ROYAL Dutch Shell reported a 16% surge in first quarter profits, helped by high oil prices, and highlighted its belief in the potential of the North Sea.

The oil and gas giant made $7.3 billion (£4.5bn) profits excluding one-offs in the first three months compared with $6.3bn (£3.9bn) in the same period last year amid booming demand for the black stuff overseas.

The results beat the $6.7bn (£4.1bn) consensus forecast among City analysts who welcomed the company's apparent return to form following a disappointing fourth quarter.

However, they may rub fresh salt into the wounds of motorists who have faced swingeing increases in petrol prices.

The average price Shell received for oil increased by 15% annually in the quarter, to $111.51 per barrel from $97.22pb in the first quarter 2011.

Crude oil prices surged to $128 a barrel for Brent last month.

Chief financial officer Simon Henry said demand for oil products is being eroded by high prices. Shell's first quarter sales of fuels like petrol and diesel fell 3% annually.

Despite a fall in gas prices in the US, where huge new supplies are being produced by operators who fracture Shale rock, the amount Shell got for its output increased by 8% annually.

Demand increased in Japan following the disaster at the Fukushima nuclear power plant.

Shell's chief executive Peter Voser said the profits growth also reflected an improved operating performance.

He said: "Our profits pay for Shell's dividends and substantial investment in new energy projects, to ensure affordable, reliable energy supplies for our customers, which create value for our shareholders."

Shell spent $0.6bn (£0.4bn) on new exploration acreage during the quarter, including offshore positions in the UK North Sea. It was awarded interests in a number of North Sea blocks in the 26th UK Licensing Round.

The company committed to investing in major developments west of Shetland last year, including the £4.5bn Clair Ridge project with BP, despite the hike in taxes in the 2011 Budget.

The head of Shell's North Sea business, Glen Cayley, is on the board of industry body Oil & Gas UK, which welcomed the Chancellor's measures to stimulate investment in this year's Budget.

However, Shell gave no indication of how the UK operations will be impacted by the decision to increase the target for asset sales for 2012 to over $4bn (£2.5bn), from $2-3bn. Mr Voser said Shell was making good progress against its targets to deliver a more competitive performance. The company is focusing investment on giant projects that could underpin growth for years.

These include the flagship Pearl GTL project in Qatar, which turns gas into valuable liquids. Production increased by 1.4% in the first quarter compared with the same period last year.

Mr Henry said the company is studying the potential for producing Shale gas in China. It has bid £1.1bn for Mozambique-focused Cove Energy.

First quarter downstream earnings fell to $1.1bn (£0.6bn), from $1.7bn (£1bn) in the first quarter 2011 reflecting weak economic conditions.

The company increased the first quarter dividend to $0.43 per share from $0.42 last time. Shares closed up 3%, 67.5p, at 2195.5p.