Shell attacks British Gas over contracts

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The Independent Online

Industrial Correspondent

Shell yesterday fuelled the row over British Gas's high-cost long-term contracts with North Sea producers, calling on the company to propose a solution and accusing it of negotiating through the press. Chris Fay, chairman of Shell UK, also said that the problem with contracts, which are forcing British Gas to buy more than it can sell, has been over-stated and that the solution "is in the gift of British Gas management".

British Gas has called repeatedly for renegotiation of billions of pounds of contracts with offshore groups which, according to some estimates, leave it with pounds 1.5bn in liabilities. The company has also urged the Government to support it in its quest.

Mr Fay said: "I do not think the problem is really as big as some people are saying. The issue is one of volume management and not of prices and I believe that the answer has been in the gift of British Gas management. The question I have to ask is what have we done wrong." He accused the company of taking a "monopolistic, big-brother approach" to the issue. "British Gas has never to this day come to us with a proposal. They wait for suggestions, take the nice bits and leave the nasty ones."

Mr Fay was speaking as Royal Dutch/Shell announced a higher-than-expected increase in dividend for 1995 but profits which disappointed City analysts. Current-cost profit rose by 25 per cent to pounds 4.5bn in 1995 excluding special items, but fourth-quarter earnings dropped by 24 per cent to pounds 851m. Shell's shares jumped by 11.5p to 893p on the London Stock Exchange at one point, largely because of the dividend increase, but closed down 12.5p at 869p.

Investment Column, page 24