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LONDON: Royal Dutch Shell Chief Financial Officer Simon Henry said the company was “nearly there” in ramping up to full output at its Pearl Gas-to-Liquids (GTL) facility in Qatar and that the company was “on track” to restart the 325,000 barrels-a-day damaged Port Arthur refinery unit in the United States. Henry was speaking at a presentation of Shell’s third-quarter results.
The world’s No. 2 oil company struggled to deliver production growth in the third quarter and warned it was seeing signs of economic weakness “all around us”.Underlying net profit fell 6 percent but came in ahead of investor expectations thanks to the strength in refining margins, Shell said. That margin strength was the result of supply shortages, not stronger demand, and the “downstream” refining performance masked a poor quarter for “upstream” oil and gas production and prices - the drivers of industry profits in the long term.
Henry outlined continuing difficulties with the company’s Nigerian output and said the refining bright spot would be shortlived too.
“We’re seeing evidence of a weak economy all around us in our downstream, marketing and our chemicals business, so the downstream rally overall could be short-lived,” he told reporters on a conference call.
Shell reported current cost of supply (CCS) net profit, adjusted for charges, of $6.6bn, down from $7bn a year ago and ahead of analysts predictions of $6.3bn. The net charge for the quarter, at $432m against a net gain of $245m a year earlier, was largely down to a widely expected asset writedown to account for persistently weak US gas prices and for UK tax changes.
Shell remains an extremely profitable company with healthy operating cash flow in the quarter of $9.5bn financing net capital investment of $8bn, and it has one of the best upstream output growth prospects in the sector over the coming three to four years.
Production shut-ins in Nigeria due to security breaches there contributed to a fall in overall oil and gas production to 2.982 million barrels of oil equivalent a day from 3.012 million a year ago. Even leaving out the impact of Nigerian troubles, divestments and other one-offs, Shell’s oil and gas output grew only 1 percent. The struggle for output growth has been a feature of the third quarter earnings season for all the top oil companies so far.