Page last updated at 14:11 GMT, Tuesday, 27 May 2008 15:11 UK

Shell sees end of 'easy oil' era

Steven Duke,
BBC News

The head of Shell UK discussed new technologies to produce oil

The boss of Shell UK, the London-based arm of the Anglo-Dutch oil company, has warned the era of "easy oil" is over.

In an interview with the BBC, James Smith said that energy companies were having to go to ever more extreme lengths to sustain production.

Shell has been criticised for making huge profits after oil and fuel prices surged to record breaking levels.

However, Mr Smith said the firm could do little to ease consumers' pain as it needed money to fund future operations.

Higher profits

"The challenges are huge. We've now got 30,000 technologists in Shell alone trying to find new ways to get oil and gas," Mr Smith revealed.

Shell announced annual profits of 13.9bn earlier this year - thanks in part to the high oil prices.

But Mr Smith said it would be wrong to use profits from exploration to help lower petrol prices, and there was little the firm could do even though he understood people's concern about prices.

"Well over 90% of Shell's profits are not made in the UK, they're made abroad," Mr Smith said.

"It's not at the petrol pump. I want to give that assurance to motorists. There's actually very little money to be made in selling petrol in the UK," he added.

"Subsidising losses in one part of the business using profits from another doesn't make business sense."

Mr Smith would not comment on whether he believes oil prices would continue to rise.


Shell petrol pump
Shell UK's boss told the BBC there was little it could do to help motorists

Following the record profits enjoyed by Shell and its rivals, critics of the firms have called for a windfall tax on oil companies, something Mr Smith said may only worsen supply problems in the long run.

"A windfall tax might be fair if we had our feet up and didn't know what to do - but we're ploughing the money back into technology," he explained.

"For every 1 we spend in taxes, that's 1 less we can spend on investments," he said.

Mr Smith's comments came as Shell's latest oil platform left its workshop in Finland, destined for the Gulf of Mexico.

"It's an extraordinary piece of technology - it'll operate in 8,000 ft of water," he said.

The platform will create one of the world's deepest oil production facilities, capable of producing the equivalent of 130,000 barrels of oil per day.

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