Shell Expecting Dip in LNG Volumes

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Written by Daniel Graeber for IIR News Intelligence (Sugar Land, Texas)

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Summary

Shell said in a preview of its third-quarter report that it expects LNG volumes to turn lower. the The company did not provide specifics, but it has a stake in Qatari assets damaged by the Iranian war.

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Production Gains Won't Translate to Higher Exports

Production volumes for liquefied natural gas (LNG) are expected to be lower than during the second quarter, though gas output is holding up, Shell said in a preview of its quarterly earnings.

Industrial Info is tracking a handful of projects tied to LNG that are affiliated with Shell. Two of them--the Lindi LNG project in Tanzania and the LNG Canada facility in Kitimat, British Columbia--have a combined investment value of nearly $50 billion.

Industrial Info Resources offers more information on these facilities in its Global Market Intelligence (GMI) Oil & Gas Plant Database, where readers can find detailed profiles of the Lindi LNG and LNG Canada plants.

In Tanzania, Shell leads a consortium planning to build at least two trains that would process natural gas--sourced from Norwegian energy firm Equinor ASA--into at least 10 metric tons per annum (MTPA) of LNG for the Asian market. It could be completed by 2031, according to Industrial Info Resources data.

In Canada, Shell and its peers recently agreed to add two more liquefaction units, or trains, that would double the design capacity of the LNG Canada from 14 MTPA to 28 MTPA.

The overall plant was included in Canadian Prime Minister Mark Carney's broad-based trade initiative that aims to cut the dependency on the U.S., its largest trading partner and destination for much of Canada's natural resources.

By the Numbers

• 20% of Shell's oil and gas went through Strait of Hormuz pre-war
• 28 MTPA expected from expanded LNG Canada terminal

LNG Sector Torn by Conflict

LNG is ensnared in the conflict simmering in the Middle East as Qatar, one of the world leaders in LNG exports, said it would take several years to repair the damage to its infrastructure, leading to delays in deliveries to its European customers.

But Shell, in a preview of its third-quarter performance, said it expected its LNG volumes to be in the range of 7.2 million metric tons (MT) and 7.6 MT, compared to second-quarter volumes of 7.7 MT. Production nonetheless should show an increase from the 631,000 barrels per day in oil equivalent volumes per day (boe/d) to as high as 780,000 boe/d.

The company offered no formal explanation for the expected quarterly variances. Shell holds a 30% stake in the Ras Laffan (North) liquefaction unit in Qatar, one of two facilities damaged by drone strikes in September. Readers can learn more from a plant profile.

Roughly 20% of Shell's oil and gas production, or about 550,000 boe/d, had moved through the Strait of Hormuz before the fighting began in late February.

In the second quarter, Shell posted net earnings of about $10.8 billion, driven by a surge in demand and from higher commodity prices, which have been supported for much of the year by the conflict in the Middle East. Earnings were boosted in part by the acquisition of Canadian oil and gas producer ARC Resources Limited, which gave Shell an expanded role in Western Canada's Montney Formation.

Shell said it expected to see a lift in oil-related earnings because of higher refinery margins, which should improve from $24 per barrel during the second quarter to $42 per barrel in the third quarter.

Adjusted earnings from its marketing division are expected to be lower than second-quarter levels.

Key Takeaways

• Shell not expecting growth in LNG production
• High refinery margins could make for a balanced quarter

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About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news, and analysis on the industrial process, manufacturing, and energy-related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified, and verified plant and project opportunities. Across the world, Industrial Info Resources is tracking over 250,000 current and future projects worth $30.2 trillion (USD).