Shell Takes Hit of Up To $5bn on Russia Exit

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  • Near-1 mil boe/d output fall from pre-pandemic 2019 level
  • LNG business to be impacted by Sakhalin 2 exit
  • Trading, refining margins set to benefit in volatile quarter

Shell on April 7 flagged a $4 billion-$5 billion hit from its withdrawal from Russia when it publishes upcoming first-quarter results together with further reductions in its oil and gas production, saying its upstream output had been in a range of 1.9 million-2.1 million b/d of oil equivalent, down from 2.5 million boe/d a year earlier.

Shell publishes first-quarter results

Publishing a preview of first-quarter results, it said its estimate of the impact of the withdrawal from Russia following the invasion of Ukraine encompassed “write-downs of receivables, expected credit losses and onerous contracts.”

Its upstream production guidance for the quarter was as much as 1 million boe/d below levels before the pandemic in the first quarter 2019, when output was 2.9 million boe/d.

It said the Integrated Gas unit’s production had also fallen from 967,000 boe/d a year earlier to a range of 860,000-910,000 boe/d in the first quarter.

Shell expect a further output

Comparisons are affected by Shell shifting its Canadian shale business from its upstream unit into its LNG-focused ‘Integrated Gas’ unit, the effect being 50,000 boe/d for the first quarter, Shell said.

Part of the output fall in Integrated Gas was due to a maintenance turnaround at one train of the Pearl gas-to-liquids facility in Qatar, Shell said. Its liquefaction volumes appeared less affected, at 7.7 million-8.3 million mt, compared with 8.16 million mt a year earlier.

Shell can expect a further output hit from its abrupt exit from Russia. In particular, it holds a 27.5% stake in the two-train Sakhalin 2 project, one of the world’s largest LNG facilities, with shipments of 11.6 million mt in 2020.

Volatile quarter impacted by Ukraine invasion

Shell flagged likely strong results in its downstream and trading businesses in what was an increasingly volatile quarter impacted by the Ukraine invasion.

Its indicative refining margin rose 56% compared with the fourth quarter to $10.23/b, while its refinery utilization rate increased to 70%-74% from 68% in the fourth quarter 2021.

It flagged higher trading and optimization results in Integrated Gas and “significantly” higher trading and optimization results in its oil products business compared with the fourth quarter.

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Source: Platts

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