Shell profits hit £9.3bn record high

Graeme Evans

The figure, up 38% on last year, revived calls in some quarters for companies such as Shell to be subject to a windfall tax.

And despite the record performance, the result was overshadowed by the latest downgrade to the company's book of oil and gas reserves.

That issue sparked the biggest crisis in the company's history, leading to the departure of three senior executives and prompting moves to merge Shell's British and Dutch parent companies after nearly 100 years of separate operations.

Shell chief executive Jeroen van der Veer said he hoped the fifth and latest downgrade of 10%, or 1.4 billion barrels, drew a line under the issue.

He called 2004 a "year of extremes" after record earnings were balanced by the blow to investor confidence caused by the reserve downgrades.

The profits rush, which betters the £7.7bn set by the HSBC bank last year, is expected to be mirrored by oil giant BP next week, although neither company can match the $25bn (£13.27bn) generated by US-based Esso-owner ExxonMobil on Monday.

The companies saw their profits surge after the price of crude oil topped $55 US dollars a barrel in New York in October.

The impact of increased demand from Asia on refining capacity has also boosted margins.

Tony Woodley, general secretary of the British Transport and General Workers Union, called the level of profits "more than excessive."

He said: "Such levels of excess are, quite frankly, obscene. With our pensions in crisis, these profits are 9.3 billion extra reasons for a windfall tax." Martin O'Neill, chair of the Commons Trade and Industry Select Committee, indicated a windfall tax on profits made in Britain should be considered.

He said Shell should be "encouraged" to invest more of the money in community and social responsibility projects, adding that British Chancellor Gordon Brown may consider other sanctions if the firm resisted.

A windfall tax would be appropriate if profit derived from British operations was excessive, Mr O'Neill said.

He added: "Shell operates across the world and it would be wrong to tax them for activities outside Britain and I'm not sure we could make it stick.

"But we need to very carefully look at the make-up of the profits to see if they have benefited from the rise in oil and gas prices in Britain which affect the poorest households especially."

Shell said it expected the payment of at least $10bn (£5.3bn) to shareholders in dividends in 2005.

It will also use strong levels of cash generation to restart its share buy-back programme, with an anticipated return to shareholders of up to $5bn (£2.65bn).