Media Release

Shell Australia today announced a mixed result for calendar year 2004 attributable to robust performances from its Upstream and Downstream marketing businesses and a disappointing Downstream refining business result.   The outlook for 2005 and beyond remains very positive.

Shell’s Australian Upstream (Exploration, Production and Natural Gas) and Downstream (Refining and Marketing) businesses reported a total profit before interest and tax of $587 million for calendar year 2004 compared with $815 million in 2003.  

Shell Companies in Australia Chairman, Tim Warren, said: “As in previous years, Shell’s Upstream business is the significant contributor of our profitability in Australia. Shell is committed to the ongoing development of Australia’s gas resources and has a direct interest in the North West Shelf (NWS) project and the majority of Australia’s discovered but undeveloped gas resources.

“Upstream profit before interest and tax in 2004 was $583 million, compared with $632 million in 2003,” Mr Warren said.

“Revenue was boosted by higher oil and gas prices and increased LNG production, due to the commissioning of the North West Shelf’s fourth LNG train.

“This was offset by declining oil production from the mature Laminaria and Corallina oil fields and the 12 per cent currency appreciation against the US dollar which reduced the Australian dollar value of oil and gas exports. The net result of these factors was a decline in profit before interest and tax of $49 million.”

Mr Warren said that despite an outstanding Retail performance, the overall Downstream business profit result was disappointing due to the increased reliance on imported product to supplement less than expected refinery production in 2004.

“Profit before interest and tax (measured on a current cost of supply basis*) was $4 million in 2004 compared with $183 million in 2003,” Mr Warren said.

“We had stock value gains of $177 million before tax due to the rising price of crude oil during 2004 giving us a profit before interest and tax (measured on a historical cost of supply basis) of $181 million, compared with $22 million in 2003.

“Although refiner margins were strong, extensions of planned shutdowns in both refineries, plus some unplanned shutdowns, limited Shell’s ability to capture the benefits of the strong margins. The resulting requirement to increase imports of fuel to meet our customers needs increased costs considerably.

“Our major highlight was the Shell-Coles Myer Retail Alliance which continued to be exceptionally successful in 2004, maintaining a more than 30 per cent volume increase during 2004 compared with volumes before the Alliance began.

“We plan to remain Australia’s preferred fuel brand and are putting the building blocks in place to ensure robust supply of high quality petroleum products at competitive prices in the evolving Downstream market. 

“We have significant projects underway, such as our ‘clean fuels’ program, which make us well placed for 2005 and beyond.

“Shell’s total ‘clean fuels’ investment will be around $340 million, including $140 million on benzene reduction plants, enabling both Clyde and Geelong refineries to produce fuels meeting the 2006 Australian Government specifications.

“Shell has already spent more than $200 million to deliver ultra low sulphur diesel to the Australian market well ahead of the Government 1 January 2006 deadline and our plans are well underway to ensure provision of low benzene petrol to the market in time for 1 January 2006.”

Mr Warren said as Shell entered its 105th year of operation in Australia, the company’s vision was to be recognised as a leading provider of sustainable energy solutions for Australia, now and in the decades ahead.

“We recognise that we need to take advantage of the significant changes in the Upstream and Downstream markets to grow our business profitably, not just for our shareholders but for the Australian economy as a whole, and are putting our plans in place to achieve this,” Mr Warren said.

“In Downstream so far this year, our performance has improved compared with last year. Our refineries have made substantial improvements and are meeting production targets for 2005. Our Retail alliance with Coles Myer continues to be very successful with sustained strong volumes demonstrating Shell’s leadership as the brand of choice for Australian consumers.

“In Upstream we anticipate further growth. We are working towards major milestones including a final investment decision by the NWS Joint Venturers to develop a fifth LNG train and a decision by the Gorgon Venture to move to the Front End Engineering Design (FEED) phase of the project. Both these decisions are expected to be taken in mid 2005.

“In addition, our commitment to Australia is evidenced by our direct contributions to the local economy. In the past year, we contributed almost $5 billion in government revenues and sourced $968 million worth of goods and services from local businesses.

“Lastly, I would like to congratulate our more than 3400 employees whose continued contribution enables our businesses to be well positioned for the future.

* Current cost of supply basis excludes the effect of changes in oil prices and gives a clear picture of the underlying performance of the Downstream business.