Shell Looks to the Future While Reaping Benefits of Strategic Transformation

Written by John Egan for IIR News Intelligence (Sugar Land, Texas)

Summary

The just-completed second quarter was a transformative one for Shell plc, as it acquired a major oil and gas company in Western Canada, sold assets in the U.S., India and South Africa, and weathered the Middle East conflict, the company said Thursday. In a meeting with analysts, company leaders also discussed the status of future projects in Canada, Africa and Latin America as well as its outlook for LNG.

A Busy Season of Asset Rotation

When Shell plc Chief Executive Officer Wael Sawan met with investors and analysts in March 2025 at the company's capital markets day, he pledged to focus the company's sprawling portfolio, cut costs, boost earnings and reduce carbon emissions.

The company's just-completed second quarter shows those efforts are bearing fruit. During the second quarter, the company made these strategic moves:

• Acquired a Canadian oil and gas company, ARC Resources Ltd., for US$13.6 billion.
• Completed the sale of its Jiffy Lube lubricants business for US$1.3 billion.
• Sold an Indian electric power company, Spring Energy, for US$1.8 billion.
• Sold oil and gas assets in the Gulf for US$1.7 billion.
• Sold its South African downstream business for about US$1 billion.

Taken together, Sawan said during Shell's earnings conference call, these measures demonstrate "high-grading in action--releasing value from assets where we are no longer the natural owner and reinvesting it in the next generation of competitively positioned supply."

Future Projects Around the World

Sawan also discussed the status of a number of projects in Africa, Latin America and Canada, the funding for which would be made easier by its second-quarter asset divestitures. Industrial Info Resources is following hundreds of active Shell-related capital projects.

In Africa, where Shell is developing the multibillion-dollar Zabazaba and Bonga Southwest offshore oil projects, he said he hoped the company would make final investment decisions (FIDs) for Bonga Southwest, a US$2.5 billion floating, processing, storage, offloading (FPSO) project in 2027. An FID for the Zabazaba project, a US$2.5 billion exploration project coupled with a conversion of a very large crude carrier (VLCC) to a FPSO, could come in 2027 or 2028. The Industrial Info Resources Global Market Intelligence (GMI) Oil & Gas Project Database offers detailed project reports for Zabazaba and Bonga Southwest.

Turning to Latin America, Sawan told analysts that the Manatee project in Trinidad & Tobago, where construction is underway, should begin producing natural gas in 12-18 months. Readers can access the umbrella project report for Manatee here.

And in Canada, the Shell chief said an FID may come by yearend 2026 for the second phase of its Kitimat LNG Canada LNG export terminal. Construction of the first phase of the project, comprising Trains 1 and 2 totaling 14 million metric tons per annum (TPA), was completed earlier this summer. If Shell decided to add a second phase to that facility, at a cost of about US$12.5 billion, it would consist of two trains with capacity of 7 million TPA each. Adding Trains 3 and 4 would double the plant's overall export capacity, to 28 million TPA. The detailed project report for Phase 2 of the Kitimat LNG terminal can be viewed at the Industrial Info Resources Global Market Intelligence (GMI) Oil & Gas Production Project Database.

Sawan used the phrase "early days" to describe several other Shell projects, including in Egypt and Namibia.

Overall, though, he reiterated the company's bullish stance on LNG: he projected the world would add about 180 million TPA of new capacity by the end of 2030.

On the call, Shell Chief Financial Officer Sinead Gorman said that Shell's previous estimate of capital expenditures (capex) for 2026 of about US$20 billion to US$22 billion, will rise to approximately US$24 billion-US$26 billion this year due to the acquisition of Canadian oil and gas producer ARC Resources Ltd., announced this past April. That transaction, which has been approved by ARC's shareholders, is undergoing regulatory scrutiny. The extra outlays are to fund the acquisition itself and fund ARC's existing capital commitments.

ARC Resources Buy Creates More Options for Shell

Once finalized, the ARC Resources acquisition will boost Shell's global annual production of hydrocarbons by about 4%, compared to the 1% growth that was forecast prior to that transaction. ARC's current production from its properties in Alberta and British Columbia totals about 356,000 barrels of oil equivalent per day (BOE/d). Prior to this deal, announced April 27, Shell had been a small player in Western Canada's Montney Formation.

That output gain, while notable in itself for a company of Shell's size, also creates several strategic options: It positions the London-based supermajor to increase pipeline exports to the U.S.; expands Shell's potential to sell liquefied natural gas to Asian markets, where demand growth is strong and prices and profits are high; and it reduces the company's exposure to Middle East oil and gas production.

Roughly 20% of Shell's oil and gas production, about 550,000 barrels of oil equivalent per day (Boe/d), is moved through the Strait of Hormuz, which has been mostly closed since the U.S. and Israel launched a war against Iran on February 28. There are signs that the fragile truce between those countries, reached in June, has come was coming apart as attacks have resumed. Train 2 of the Pearl gas-to-liquids processing plant in Qatar was damaged during the conflict; repairs should be completed by next March. Shell is a 30% owner of that facility

But the bigger play may be to use that expanded Western Canadian production to supply the potential addition of two more trains to the recently completed Kitimat LNG Canada export terminal.

Quarterly Earnings Highest in Five Years

Strong demand, coupled with increased operational efficiencies, higher commodity prices and proceeds from asset sales, pushed second quarter net earnings to approximately US$10.8 billion on a generally accepted accounting principles (GAAP) basis. By contrast, the company earned US$3.6 billion the company earned in the April-June 2025 period.

Key Takeaways

Shell moved forward with transformative asset purchases and disposals in the just-completed quarter.

• The acquisition of Canadian oil and gas producer ARC Resources Ltd. Dramatically expands Shell's role in Western Canada's Montney Formation
• The ARC acquisitions positions Shell to either increase pipeline exports to the U.S. or sell additional LNG to Asian markets while also reducing its exposure to production in the Middle East.
• The company reported encouraging preliminary results from several other projects around the world.

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 validated plant and project opportunities. Across the world, Industrial Info Resources is tracking over 250,000 current and future projects worth $30.2 Trillion (USD).