Royal Dutch Shell, Europe's biggest oil company, is expected to take a huge hit on its refining and marketing earnings but could follow rival ExxonMobil in posting profit that matches or exceeds analyst expectations thanks to high oil prices.

The oil and natural gas producer and refiner is expected to report fourth-quarter net income of $5.63 billion on revenue of $114.5 billion, the Associated Press said, compared with $6.79 billion in profit bolstered by $1.59 billion on asset sales, on revenue of $105 billion,  the year before.

Analysts expect the company to report earnings per share of 81 cents, compared with $1.11 a year ago.

Low demand, low prices and declining refinery capacity are all joining together to trim earnings. On Tuesday, ExxonMobil,  the biggest U.S. energy producer, said fourth-quarter net income rose only about 2 percent to $9.4 billion. ExxonMobil, based in Irving, Texas, blamed its showing on similar reasons and also cited the European economic crisis for easing demand.

Merrill Lynch estimates Shell, managed from London but incorporated in The Hague, could report $5.2 billion in total upstream earnings, a 51 percent increase above 2010's $3.4 billion. Upstream earnings refer to oil and gas-drilling activity.

Shell could report a 70 percent drop in its downstream operations, or activity stemming from its refineries and other processing operations, Merrill Lynch estimates, because warmer temperatures in Europe and the U.S. have cut natural gas demand and struggling economies have cut crude demand, leading to lower refinery use.

Barclays Capital analysts estimate Shell could report net income of $5 billion, mainly from upstream activity. Predictions lean toward a disappointing quarter with income expected to be 30 percent below the third quarter's $7.2 billlion but 31 percent above 2010''s result..

With liquified natural gas demand also appearing to have weakened towards the end of the quarter, we expect to see a significant decline in the group's integrated gas profitability, Barclays said.

Like its counterparts, Shell is finding it increasingly difficult to replace declining oil reserves. This has prompted the more than a100-year-old oil and gas giant to focus more on natural gas exploration and production, Morningstar said.

Shell's exposure to natural gas could further dent profits due to the commodity's price weakness. Over the past 12 months, North American natural gas prices have plunged 51 percent from $5.01 per 1,000 cubic feet to only $2.44 due to over-production, thanks to hydraulic fracturing  Nearly a third of Shell's natural gas activity is in North America.

Barclays Capital expects the company to post a loss of $352 million in its downstream operations, or $92 million more than in 2010.

Shell's American Depository Receipts closed at $73.74, up 40 cents. The 52-week high was $78.81.