Shell's exploration and production business (EP) contributed $NZ172.35 million, well up on the 2000 result of $NZ113.8 million, to the Shell NZ group's total 2001 profit of $NZ200.48 million.

This country's fiercely competitive fuels market meant Shell's combined retail and commercial oil products (OP) business profits dropped by 50%. However, the contribution of the former FCE businesses more than made up for that loss, with overall group net profit rising 12% from the 2000 result of $NZ178.3 million.

Shell NZ chairman Lloyd Taylor said that the improved EP result reflected in large part the contribution from upstream businesses acquired with FCE on March 23, 2001.

However, he cautioned that direct comparisons with the 2000 EP result were not straightforward, due to the complex nature of the FCE transaction, and the differing balance dates for the Shell and FCE entities. The result also included one-off costs associated with integration and some of the impacts of divestment transactions.

"This EP result is satisfactory, and reflects the costs associated with the acquisition of Fletcher Challenge Energy, which has seen Shell New Zealand become the country's largest and most efficient producer and marketer of oil and gas," Taylor added.

Industry commentators are not surprised at the large jump in EP income and resulting profit, with Shell now having the lion's share in the offshore Maui field, though it is still required to divest a 10% stake in this country's largest single energy resource.

Shell's share of Maui leaped from 18.75% to 87.5% when it took over FCE, and it has since reaped the massive benefits of increased ownership, through its greater stake in crude oil, condensate and gas production, particularly during the cold, dry winter of 2001, which saw record offtake rates as electricity generators ran their thermal plant as hard as possible to preserve hydro lake levels.

Taylor said the 50% plunge of the combined retail and commercial oil products (OP) businesses was not unexpected and reflected the fiercely competitive local marketplace for fuels, coupled with the large oil and product price rises experienced over the year. "While the OP result was disappointing, it was not unexpected and mirrors the difficult downstream business conditions that have prevailed globally in the last eighteen months."

This competitive environment resulted in considerably reduced product margins, so that the OP business produced a net profit of $31.16 million in 2001, some 50% less than that of 2000 ($62.4 million).

Shell NZ also released its second sustainable development report, which had been independently verified for the first time." We are not just interested in making a profit, although that is critically important for today and the future. We also have a committed focus on valuing people and our planet on an equal footing with the financial wealth we create as a New Zealand commercial enterprise."

Shell NZ companies were not required to make public announcements of profits, being part of the Royal Dutch Shell group, but did so in the interests of transparency, Taylor concluded.