Royal Dutch Shell Plc, Europe’s biggest oil company, blamed oil theft and gas supply disruptions in Nigeria, as well as the impact of a weakening Australian dollar on a deferred tax liability, for a drop in earnings during the second quarter.
During the three month period, the oil giant saw earnings fall on a current cost of supply basis to $4.6bn (£3bn), down from $5.7bn in the same quarter a year before. This is excluding a one off net charge of $2.2bn mainly due to impairments in its Italian business and liquids-rich shales properties in North America.
“Higher costs, exploration charges, adverse currency exchange rate effects and challenges in Nigeria have hit our bottom line. These results were undermined by a number of factors – but they were clearly disappointing for Shell,” said chief executive Peter Voser, who is stepping down from his role in early 2014 to be replaced by refining director Ben van Beurden.
On the operating issues in Nigeria, Voser said: “We will play our part, but these are problems Shell cannot solve alone.”
According to the Nigerian Extractive Industries Transparency Initiative (NEITI), oil accounts for around 90% of the country’s export earnings.
Its first quarter GDP report for 2013 noted that oil production in Nigeria had suffered a second quarterly fall in oil production, dropping -0.54% to an average daily output of 2.29 million barrels. In the quarter, oil accounted for 14.75% of GDP, down from the Q4 2012’s 15.8%.
“During the period under review, the Nigerian oil sector witnessed some levels of disruptions as a result of pipeline vandalisation and bunkering incidents with some oil companies such as Eni (Agip) declaring force majeure during the quarter,” said the Nigerian statistics agency.
“However, the sector also benefited immensely from the relative stability in international crude oil market price and the exchange rate of naira against the dollar.”
Around 60% resource-rich Nigerians live in absolute poverty. Militias from different ethnic groups regularly clash in the country, both against each other and the government, as they struggle for control of valuable resources.
The Movement for the Emancipation of the Niger Delta, one of the biggest militant groups, is regularly involved in attacks on the country’s oil industry, such as kidnapping workers and hijacking oil ships, to sabotage production.
Meanwhile, Royal Dutch Shell will sell at least four more oil blocks in Nigeria in its latest divestments from Africa’s top oil exporter, three oil industry sources familiar with the deals said on Wednesday.
The blocks are Oil Mining Licenses (OMLs) 13 and 16 onshore in the Niger Delta, and OML 71 and 72, which lie offshore, the sources told Reuters. A Shell spokesman declined to comment.
