Facing eroding profits and future headwinds, executives at Royal Dutch Shell said Thursday they face "hard choices" about future investment plans, including the company's potential $2 billion petrochemical plant along the Marcellus shale.
Shell, Europe's largest oil company, announced Thursday that third quarter profits fell short of analysts' expectations. The $4.5 billion the company earned during the quarter fell 32 percent from the same quarter one year ago.
The drop in earnings was driven by weaker fuel demand, refinery profit margin declines and reduced output in Nigeria due to attacks on the company's pipelines.
In addition to the $2 billion ethylene cracker plant the company is looking to build in Beaver County, Pa., Shell had also planned a slew of new construction and infrastructure development projects for the latter part of this decade.
However, the recent drop in profits is now forcing company leaders to rethink those plans. Executives said the company would have to strike a careful balance between incoming cash flow and outgoing capital spending in order to maintain future profits.
"We are facing headwinds from weak industry refining margins, and the security situation in Nigeria, which continue to erode the near term outlook," Peter Voser, chief executive officer at Shell, said in Thursday's earnings announcement.
"The company is rich with new investment opportunities," Vosar said. "In the next few quarters, Shell's capital discipline means we will need to make hard choices between the best new investment opportunities from this industry-leading portfolio."
Chief Financial Officer Simon Henry said the $10 billion in new project investments would likely make 2013 a "peak investment year" for the company.
The company plans to sell off some assets in 2014 and 2015 to boost cash flow. However, Henry said officials would need to make decisions within the next year about whether the company will move forward with some new projects later this decade.
"We have reached critical mass with our 2015-plus investment option set," Henry said, "and there will be decisions to make in the next few quarters on which options to take to final investment decision, especially in our global integrated gas business."
In June 2011, Shell announced it was looking into building a large petrochemical complex in the Appalachian region to capitalize on the Marcellus shale gas boom.