Upstream (Exploration, Production and Natural Gas) Shell’s Chairman for Australia, Russell Caplan said, “Once again, it’s our upstream business that is the major contributor to Shell’s profitability in Australia, producing around three quarters of our total profit result. The results are very pleasing and provide a solid platform for us in 2007.” “Shell’s upstream profit in Australia before interest and tax in 2006 was $1.335 billion, compared with $968 million in 2005. Our upstream business benefited from strong LNG production and sales volumes in a relatively strong market,” Mr Caplan said. “Capital expenditure in 2006 was $654.7 million, significantly higher than in 2005, reflecting the increased levels of investment and exploration expenditure.” “Australia continues to be an important part of Shell’s LNG growth ambitions in this region, which is supported by our return to exploration operatorship in our own right.” Downstream (Refining and Marketing) Mr Caplan said that the continued performance improvement in the downstream business result was pleasing but refining still has its challenges in Australia. “Profit before interest and tax (measured on a current cost of supply basis) was $398 million in 2006, compared with $300* million in 2005,” Mr Caplan said. “Shell’s downstream profit before interest and tax, is about 2.3cpl when spread across our total petrol and diesel sales in 2006. Capital expenditure was $253.6 million, the majority again being spent in the refineries.” “The downstream petroleum industry is a cyclical business and we need to ensure our core business continues to be robust to cope with any downturns in refiner margins which would leave us exposed to global competition.” “Shell continues to lead the industry with new and innovative fuels highlighted in 2006 by the launch of new petrol products including Fuel Economy formula, Shell V-Power and Shell V-Power Racing. In December 2006 our second bio-fuel, Shell Unleaded E10 was also launched.” “Planning continues at our refineries in preparation for the next round of clean fuels specifications in 2008 and 2009.” Outlook As Shell entered its 107th year of operation in Australia, Mr Caplan said the company’s global strategy of ‘more upstream and profitable downstream’ was particularly relevant. “On the upstream side, we are working hard to find and develop Australian gas opportunities.” “On the downstream side, we will operate our refineries as efficiently and effectively as possible and innovate to provide quality and value to our loyal customers,” Mr Caplan said. “Looking further forward, Shell’s carbon capture and storage technology and our proprietary coal gasification and gas liquefaction processes are at the heart of two projects, Zerogen in Queensland and Monash Energy in Victoria, that we hope will lead to the continuing development of Australia’s abundant coal resources in an environmentally responsible way.” “Shell’s commitment to Australia is demonstrated by our contribution of around $5billion in government revenues and purchase of $1.12 billion of goods and services from local businesses in 2006.” Mr Caplan said, “I would like to acknowledge our 3200 employees, who have again enabled us to produce such a satisfactory result in 2006.” * 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.
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