LNG plant bolsters Shell output

Royal Dutch Shell, Europe's biggest petroleum group, has posted better-than-expected first-quarter profits.

Shell reported net profits of $8.78 billion for the first three months of this year. David Paul Morris / Getty Images / AFP

The commercial start-up of a new liquefied natural gas (LNG) plant in Qatar has helped Royal Dutch Shell to limit a drop in production due to asset sales while improving its first-quarter earnings by 60 per cent.

Europe's biggest petroleum group reported net profit for the first three months of this year of US$8.78 billion (Dh32.24bn), up from $5.48bn for the same quarter last year. It attributed the increase to higher oil prices, gains on asset sales and improvements in its refining operations.

Rival ExxonMobil also reported surging earnings yesterday as first-quarter net profit advanced to $10.7bn from $6.3bn a year earlier - its fifth consecutive quarterly profit rise.

Shell's earnings for the first quarter of this year included a $1.12bn net gain on sales of oil and gas assets and a $483 million charge related to asset impairment in its refining business.

Without one-off items, Shell's earnings for the period were $7.14bn, up from $5.4bn in the first quarter of last year.

"Our first-quarter 2011 earnings have risen from year-ago levels, driven by higher industry margins and our own operating performance," said Peter Voser, the chief executive of Shell.

The company said it started commercial production at two new projects during the quarter, including the Qatargas 4 LNG joint venture with Qatar Petroleum, in which it holds a 30 per cent interest.

When operating at capacity, the plant is expected to process 1.4 billion cubic feet per day of Qatari gas to yield 7.8 million tonnes of LNG a year and 70,000 barrels per day (bpd) of gas liquids.

In the Netherlands, Shell this year pumped its first oil from the Schoonebeek enhanced oil recovery project. Oil and gas output from the field is expected to reach 20,000 barrels of oil equivalent per day (boepd).

Shell's total first-quarter oil and gas production fell 3 per cent to 3.5 million bpd, compared with the same period last year. The combined output from properties still in its portfolio at the end of the period was flat, the company said.

"New field start-ups and the continuing ramp-up of fields contributed to the production in the first quarter by some 230,000 boepd, in particular from the ramp-up of Gbaran Ubie in Nigeria, the start-up of the Qatargas 4 project in Qatar, and the ramp-up for the Jackpine mine at the Athabasca oil sands project in Canada, which more than offset the impact of field declines," Shell said.

The Canadian project involves exploiting a huge deposit of grit mixed with bitumen, a type of solidified crude oil, in one of the world's largest open-pit mining operations. The tarry mixture is stripped of sand and processed into synthetic light crude, which is shipped to conventional refineries for further processing.

Shell also posted a 4 per cent increase to 4.42 million tonnes in first-quarter LNG sales, reflecting higher volumes from its gas liquefaction projects in Nigeria and on Russia's Sakhalin Island, as well as the start-up in Qatar.

In its oil-refining operations, Shell's profit margins improved after the sale of certain US assets. In further efforts to improve profitability, the company recently agreed to sell most of its refining and marketing operations in Africa and Chile, and its Stanlow refinery and associated marketing business in the UK, in deals totalling almost $3bn.

It has also proposed converting a small Australian oil refinery and terminal into a fuel import terminal.