Shell considers big drive into Russia

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The Independent Online
Shell, the Anglo-Dutch oil group, could be about to launch its biggest drive yet into the Russian oil business, according to one of the country's new agencies.

As Chris Godsmark, Business Correspondent, reports, the speculation came as the company disappointed analysts with a small increase in profits.

Reports yesterday said Shell was planning to make a joint bid with Gazprom, the oil and gas group, for Rosneft, one of Russia's biggest oil businesses. The Russian government intends to privatise Rosneft next year.

Shell described the reports as "speculation" yesterday and declined to comment further. The oil giant has already made more limited in-roads into Russia, though a partnership in an offshore venture with Marathon, Mitsubishi and Mitsui. The company has also been given approval to build several petrol station sites in St Petersburg, with the first garage due to open this year.

The speculation follows indications by British Petroleum earlier this week of renewed interest in Russia after a disappointing experience in the early 1990s. BP has recently expanded a chain of petrol stations in Moscow and said it was debating whether to step up its investment programme into the upstream oil exploration business. John Browne, chief executive, said BP was "talking to lots of people" in Russia and was encouraged by the improving political climate for foreign investors.

Shares in Shell Transport, the UK-quoted part of the group, fell 8p yesterday to 412.5p, after the company revealed a modest 5 per cent rise in earnings in the third quarter, excluding special items, to pounds 1.17bn. Shell said the results was its second record third-quarter performance in a row, but analysts pointed to continuing uncertainty over the future of the group's pounds 7bn cash pile.

One analyst, John Toalster from Societe Generale, said: "There is a lot of hope value and nothing is materialising." Shell has previously said a buyback was unlikely in the short term because of unfavourable tax treatment in the Netherlands.

Shell has raised expectations with recent deals, including buying out its Italian joint venture partner, Montedison, in the Montell plastics making business.

The results were boosted by continuing cost cutting in Shell's exploration and production business, which partly offset the recent drop in oil prices. Third-quarter earnings from exploration and production fell 1 per cent, to pounds 595m. Shell yesterday said it was pleased by the efficiency gains, which a spokesman described as "self help", apparently borrowing a phrase which has become BP's mantra.

Profits margins from oil refining and marketing, including petrol retailing, improved significantly. Refining and marketing earnings between July and September were pounds 451m, up 7 per cent on the previous year.

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