Shell sees up to $2.7 billion write-down on Singapore and Rotterdam plants

LONDON - Shell expects as much as US$2 billion (S$2.7 billion) of impairments in its second-quarter earnings related to a delayed biofuels plant under construction in the Netherlands and its chemicals facility in Singapore, which it agreed to sell in May.

Since taking the job in January 2023, Shell chief executive officer Wael Sawan has pledged to be “ruthless” in improving the company’s performance and boosting investor returns. That process has included eliminating jobs, selling assets and changing the pace at which it seeks to cut its carbon emissions.

Earlier this week, the company said it will pause construction of a biofuels plant in Rotterdam in order to figure out the best way forward with the project. That will result in a non-cash post-tax impairment of US$600 million to US$1 billion, Shell said in a statement on July 5.

When completed, the Dutch facility will produce sustainable aviation fuel and renewable diesel in anticipation of rising demand for low-carbon energy. Yet the pace of the developed world’s shift towards net-zero emissions has come into question lately with right-wing populists who challenge the cost of the transition in the political ascendancy.

BP recently scaled back plans for biofuels production at its Cherry Point refinery in the United States and its Lingen plant in Germany. Shell has said it remains committed to achieving net-zero emissions by 2050, while using shareholder capital in a “measured and disciplined way”.

Shell expects a further write-down of US$600 million to US$800 million in relation to the Singapore chemicals and products facility, which the company

agreed to sell to a joint venture

between commodity trader Glencore and Indonesia’s Chandra Asri Pacific.

Shell’s gas trading results are set to be lower in the second quarter due to seasonal shifts in the market, while remaining in line with the division’s performance a year earlier, according to the statement. The unit has been a big driver of profits for the company in recent years, with “exceptional” earnings at the end of 2023 and a strong performance in the first three months of 2024.

In separate news, Shell, Total­Energies, BP and Mitsui & Co will each take a 10 per cent stake in Abu Dhabi National Oil’s next liquefied natural gas (LNG) export project, according to people with knowledge of the matter.

By investing in Ruwais LNG plant, the energy majors are bet­ting on long-term demand for natural gas, even though many countries intend to switch to greener alternatives. While fuel prices have eased from the stratospheric heights reached two years ago, they remain elevated, boosting the appeal of new supply projects. BLOOMBERG