Media Release

The Shell Companies in Australia today announced a profit before interest and tax for calendar year 2005 of AUD$1.268 billion, up from AUD$751.5* million in 2004.   This represents a return on average capital employed of 13%.   The improved result was attributable to a continuing robust upstream performance (Exploration, Production and Natural Gas), strong performance in the downstream Marketing businesses and a turnaround in the Refining business. 

Shell Chairman, Russell Caplan said, “Once again, it’s our upstream business that is the major contributor to our profitability in Australia.”

“Shell is committed to growing our gas business through ongoing development of Australia’s gas resources.   Over the last 12 months, Shell has been a participant in six exploration permits awarded in three different areas off Australia’s Northwest coast.   We’re optimistic about the prospects for significant gas discoveries in these areas.

“Upstream profit before interest and tax in 2005 was $968 million, compared with $708* million in 2004.   Shell’s upstream business benefited from record LNG production and sales volumes in a relatively strong market,” Mr Caplan said.

“Capital expenditure in 2005 was $467 million, significantly higher than in 2004, reflecting the inclusion of more than $300 million of capitalised exploration expenses relating to the Gorgon project.”

Mr Caplan said that the downstream business result was welcome, especially because of a turnaround in the performance of the Clyde and Geelong refineries.

“Profit before interest and tax (measured on a current cost of supply basis) was $300** million in 2005, compared with $43.5* million in 2004,” Mr Caplan said.

“Capital expenditure was $267 million, the majority being spent in the refineries.”

“Refiner margins were strong, and with our refineries operating reliably and meeting their production targets, Shell was able to capture the stronger margins.   Continued improvement in the underlying operation is essential to make the refineries as competitive as they can be when margins aren’t so favourable,” he said.  

“Apart from our improved business performance, other highlights in 2005 were the launch of our first biofuel, Shell Optimax Extreme and our meeting the Federal Government’s clean fuel specifications ahead of the 2006 deadline.”

“We plan to remain Australia’s preferred fuel brand by continuing to lead the market with new and innovative fuels.   Shell has a compelling retail offer, with the most comprehensive suite of fuel products for every vehicle type and budget, delivered through a convenient network of service stations,” Mr Caplan said.

“We continue to plan for the future.  In particular, our refineries are preparing for the next round of clean fuels specifications in 2008 and 2009, with Shell’s total clean fuels investment to date being around $340 million.”

As Shell entered its 106th year of operation in Australia, Mr Caplan said the company’s global strategy of ‘more upstream and profitable downstream’ was particularly relevant.

“We anticipate strong growth in gas demand and our upstream business in Australia is well placed to supply to this expanding market.  We’re hopeful that our ambitious drilling programme will further strengthen our position and we will work hard over the coming years to ensure excellence in our project delivery.   On the people side, we expect to grow from 55 staff in our upstream business in 2003 to over 120 staff in 2006.”

“An exciting development just last week was the first shipment to China of liquefied natural gas from our North West Shelf joint venture.  This is the start of a 25 year contract with Guandong Dapeng LNG Company.”

“On the downstream side, we will keep talking with our customers and governments on issues affecting our industry and working on innovations to meet our customers needs,” Mr Caplan said.

“In response to customer demand and in light of current fuel prices, we have just launched our newest fuel innovation, bringing Shell’s new fuel economy formula to our Shell Unleaded, Shell Unleaded 95 and Shell Premium Unleaded fuels.   These new fuels can help everyday Australian motorists achieve improved fuel economy and ultimately buy less fuel – saving them money.  This will help consolidate Shell’s leadership as the brand of choice for Australian motorists.”

“Shell’s commitment to Australia is evidenced by our direct contributions to the local economy.   In the past year, we contributed almost $5.1 billion in government revenues and sourced $1.15 billion of goods and services from local businesses.”

Mr Caplan said, “I would like to acknowledge our 3200 employees, whose continued contribution has enabled our businesses to perform so well and has placed us in a strong position for the future.”

* For consistency, the 2004 figures previously reported have been revised here in accordance with the new International Accounting Standards.

** Excludes $215 million income from sale of trademarks to Shell Brands International (SBI).

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.