Tumbling oil price hits Shell

London - British energy giant Royal Dutch Shell said on Thursday that its second-quarter net profit plunged 67% to $3.82bn on tumbling crude oil prices.

"Our second quarter results were affected by the weak global economy," said Chief Executive Peter Voser in the group's results statement.

"This weakness is creating a difficult environment both in upstream and downstream" operations.

On a "current cost of supplies" basis, adjusting for changes in the value of oil held in stock, Shell said profits dived 70% to $2.34bn in the three months to June, compared with the same period last year.

Production fell five percent to 2.96m barrels of oil equivalent per day as output was hit once again by ongoing violence in Nigeria.

Revenues tumbled 51.4% to $63.88bn in the second quarter.

Voser also warned that "substantial" staff reductions were likely as a result of the company's restructuring programme unveiled earlier this year.

"Looking beyond 2009, Shell needs to become a more efficient company, with faster decision-making, sharper implementation of strategy, and more focus on costs and value," he said.

Shell said it had reduced its costs by $700m during the first half of 2009.

Oil prices struck record peaks above $147 per barrel in July 2008 but then nosedived as a savage global economic slowdown slashed demand for energy.

"Energy demand is weak. There is excess capacity in the market, and industry costs remain high," Voser said.

Rival British energy group BP said on Tuesday that its second-quarter net profit slumped 53% to $4.39bn - and also blamed falling oil prices in the weak global economy.

Voser noted that a sudden pick-up in energy demand was unlikely.

"Conditions are likely to remain challenging for some time and we are not banking on a quick recovery," he said.

"Shell is adapting to this new situation and we must do more. We are sharpening our focus on delivery and affordability."

-AFP