Shell to write down up to $31b as virus hits Big Oil

LONDON • Royal Dutch Shell will write down between US$15 billion and US$22 billion (S$21 billion and S$31 billion) in the second quarter, as the company gave investors a wider glimpse of just how severely the coronavirus crisis has hit Big Oil.

The pandemic left no part of the energy giant's sprawling business unscathed. Oil production slowed, fuel sales fell and shipments of liquefied natural gas to petrochemicals suffered.

Oil-product sales volumes will be 3.5 million to 4.5 million barrels a day in the second quarter, down from 6.6 million a year earlier, driven by a "significant drop" in demand because of the pandemic, the oil major said in a statement yesterday, ahead of quarterly results on July 30.

Shell said it has revised its mid-and long-term pricing and refining margin outlook, and expects gearing - a measure of debt - to increase by as much as 3 per cent due to the impairment charges. Shell's in-house trading unit will not be providing respite this quarter as well.

The company indicated more pain to come from LNG sales, which have a price lag of three to six months compared with oil. The impact of crude prices on LNG margins became "more prominent" from June.

Over the longer term, Shell is optimistic about the LNG market, with chief executive officer Ben van Beurden telling Bloomberg in May that he expects the market to recover to pre-coronavirus levels.

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A version of this article appeared in the print edition of The Straits Times on July 01, 2020, with the headline 'Shell to write down up to $31b as virus hits Big Oil'. Print Edition | Subscribe