By Christian Moess Laursen
Shell’s integrated gas trading has propelled its quarterly earnings, surpassing consensus forecasts despite the challenges posed by low oil prices and refining margins. The London-based oil-and-gas giant announced the following highlights:
Integrated Gas Division
The integrated gas division encompasses liquefied natural gas (LNG) and the conversion of natural gas into gas-to-liquids (GTL) fuels and other products.
“Total oil and gas production remained steady, aligning with the third quarter of 2023. The increase in LNG liquefaction volumes by 3% can be attributed to reduced maintenance.”
The improved earnings, in comparison to the third quarter of 2023, can be attributed to higher contributions from trading and optimization, as well as favorable realized prices and increased volumes. However, these positive factors were partly offset by higher operating expenses and unfavorable deferred tax movements.
The trading and optimization results reflect the seasonal nature of the business and an abundance of optimization opportunities.
Upstream Segment
The upstream segment focuses on the exploration and extraction of crude oil, natural gas, and natural gas liquids, while also encompassing oil and gas marketing and transportation.
“In comparison to the third quarter of 2023, total production increased primarily due to reduced scheduled maintenance and growth from new fields.”
The improved earnings, compared to the third quarter of 2023, mainly stem from favorable movements in deferred tax positions and higher volumes.
Marketing Segment
The marketing segment includes mobility, lubricants, and sectors and decarbonization businesses.
“Marketing sales volumes, including hydrocarbon sales, reduced compared to the third quarter of 2023 primarily due to seasonal factors.”
Earnings, in comparison to the third quarter of 2023, were impacted by lower marketing margins. This includes lower lubricants margins resulting from higher feedstock costs and the seasonal effect on mobility margins. However, higher margins from sectors and decarbonization partly offset these factors.
Chemicals and Products Segment
The chemicals and products segment involves the operation of chemicals manufacturing plants and refineries, responsible for transforming crude oil and other feedstocks into a diverse range of oil products.
“During the third quarter of 2023, chemical manufacturing plant utilization decreased to 62% compared to 70% in the third quarter of 2023. This decrease can be attributed to increased planned and unplanned maintenance activities in North America, along with economic optimization.”
Refinery Utilization and Earnings
The refinery utilization for the fourth quarter of 2023 was 81%, down from 84% in the previous quarter. This decrease was mainly attributed to planned maintenance activities in North America.
In terms of earnings, there was a decline compared to the third quarter of 2023. The decrease in product margins was the primary contributing factor, driven by lower refining margins due to reduced global product demand. Additionally, lower margins from trading and optimization had an impact on earnings.
The segment earnings also reflected lower chemical margins. This was influenced by the ongoing global oversupply in the chemical industry, as well as weak demand. Moreover, there was lower income from joint ventures and associates.
Renewables and Energy Solutions
Renewables and energy solutions encompass a range of activities, such as renewable power generation, power and pipeline gas trading, carbon credits trading, hydrogen production, and the development of commercial carbon capture and storage hubs.
In terms of earnings, there was an improvement compared to the third quarter of 2023. This increase was primarily driven by higher margins resulting from trading and optimization in Europe and the Americas, which were influenced by market volatility and seasonality. Favorable tax movements also contributed to the higher earnings. However, these positive factors were partially offset by higher operating expenses.
First Quarter Guidance
Integrated Gas Production
Integrated gas production is expected to range between 930,000 and 990,000 oil-equivalent barrels per day.
LNG Liquefaction Volumes
LNG liquefaction volumes are projected to be approximately 7.0 million to 7.6 million metric tons. The outlook takes into account the resumption of operations at Prelude LNG platform, located offshore Australia, following a major turnaround.
Upstream Production
Upstream production is anticipated to be around 1.73 million to 1.93 million BOE (barrels of oil equivalent) per day. The production outlook accounts for planned maintenance activities in deep-water assets.
Marketing Sales Volumes
Marketing sales volumes are expected to be approximately 2.15 million to 2.65 million barrels per day.
Refinery Utilization
Refinery utilization is projected to be approximately 83% to 91%. This increase is attributed to the completion of planned maintenance activities in North America.
Chemicals Manufacturing Plant Utilization
Chemicals manufacturing plant utilization is anticipated to range between 68% and 76%.