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Shell vows to invest billions in North Sea

THE chief executive of Royal Dutch Shell has said the company will invest billions of dollars in the North Sea in coming years and signalled it has no major concerns about the prospect of Scotland voting for independence.

INVESTMENT: Ben van Beurden says Shell will pump billions into its North Sea concerns. Picture: Chris Bolin
INVESTMENT: Ben van Beurden says Shell will pump billions into its North Sea concerns. Picture: Chris Bolin

Ben van Beurden highlighted the oil and gas giant's enthusiasm for areas like West of Shetland after the company posted a one third increase in underlying profits for the second quarter helped by strong oil prices.

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The Anglo-Dutch company made $6.1 billion (£3.6bn) net of one-offs in the three months to June. It made $4.6bn in the same period of 2013 under Mr van Beurden's predecessor Peter Voser.

Asked if Shell had developed contingency plans for Scotland becoming indendent following the referendum in September, Mr van Beurden said: "As I've said before in December I think we would prefer it for the UK to remain a single country.

"There is of course uncertainty that would flow from a Scottish independence outcome, but then having said that we would of course deal with Scottish independence in the way that we would have to. I don't think there is in that sense anything that we are deeply concerned about."

Mr van Beurden, who took charge in January, indicated that Shell is likely to remain a big player off the UK after he has completed rationalising the company's global porfolio to boost returns.

Shell put three relatively small, mature assets off Scotland, including the Sean field, up for sale earlier this year. However, Mr van Beurden indicated sales of such assets formed part of routine house-keeping in the North Sea.

He noted: "You have to bear in mind that there's also significant growth still. We still invest for the next few years two billion dollars a year particularly in Clair and Schiehallion (West of Shetland), so it's not as if we are completely stepping away from the North Sea. We are just engaged in the normal active portfolio management where we prune ourselves of end of life, late life assets and where ownership is better had elsewhere ... and where basically we have a bigger bang for our buck elsewhere."

Chief financial officer Simon Henry noted fiscal and regulatory changes could boost activity in the North Sea in coming years.

He said Shell welcomed the direction of the recommendations made in the recent review of the North Sea industry and related regulatory issues by oil services tycoon Sir Ian Wood.

Noting the UK Government has launched a review of North Sea taxation, Mr Henry said: "The combination of the two, the regulatory development and the fiscal review we see as a great opportunity for the UK to maximise the remaining value."

Mr van Beurden said Shell had made good progress with efforts to improve its performance but had a long way to go. The Dutch executive highlighted the oil products business and North American resources, such as shale, as areas where Shell needs to do better.

Shell has made big losses on hefty investments it has made in shale in the US. It has decided to focus on liquids rich shales.

The company recorded $1.9bn impairments in the latest quarter, mainly related to dry gas properties in the US.

"There may be even more writedowns to come," said Jason Kenney, analyst at Santander, who has a "hold" rating on Shell's shares.

Mr van Beurden told of his sadness about the crash of the MH17 Malaysia Airlines flight in eastern Ukraine in July, which took the lives of four Shell employees and many of his compatriots and which he described as a terrible tragedy. He said it was too soon to assess the implications for Shell's operations in Russia, which faces more sanctions for its support for rebels in eastern Ukraine.

Analysts had expected Shell to make $5.46bn underlying profit in the second quarter.

Shell announced a quarterly dividend of $0.47 per ordinary share, up four percent year on year. The company said the value of its share buybacks and dividends for 2014 and 2015 would exceed $30bn.

Royal Dutch Shell A shares closed up 58.5p at £24.41.

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