Actually Not so Good for Shell

By CHURCHOUSE, Nick

SHELL OIL NZ has made a $491 million profit over 2007, a 7.6 per cent increase on 2006, but has been hit by the skyrocketing oil prices with actual business profits down.

The oil company’s revenues for the year ended December 31 were up 5 per cent, but profits for its “upstream” activities — oil and gas exploration and production — and its downstream retail activities had actually declined.

Profits from the exploration and production business dipped 13 per cent to $281 million from $326 million in 2006.

The downstream retail business baseline profit nearly doubled from $129 million to $250 million, mainly because of large one-off items.

These included the sale of its lpg business to BOC Gases for an undisclosed sum and the sale of EnviroWaste, for an undisclosed sum estimated at $365 million, by Shell’s part-owned subsidiary Fulton Hogan.

Actual retail business profits declined by about $8 million compared with 2006, to $38 million.

Shell would not comment on the results, but fuel sales margins were under pressure from wildly fluctuating product prices for refined fuel and crude oil during the year.

Shell Oil International produces a small percentage of the world’s oil output and buys refined fuel off the market to put into its service stations.

The increasing international price of refined fuel squeezed import margins, which were about 15-17 per cent before taking into account the retail costs of transport and sales.

As a result pump prices for 91- octane rose from $1.37 a litre in January 2007 to $1.74 in November. The price is now $2.19 per litre.

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