Shell's record profits of £13.9 billion were boosted by soaring oil prices last year and have attracted the usual calls for a windfall tax on "obscene" oil company profits, but the truth is that they mask some uncomfortable realities about the group's lacklustre performance.

While the headline numbers are undoubtedly huge, around the globe Shell is facing soaring costs and mounting problems at some of its key operations which are restraining production and levels and do not bode well for the company's future.

Shell's Nigerian operations, which under normal conditions should produce 12 per cent of global production — second only to the US, are causing real trouble.

Not only has dire security prompted Shell to offload some of its assets there but it emerged today that its joint venture with the Nigerian Government is chronically starved of investment and this too is affecting production levels.

Globally, Shell is also struggling with lower refining margins, higher costs and taxes as well as increasingly hostile national governments in Russia and a number of other countries.

Shell's full year 2007 production was 3.3 million barrels per day, down from nearly 3.5 million barrels per day in 2006.

The results also showed that Shell invested $33 billion into its upstream activities last year — more than its entire full year profits. Yet is still struggling to replace its reserves.

The full data on Shell's reserves will not be available until March but there are fears the news may not be good.

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