Europe’s largest oil producer, Royal Dutch Shell, has announced annual profits that are a record for a European company – the equivalent of two million euros every hour. But behind the headline were problems: its production fell last year and experts said it is not adding sufficient reserves.
In 2006 when oil prices averaged 60 dollars a barrel Shell’s net profit was 17.5 billion euros. Last year – with a 70 dollar average – profit reached 21.5 billion euros, an increase of 23%.
That has led to calls for Shell and other producers to pay higher tax. Chief Executive Jeroen Van Der Veer’s response to that was to say: “Looking at where we made those profits, it was mainly in the upstream, it was not at the gasoline pump in the UK. If we are taxed additionally and if that taxation is significant, then I think what will happen is that our industry will eventually invest less.” Van Der Veer said investment is essential to find new reserves and increase output.
During last year Shell’s production was hit by the reduction of its stake in the Sakhalin gas project in Russia. The company also took a 480 million euro million charge related to security and funding problems in Nigeria where it faces escalating violence from militants and plans to scale down its operations.