By Stephanie Kelly and Shadia Nasralla
LONDON (Reuters) -Shell expects to report a $600 million hit in the third quarter after abandoning its biofuels project in Rotterdam, bringing total impairments and provisions related to the venture to $1.4 billion, it said on Tuesday.
Shell had approved development of the 820,000 metric tons-per-year biofuels plant in 2021, but paused construction last year and cancelled the project entirely in early September because it would not have been competitive.
The decision to exit the project is the latest in a series of steps by fossil fuel producers retreating from earlier pledges to expand cleaner energy.
In February, BP announced it would sharply reduce its investment in renewables, while Equinor said it was scaling back its renewable energy ambitions.
SHELL RAISES LNG PRODUCTION OUTLOOK
Shell also signalled a stronger performance in its liquefied natural gas business, raising its third-quarter production outlook to between 7 million and 7.4 million tons, it said in a quarterly trading update.
The company had previously forecast LNG production of about 6.7 million to 7.3 million tons, the oil major said in July, compared with 6.7 million tons in the second quarter.
It expects trading results to be significantly higher in its integrated gas division.
Energy majors typically never divulge detailed results of their trading divisions saying that publishing such details would lessen their competitive advantage.
Shell also said it expects its indicative refining margin in the third quarter rising to $11.6 per barrel from $8.9 in the previous three months.
Lower gas trading results and lower oil prices had weighed on Shell’s second quarter net profit, which dropped by about a third.
Global benchmark Brent crude prices averaged around $68 a barrel during the July-to-September quarter, compared with $67 in the second quarter and $79 in the same period of last year.
Shell, which is seeking new partners or buyers for some of its chemicals assets, said its chemicals division is expected to record a loss in the quarter.
It also flagged a $200 million to $400 million hit from a decrease of its share of production from Brazil’s Tupi fields to reflect updated reservoir data, which a Shell spokesperson said was normal course of business.
“We see this as a strong update from the company, with improvement in operational indicators across its two key upstream divisions, as well as better trading q-o-q despite weaker market conditions more broadly,” according to analysts at RBC Capital Markets.
(Reporting by Stephanie Kelly and Shadia NasrallaEditing by David Goodman, Kirsten Donovan and Louise Heavens)
