Shell, the second largest of the western world oil "majors" behind Exxon Mobil, said earnings fell to around $5.7 billion from $6.6 billion a year ago on a current cost of supply basis adjusted for special items.

Analysts had predicted around $6.3 billion.

The miss was primarily due to maintenance costs and shutdowns in the U.S. Gulf, where the company has some of its most profitable production, and in Australian Liquefied Natural Gas.

Chief Executive Peter Voser told Reuters Insider the profit miss included about $500 million of costs associated with these factors.

Like its rivals, Shell is battling resource nationalism and competition from Asian rivals to keep growth going, and has to keep one eye on a volatile oil price.

Last week it lost out to much smaller state-owned Thai company PTT in its attempt to add gas reserves for future liquefied natural gas (LNG) production, pulling out of a potential auction for Cove Energy to avoid overpaying. Some 72 percent of Cove shareholders had accepted PTT's offer by Thursday.

"Our industry continues to see significant energy price volatility as a result of economic and political developments," said Voser in the earnings statement. "Shell is implementing a long-term, consistent strategy against this volatile backdrop."

MOTIVA COSTS STILL UNKNOWN

Crude refining industry eyes are firmly fixed on Shell's giant 600,000 barrels a day Port Arthur, Texas, refinery, owned jointly with Saudi state company Saudi Aramco through the Motiva venture.

It has been shut since a week after it opened in April this year after extensive corrosion was found.

Voser repeated that it should restart by 2013, but he was unable to put a figure on the likely cost.

"We need to fix this and this will take us in to 2013. We don't know yet how much (of the refinery) we will have to replace and we don't know how much this is going to cost us but we should be able to update on that later in the year," he told Reuters Insider.

Shell shares fell 3.4 percent to 2,113 pence in morning trading but traders said the weaker-than-expected result should not be too badly received by investors.

"We still see value in RDS that has the unique ability to be well-positioned in an industry where margins are decreasing," said Atif Latif, director of Guardian Stockbrokers.

OTHERS

Shell's smaller European rival Statoil also missed market forecasts with its second-quarter figures, although it managed to increase profit.

British gas and oil firm BG Group reported a 4 percent fall in quarterly profit and downgraded its 2012 production forecasts, due to difficulties in the North Sea and its reduced activity in the U.S. shale gas market.

But Spain's Repsol posted a 27 percent rise in second-quarter adjusted net profit, due to higher output from Libya and higher gas realization prices from the start-up of the Margarita oil field in Bolivia.