Shell’s Gas Gambit: Trading Green for Gas in the Name of Profit

Posted by John Donovan 12 July 2024

In another classic move from our favorite eco-villain, Shell has gone all-in on liquefied natural gas (LNG), trying to plug the gap left by its exit from Russia in 2022. With a series of deals, Shell’s CEO Wael Sawan is betting big on LNG, all while quietly stepping away from those pesky renewable energy projects.

Filling the Russian Void:

Shell’s new projects in the United Arab Emirates and Trinidad and Tobago, along with snapping up a hefty trading portfolio, are all part of Sawan’s master plan to boost LNG volumes by up to 20 million metric tons per year (mtpa) between 2023 and 2030. These moves help Shell recover from the 2.5 mtpa shortfall after ditching Russia’s Sakhalin LNG project, which led to a 5% dip in liquefaction volumes last year. Because nothing says resilience like swapping one geopolitical mess for another.

LNG: The New Black:

LNG is now Shell’s pride and joy, especially after their $53 billion acquisition of BG Group in 2016. Shell’s integrated gas division raked in almost half of the company’s $28 billion adjusted earnings in 2023. Clearly, there’s gold in that there gas.

Since taking the reins in January 2023, Sawan has yanked Shell out of many renewable ventures and doubled down on natural gas. According to Shell, the LNG market will swell by 50% by 2040, driven by Asian economies swapping coal for this “less dirty” fossil fuel. Shell aims to pump up its LNG sales volumes by 20% to 30% by 2030, hitting up to 87 mtpa from 67 mtpa in 2023.

New Ventures Galore:

On Wednesday, Shell announced it’s grabbing a 10% stake in Abu Dhabi National Oil Company’s Ruwais LNG project, expected to double output to 15 million tons per year by 2028. Shell will also buy 1 million mtpa from the plant, which will set back investors around $5.5 billion, according to partner Mitsui.

But wait, there’s more! Shell is also developing the Manatee natural gas field off Trinidad and Tobago’s coast, which will feed into the country’s underutilized Atlantic LNG facility. Plus, Shell’s acquisition of Singaporean LNG company Pavilion Energy from Temasek gives it a new foothold in European and Singaporean markets.

The Halfway Mark:

Analysts like Saul Kavonic from MST Financial say these deals put Shell halfway to its LNG growth target. Zoë Yujnovich, Shell’s Integrated Gas and Upstream Director, mentioned that about half of the 2030 growth (roughly 11 mtpa) will come from projects already under construction. These include Qatar’s North Field expansion, LNG Canada set to go online next year, and Nigeria’s NLNG facilities. Shell will also enhance operations at its Prelude floating LNG facility off Australia and Trinidad’s Atlantic facility.

A ‘Critical Fuel’ Spin:

Shell frames LNG as a “critical fuel in the energy transition,” a sentiment echoed by analyst Rohan Bowater from Accela Research. However, Bowater points out that increasing LNG in Shell’s portfolio by 10% by 2030 will only reduce net carbon intensity by 4%, whereas a similar boost in renewables capacity would cut it by 14%.

So, here’s to Shell: pushing the boundaries of corporate greenwashing while keeping those profit margins nice and fat.

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