Ahead of Shell’s New York Capital Markets day yesterday, CEO, Wael Sawan revealed that the UK energy giant would prioritise its capital spending on LNG growth, while maintaining oil output at current levels.
Sawan said that this approach would make the company “resilient irrespective of how the energy system evolves.”
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The investment in LNG will result in a 4-5% annual increase in sales through 2030, Shell said. “Demand for energy will continue to grow,” said Sawan. “Across all [Shell’s forecast demand] scenarios, we see gas, particularly LNG, being a winner.”
Maintaining oil and natural gas liquids production at 1.4 mill barrels of oil equivalent per day will still need investment in new output to replace existing reserves.
Capital spending for the upstream division, which also includes gas, will be $12-$14 bill a year. Acquisitions will also primarily involve this business area.
Investments will probably remain focused on areas, such as the Caribbean and the Gulf of Mexico (America), although Shell is also awaiting for a second green light on the Jackdaw project in the North Sea.
UK Chancellor, Rachel Reeves had confirmed earlier this week that Jackdaw and Equinor’s Rosebank projects would go ahead.
Shell’s renewables and energy business spending will drop from around 10% to 9% to $20-$22 bill per year, down from the previous range of $22-$25 bill.
The lower spending regime and also increased cost cutting measures will help Shell meet its goal of raising free cash flow per share by 10% a year between 2025 and 2030.
Shell will also put 40-50% of cash flow from operations towards dividends or buybacks, compared to the previous policy of 30-40%, although the company had already exceeded 40% in 2022 and 2023, according to RBC, talking with newswires.
Unlike UK rival bp, which was under severe pressure to follow better-performing US energy companies and ditch previous targets to reduce oil and gas production, Shell was more bullish on future oil and gas demand.
Last month, Shell said that LNG global demand is set to rise by about 60% by 2040.
This increase will be primarily driven by Asia’s economic growth, industry and transport de-carbonisation, and the impact of artificial intelligence, Shell said in its ‘LNG Outlook 2025’.
Shell forecast that global LNG demand will reach between 630 mill and 718 mill tonnes per annum by 2040, which was higher than predicted in the 2024 report.
Despite a sluggish 2 mill tonne growth in global LNG trade last year, the lowest increase in a decade, Shell said more than 170 mill tonnes of fresh supply is expected by 2030.
Shell also said that the shipping sector was due for a 60% increase in LNG demand by 2030, driven by a growing fleet of LNG-powered vessels.
The company is currently nearing first LNG exports from its LNG Canada project in Britsh Columbia.
Yesterday, Sawan also said that an arbitration dispute with Venture Global should be resolved in the coming months.
Venture Global, whose $58 bill market debut fell short of expectations in January, began generating proceeds in 2022 from its Calcasieu Pass facility but has not delivered LNG cargoes to leading energy companies thus far who had originally signed long term deals for LNG with the company.
A group of energy companies have since started arbitration proceedings against Venture Global, alledging that the company sold LNG on the spot market instead to secure more funds.
Sawan claimed that Venture Global had already delivered 400 cargoes from Calcasieu Pass.
