Company chairman Lloyd Taylor said the result, the first full year after purchasing the New Zealand assets off Fletcher Challenge Energy, showed a modest return on assets of 6.4%.

The Exploration and Production (EP) business contributed a record $153 million to the 2002 profit, while the Oil Products (OP) business posted a $86.9 million profit, which represented an 11% reduction compared with the 2001 figure, because of intense retail competition.

The EP profit, buoyed by a high average realised oil and condensate price of $55.11 per barrel during 2002 was, however, adversely impacted by a $148 million foreign exchange accounting loss. So, the underlying operational performance represented an increase of some 75% on that achieved in 2001.

Total capital expenditure in the exploration and production (EP) business for 2002 was $88.4 million, $44.3 million of which was spent on appraisal and development studies for the Pohokura gas-condensate field off north Taranaki. Shell, which holds a 48% stake in Pohokura, expects to spend a further $23 million in 2003.

"In addition to the considerable capital invested to date, a further $450 million of Shell investment is likely to be required to achieve Pohokura gas field commissioning in the first half of 2006," Taylor said.

Given these capital expenditure figures, this would put the total projected Pohokura development cost at more than $1 billion. The other partners, Austrian firm OMV Petroleum and New Zealand's Todd Energy, are finalising a deal for Todd to purchase an extra 9.86% equity from OMV. This will see both with a 26% stake in New Zealand's biggest energy project for a decade.

Shell and its Pohokura partners are still scheduling first gas production from early 2006, with full production of 60-80 PJ per year by mid-2006. They were still expecting to tender for the first tranche of Pohokura gas from September, given Commerce Commission approval of their application for joint marketing and selling of Pohokura gas.

Taylor also said Shell was predicting big things for Taranaki in the coming years as the company concentrates its EP activities in the area because of promising data, the existing infrastructure and skilled workforce.

"Looking to the future, the key challenge for the EP business is to offset the longer-term production decline of the Maui field by the early development and commissioning of the Pohokura gas field, supplemented by an exploration effort directed at large oil and gas prospects in the offshore Taranaki region," Taylor said.

He said the decline in Maui oil and gas production, the strengthening New Zealand dollar, and the probability of softening oil prices in the second half of 2003, meant the performance of the EP business was likely to be less than the 2002 result for the foreseeable future.

As well, Taylor disputed electricity generators' claims that uncertainties about gas supplies were part of the problem with the just-averted winter power crisis. He said the Maui gas field had delivered all the gas the generators asked for this year, but generators were asking for less gas from Maui because they wanted to stretch out their entitlement, due to reduced remaining economic reserves.

Taylor also confirmed his departure from Shell NZ at the end of the year, as Royal Dutch Shell continued its global restructuring of its EP activities into five regional businesses. The New Zealand EP business is scheduled to become part of an integrated Asia-Pacific business unit.