Shell earns $1bn per year in US oil trading according to court documents

Shell’s oil trading activities in the United States generate about $1 billion per year, according to court documents that provide a rare glimpse into Shell’s secrecy trading division.

A former Shell employee revealed the figure in court documents in Texas as part of a dispute over employment involving one of Shell’s former trading managers.

John Dimech was a manager at Shell’s crude trading group in Houston, Texas, for 11 years. He said that his unit made an average of $950 million to one billion dollars a year. This is equivalent to between 13 and 15 percent of Shell’s US pre-tax profit in the last few years. Shell’s tax contribution report for 2022 showed that the company made a pre-tax income of $7.36 billion in the US during that year.

Shell has declined to comment about the court revelations.

Eva-Maria Frohn was a former trading manager who sued Shell for breach of contract. She sought $15 million in damages, including $6 for the bonus for 2021. Shell denied the claim.

The court documents also revealed the multi-million dollar bonuses given to the traders of the group. Frohn was awarded a bonus in 2020 of over $5 million for her work from the previous year.

The company is one of the largest oil and natural gas traders in the world

Investors can get a glimpse of the trading activity within the FTSE 100 Group when it reports its first-quarter results. Shell does not release figures on the performance of its oil and gas trading division. This business is volatile by nature, as it involves buying and selling gas and oil. The business exploits market gaps to generate profits but can also produce losses.

Shell is the largest trader in liquefied gas. Britain is increasingly dependent on LNG imports as Europe attempts to wean itself from Russian gas, and improves the security of its energy supply. The company can profit from the fluctuation in gas prices by purchasing LNG cargoes and contracts, and then selling them when prices are higher. The company also sells a part of the LNG produced at its facilities.

Shell announced in February that a “exceptional” fourth-quarter performance had helped push profits over market expectations. Wael Sawan was Shell’s new chief executive in January of last year. He said at the time that the trading division had benefitted from the volatility of global LNG prices during the fourth-quarter, and from the increased demand from buyers who were stocking up for the winter.

The adjusted earnings for the integrated business of the energy giant’s trading division and optimisation were $3.96bn in the third quarter. This is down from $5.97bn in the same period last year. This was still below the consensus estimate of $3.47bn.

The share price was little changed, with a drop of 16p or 0.6 percent, to £28.871/2 at the close.