Royal Dutch Shell reported a 3% fall in profits today after it suffered from hurricane damage in the Gulf of Mexico and security problems in Nigeria.
The Anglo-Dutch oil firm said the current cost of supply earnings fell from $7.19 billion in the third quarter last year to $6.95 billion this time around.
It came as production continued to be hit by repairs to rigs damaged by last year's vicious hurricane season as well as shutdowns in Nigeria, where oil workers have been targeted by militants.
Shell pumped 3.251 million barrels of oil out of the ground each day between July and September - just above the 3.207 million barrels this time last year. The level of output was similar to the 3.253 million barrels of oil it produced in the second quarter.
Operations were particularly badly hit in Nigeria where output was 185,000 barrels of oil a day lower than a year ago. Shell was forced to suspend production in the Western Delta over security fears as contract workers were kidnapped and installations were attacked by militants.
'Whilst efforts continue towards restoring safe operational conditions in the Niger Delta, it is unlikely that the shut in facilities in Nigeria will be restored in 2006,' the company warned.
'No firm date can be given for the re-start of the production, nor is it possible to predict the rate of ramp-up to full production. Restricted access in the area continues to impact on the drilling programme for the future, and the progress of new projects,' it added.
Shell said that excluding the impact of the security issues in Nigeria, as well as damage caused by last year's hurricanes in the Gulf of Mexico, production increased by 3% on the year.
'This is a good performance by the group,' commented CEO Jeroen van der Veer. 'Our earnings have proven to be resilient in the face of rising industry costs and weakening refining margins. But he added that cost pressure remains a significant challenge for the industry.
The oil industry has been hit by the rising cost of raw materials such as steel and concrete as well as rig-rates, or the amount explorers pay to use rigs.
The most expensive deep water rigs in in the Gulf of Mexico can cost as much as $500,000 a day to hire from contractors - a 400% increase since 2002.
Operators in the North Sea have also been hit with higher taxes by British Chancellor Gordon Brown.
But oil prices were also higher than a year ago, boosting earnings for Shell. The company fetched an average price of $69.63 for a barrel of oil in the third quarter, 12 cents more than the previous three months and well above the $61.55 a barrel this time last year.
