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Last Updated: Tuesday, 7 February 2006, 14:44 GMT
Oil price surge boosts BP profits
A giant oil rig beached by Hurricane Katrina
Hurricanes wreaked havoc in the US Gulf Coast last summer
Oil giant BP has reported a 25% increase in annual profits on the back of rising crude prices.

Profits for 2005 went up to $19.31bn (11.04bn), with profits for the last three months of the year increasing by 26% to $4.43bn.

High oil prices helped to offset the impact of disruption to production in the wake of Hurricane Katrina.

However, the annual figure was not enough to beat Shell's record profit haul of $22.94bn in 2005.

BP said that the comparable figure for their profits was $21.1bn. The $19.31bn figure applied to what are officially described as replacement cost profits, which reflect the current cost of supplies.

Shell's figures led to claims that the giant was profiteering at the expense of motorists, accusations that Shell denied.

Profit furore

Commenting to the BBC on its own figures, BP chief executive Lord Browne said the company's profits had been "magnified enormously by the high price of oil, high refining margins, and high gas prices".

"We of course first of all make most of our money in what I think most people would regard as the wholesale market - that is the production of oil and gas - not in the refining and sales of petrol and so forth," Lord Browne said.

Our 2005 result was a record; this reflects the quality of our asset base and operations
Lord Browne, BP chief executive

Profits, he said, did not sit in the company, they were reinvested or given to shareholders "which are basically, the pension funds of the United Kingdom".

However, Tony Woodley, general secretary of the Transport and General Workers Union, said: "With BP's multi-billion profits based on rocketing oil prices, there should be no doubt the oil companies have profited whilst our pensioners have suffered.

"If there is any justice in this world, then a part of those excess profits should go towards helping those whose pensions have been robbed."

Production problems

The fourth-quarter profits improvement came despite a 2% fall in production.

Flames erupt from the BP Amoco oil refinery in Texas City after the explosion
March's explosion in Texas City cost the lives of 15 workers

Production was blighted by the devastating season of hurricanes in the Gulf of Mexico, costing the company $1.6bn last year, which also hit onshore refineries such as Texas City.

Texas City had already been hit by an explosion in March which claimed the lives of 15 workers.

"BP's fourth-quarter result was particularly hit by the continued production shutdown of our Texas City refinery during its refurbishment," said BP chief executive Lord Browne.

"Our 2005 result was a record; this reflects the quality of our asset base and operations."

Reserves intact

Offsetting the impact of last year's hurricanes was the soaring price of crude oil in 2005, which leapt from $45 a barrel to above $70 a barrel.

And despite the loss of production caused by the hurricanes in the second half of the year. annual output rose to 4.01 billion barrels in 2005 from 3.99 billion a year earlier.

"These numbers are impressive, but in some respect disappointing," said David Buik, analyst at Cantor Index.

"The market is so overweight with this stock, the reaction to the results is expected to be initially adverse. Investors expected more."

The company said it had managed to replace all of the fuel it pumped out of the ground with new reserves for the thirteenth year running, leaving BP's proven reserve base at over 128 billion barrels of oil and gas by the end of 2005.

Shares in BP were down 19 pence, or 2.9%, at 646p on the London Stock Exchange on Tuesday afternoon.

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