BP reported a 30 per cent drop in its third-quarter profits.

Meanwhile Exxon, the largest oil company in the world, also blamed refining for poor third-quarter results yesterday. The US giant reported an 81 per cent drop in downstream profits to $592m, dragging down the group's profits by 18 per cent to $7.87bn.

Shell's activities in the Arctic, which are controversial with campaigners concerned about the impact of any oil spills on the environment there, have been suspended since the Kulluk ran aground while being towed to a Seattle shipyard for routine maintenance. The latest $200m charge is an estimate and the precise number will be contained in Shell's fourth-quarter results, which will be announced early next year. It relates to the fact that the Kulluk is unlikely to be brought back into operation.

The company said its focus in the Arctic would shift from the Beaufort Sea, where it carried out its previous exploration, to the neighbouring Chukchi Sea. Shell would not rule out returning to the Beaufort Sea in the future, but said the water there was too shallow to operate in at the moment without the Kulluk or a similar-sized rig.

Mr Henry said Shell has secured a replacement rig, suitable for use in the deeper Chukchi Sea, where he believes oil reserves are more plentiful.

"We have not confirmed yet if we drill in 2014 but we do expect to file an exploration plan shortly. Clearly we would like to drill as soon as possible," he added.

Mr Voser said Shell was "rich with investment opportunities" and would have to make some "hard choices" in the next few quarters to make sure it picked the right projects.

He assured shareholders that dividends were still a key priority, and said:"We have distributed more than $11bn of dividends in the last 12 months." Shell's third-quarter dividend is 45 cents a share, a 5 per cent rise from a year earlier but the same as the previous quarter.

Start your day with The Independent, sign up for daily news emails
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
Angel Di Maria is shown the red card
tech
Sport
Roger Federer after his win over Tomas Berdych
sport
Life and Style
News in briefs: big pants in 'Bridget Jones's Diary'
fashionBig knickers are back
Sport
James Milner is set to sign for Liverpool this week despite rival interest from Arsenal
sportReds baulk at Benteke £32.5m release clause
News
The controversial Motor Neurone Disease Association poster, featuring sufferer Michael Smith, has drawn a series of angry complaints
newsThis one has been criticised for its 'threatening tone'
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Guru Careers: Communications Exec / PR Exec

£25 - £30K: Guru Careers: We are seeking a highly-motivated and ambitious Comm...

Day In a Page

On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific
In this the person to restore our trust in the banks?

In this the person to restore our trust in the banks?

Dame Colette Bowe - interview
When do the creative juices dry up?

When do the creative juices dry up?

David Lodge thinks he knows
The 'Cher moment' happening across fashion just now

Fashion's Cher moment

Ageing beauty will always be more classy than all that booty
Thousands of teenage girls enduring debilitating illnesses after routine school cancer vaccination

Health fears over school cancer jab

Shock new Freedom of Information figures show how thousands of girls have suffered serious symptoms after routine HPV injection
Fifa President Sepp Blatter warns his opponents: 'I forgive everyone, but I don't forget'

'I forgive everyone, but I don't forget'

Fifa president Sepp Blatter issues defiant warning to opponents
Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report

Weather warning

Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report
LSD: Speaking to volunteer users of the drug as trials get underway to see if it cures depression and addiction

High hopes for LSD

Meet the volunteer users helping to see if it cures depression and addiction
German soldier who died fighting for UK in Battle of Waterloo should be removed from museum display and given dignified funeral, say historians

Saving Private Brandt

A Belgian museum's display of the skeleton of a soldier killed at Waterloo prompts calls for him to be given a dignified funeral