Shell's Q2 chemicals profits slump to $157m

31 July 2008 10:43  [Source: ICIS news]

LONDON (ICIS news)--Second-quarter profits in Shell's chemicals segment slumped to $157m (€100m) from $626m in the year-earlier period and $348m in the first quarter of 2008 as industry-wide liquids cracking margins dwindled, the oil major said on Thursday.

Shell reported a second-quarter loss in chemicals of $142m on a current cost of supply (CCS) basis compared with a $494m profit in the similar period of last year including a net charge of $206m for provisions and asset impairments.

Shell said it chemicals CCS earnings reflected “lower realised margins, higher operating costs and lower income from equity-accounted investments”.

Chemical product sales volumes were down 5% at $5.4bn compared with the second quarter of 2007.

The oil giant’s chemicals plants were operating at 95% of capacity in the quarter compared with manufacturing plant availability of 93% in the second quarter of 2007.

Shell said that liquids cracker margins had weakened in the quarter although US ethane margins had climbed to an average of $484/tonne compared with $320/tonne in the second quarter of 2007 and $359/tonne in the first quarter of this year.

Northeast Asia naphtha cracking margins had recovered in the latest quarter to $92/tonne from $55/tonne in the first quarter but were down compared to the average regional margin of $138/tonne in the year-ago period, according to industry data, Shell said.

Naphtha cracking margins in western Europe were $346/tonne in the second quarter compared with $423/tonne in the second quarter of 2007 and $433/tonne in the first quarter of 2008.

Shell’s group net income for the quarter shot up 33% to $11.8bn on high crude prices but the company reported only 5% higher CCS earnings at $7.9bn.

Good operating performance, combined with increased oil and gas prices, had offset the impact of weaker downstream conditions, CEO Jeroen van der Veer said.

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By: Nigel Davis
+44 20 8652 3214

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