Shell to write down up to US$22b in wake of Covid-19

Move comes after oil firm announced in April its plans to reduce greenhouse gas emissions to net zero by 2050

LONDON: Royal Dutch Shell yesterday said it will write US$22 billion (RM94 billion) off the value of its assets after sharply lowering its oil and gas price outlook in the wake of the coronavirus pandemic.

The decision also comes as the Anglo-Dutch company reviews its operations after CEO Ben van Beurden laid out plans in April to reduce greenhouse gas emissions to net zero by 2050.

Shell, which has a market value of US$126.5 billion, said in an update ahead of its second-quarter results on July 30 that it will take an aggregate posttax impairment charge in the range of US$15 to US$22 billion in the quarter.

Shell’s shares were down 0.4% in early trading.

The world’s largest fuel retailer said it expects a 40% drop in fuel sales in the second quarter from a year earlier to four million barrels per day (bpd) due to a sharp fall in consumption due to coronavirusrelated travel restrictions.

Upstream oil and gas production is expected to average 2.35 million bpd in the second quarter, down from 2.71 million bpd in the previous quarter.

Shell’s writedown mirrors rival BP’s move to take up to US$17.5 billion off the value of its assets as it prepares to shift to low-carbon energy.

Shell reduced its expected average benchmark Brent crude oil price for 2020 to US$35 a barrel, down from US$60. For 2021 and 2022 it cut its forecast to US$40 and US$50 a barrel, respectively, also down from US$60.

Its long-term oil price outlook now stands at US$60 a barrel, Shell said in an update ahead of its second-quarter results on July 30. It previously did not disclose its long-term value.

The company also cut its longterm refining profit margin outlook by 30%.

Its long-term natural gas price was set at US$3 per million British Thermal Units.

BP cut its long-term Brent forecast to US$55 a barrel from a previous US$70. – Reuters