Market turmoil amid geopolitical standoffs and global inflation is forecast to result in “significantly lower” LNG trading results for the third quarter, Shell plc said Thursday.
In a snapshot of quarterly results, the supermajor outlined preliminary numbers, including for its Integrated Gas division, which includes liquefied natural gas trading. Price volatility and higher delivery costs to move gas around the world as Russia’s war with Ukraine continues pressured the bottom line for the world’s largest liquefied natural gas trader.
“Trading and optimization results for Integrated Gas are expected to be significantly lower compared to 2Q2022 as a result of seasonality and substantial differences between paper and physical realization in a volatile and dislocated market,” the London-based company said.
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Integrated Gas production in 3Q2022 is forecast to be 890,000-940,000 boe/d. Liquefaction volumes should be 6.9-7.5 million metric tons (mmt), Shell said.
In 2Q2022, Integrated Gas production was 944,000 boe/d, with LNG liquefaction volumes of 7.66 mmt. During the second quarter conference call in July, CEO Ben van Beurden had signaled lower gas volumes for the third quarter because of an ongoing strike at the Prelude LNG facility in Australia, and on planned maintenance.
Shell said its overall upstream production for 3Q2022 is about 1.75-1.85 million boe/d, versus a previous estimate of 1.75-1.95 million boe/d.
While gas trading stumbled in 3Q2022, Shell expects to record sequential marketing gains from trading global oil and other products. Still, oil refining margins are predicted to decline by 46%, to $15.03/bbl from $28.04 in 2Q2022. Refining margins are the difference between the cost of a bbl of oil and the value of products made from the bbl. Oil refining margins had climbed in 2Q2022 because there was less diesel and gasoline produced, and consumers began traveling more.
Supply chain issues and inflation, resulting in rising costs for raw materials, are seen dinging the chemicals and products arm too. Adjusted earnings for the business unit are likely to decline sequentially.
Chemicals margins are projected to decline from $86/metric ton in 2Q2022 to minus $27 as worldwide plastics demand slumped. Shell’s preview came one day after ExxonMobil said it expects to see strong results in 3Q2022 because of high natural gas prices.
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