Shell announced on Tuesday that it expects to incur a $600 million loss in the third quarter due to its decision to abandon the biofuels project in Rotterdam. However, the company reported higher production of liquefied natural gas (LNG) and improved gas trading results.
In 2021, Shell had approved the development of an 820,000 metric tons per year biofuels plant but paused construction last year and ultimately scrapped the project last month, concluding it would not be competitive.
The company has raised its third-quarter outlook for LNG production to a range of 7 million to 7.4 million metric tons, which is an increase from a previous estimate of about 6.7 million to 7.3 million tons mentioned in July. This is compared to an actual production of 6.7 million tons in the second quarter. Additionally, Shell anticipates significantly higher trading results in its integrated gas division, as indicated in its quarterly trading update.
In the second quarter, lower gas trading results and decreased oil prices contributed to a net profit drop of about one-third. Shell is also actively seeking new partners or looking to sell some of its chemicals assets, as it expects its chemicals division to report a loss this quarter.
Furthermore, the company flagged an additional $200 million to $400 million loss resulting from the “rebalancing of participation interests” in its Brazilian Tupi field. Shell estimates its indicative refining margin for the third quarter will rise to $11.60 per barrel, up from $8.90 in the previous quarter. During the July-to-September quarter, global benchmark Brent crude prices averaged around $68 per barrel, compared to $67 per barrel in the second quarter and $79 per barrel in the same period last year.