Soaring oil price fuels a jump in Shell profits

Shell has reported an 11 per cent rise in profits for the first quarter, as the soaring price of oil outweighed the drag of lower US gas prices on its bottom line.

The Anglo-Dutch oil giant's shares jumped by more than 3 per cent as it reported a first-quarter profit of $7.7bn (£4.7bn) and raised its dividend for the period by 2 per cent to 43 cents a share.

Its profit was driven by the high oil price, with Brent crude averaging $118.60 a barrel during the first quarter, up 12 per cent from $105.43 in the same period a year earlier. Oil and gas production increased 1.4 per cent to 3.55 million barrels a day.

Peter Voser, the chief executive, said: "Our profits pay for Shell's dividends and substantial investments in new energy projects, to ensure affordable, reliable energy supplies for our customers, which create value for our shareholders."

Mr Voser said Shell had increased the value of the assets it expects to sell this year to $4bn from its previous estimate of $2bn to $3bn, to concentrate on higher-growth activities.

Disposals this year will include petrol stations in North America and a liquefied petroleum gas operation in Malaysia.

Although Shell profited handsomely from oil production, Mr Voser said he saw "continued challenges" in refining and North American natural gas, which has plummeted in price as companies have piled into the US to tap the shale gas boom.

Shell reported a 35 per cent jump in profits to $6.2bn in its so-called upstream division, which explores for and extracts oil and natural gas. Meanwhile, its downstream business, which includes refining, saw a 32 per cent fall in profits to $1.12bn.

Mr Voser said in the short term, oil prices would continue to be volatile against a backdrop of the eurozone debt crisis and political tensions over Iran, a major producer.

"Energy demand fundamentals are robust, but with near-term volatility in energy prices as a result of economic and political events," he said.

Shell is also hoping to capitalise on the expected shale gas revolution in China, after signing the country's first production-sharing contract last month with China National Petroleum Corporation.

Shell's shares rose 77.5p to 2,266.5p.