ADNOC investment decision for Ruwais LNG in UAE confirmed by Shell as three other players also take stakes
Shell Plc has confirmed its shareholding with four other partners in the new LNG export plant being developed in the United Arab Emirates by Abu Dhabi National Oil Company’s (ADNOC) at Al Ruwais.
Global LNG market heading for expansion with Asia accounting for three-quarters of demand growth
Demand for liquefied natural gas worldwide is forecast to hit 700 million tonnes by 2040 and Asia is expected to drive nearly 75 percent of this growth as Asian domestic gas production declines and LNG imports are used to tackle air quality concerns, according to the fifth Royal Dutch Shell annual outlook on LNG.
“For instance, China’s heavy-duty transport sector consumed nearly 13 million tonnes of LNG in 2020, almost doubling from 2018, to serve the fast-growing fleet of well over 500,000 LNG-fuelled trucks and buses,” the Shell report noted.
“LNG-fuelled shipping is also growing, with the number of vessels expected to more than double and global LNG bunkering vessels set to reach a total of 45 ships by 2023,” it said.
As demand grows, a supply-demand gap is expected to open in the middle of the current decade with less new production coming on-stream than previously projected.
“Just 3MT in new LNG production capacity was announced in 2020, down from an expected 60MT,” added the report.
Shell explained that because of the net-zero emissions targets companies are having to make, the LNG industry will need to innovate at every stage of the value chain to lower greenhouse-gas counts.
The Anglo-Dutch company noted that over the past year LNG prices hit a record low early in 2020 but ended the 12-month period at a six-year high as demand in parts of Asia recovered and winter buying increased against tightened supply.
“LNG provided flexible energy which the world needed during the Covid-19 pandemic, demonstrating its resilience and ability to power people’s lives in these unprecedented times,” said Maarten Wetselaar, Director at Shell for Integrated Gas, Renewables and Energy Solutions.
“Around the world countries and companies, including Shell, are adopting net-zero emissions targets and seeking to create lower-carbon energy systems,” he added.
“As the cleanest-burning fossil fuel, natural gas and LNG have a central role to play in delivering the energy the world needs and helping power progress towards these targets,” stated Wetselaar.
LNG trade increased to 360MT in 2020 and despite the “unprecedented volatility” caused by the Covid-19 pandemic the industry is moving towards a period of expansion.
China and India led the recovery in demand for LNG following the outbreak of the pandemic with both countries increasing their LNG imports by 11 percent.
“Demand in Europe, alongside flexible US supply, helped to balance the global LNG market in the first half of 2020,” said the report.
“However, supply outages in other supply basins, structural constraints and extreme weather later in the year resulted in higher prices,” it added.
Shell's first-quarter profits are almost halved but gas division is helped by solid LNG sales
Royal Dutch Shell reported that first-quarter profits had almost halved from a year ago, but the natural gas and LNG division still managed to maintain stable earnings as sales increased.
Shell said first-quarter LNG sales rose 9 percent to 19 million tonnes from 17.51MT in the same three months of 2019, though were down from the 20.09MT sold in the final quarter of 2019.
Shell’s overall quarterly earnings dropped by 48 percent to $2.75 billion from $5.29Bln in the same three months of 2019, reflecting lower realised oil, gas and LNG prices, weaker realised refining and chemicals margins as well as lower sales volumes.
Earnings from Integrated Gas, one of four production divisions at Shell and including LNG, came to $2.14Bln compared with $2.56Bln in the year-ago quarter.
“Our Integrated Gas and Marketing businesses continued to achieve robust results this quarter, bringing resilience to our cash flows,” said Shell Chief Executive Ben van Beurden.
Shell noted that during the quarter Integrated Gas announced that it would not proceed with the proposed US Lake Charles LNG project with Energy Transfer of the US due to the current market conditions.
After the quarter, in April, Shell took the final investment decision to develop the first phase of Arrow Energy’s Surat Gas Project in Queensland, Australia, which will bring up to 90 billion cubic feet per year of new gas to market at peak production.
Shell said that compared with the first quarter last year, gas earnings, excluding identified items, primarily reflected lower realised LNG, oil and gas prices as well as lower contributions from trading and optimisation.
“Total gas production increased by 12 percent, mainly due to lower maintenance activities and field ramp-ups in Trinidad and Tobago and Australia,” said the company.
“LNG liquefaction volumes increased mainly as a result of lower maintenance activities and new LNG capacity, partly offset by lower feed-gas availability compared with the first quarter 2019,” it added.
In its outlook for the second quarter, Shell said that due to demand or regulatory requirements and/or constraints in infrastructure, the company may need to take measures to curtail or reduce oil and gas production, LNG liquefaction as well as the utilisation of refining and chemicals plants.
In the second quarter, Shell said Integrated Gas production is expected to be approximately 840-890 thousand barrels of oil equivalent per day.
LNG liquefaction volumes are expected to be approximately 7.4-8.2 million tonnes.
More than 90 percent of the term contracts for Shell’s LNG sales are oil price-linked with a price lag of typically three to six months.
