Shell flags weak Q4 refining ahead of Singapore selloff

Shell on Jan. 8 highlighted a weak fourth quarter for its refining and chemicals unit due to lower margins and a maintenance impact on throughput, as it warned investors of an expected financial impairment of $2.5 billion-$4.5 billion, primarily in the downstream.

Shell said in December it plans to offload its 500,000 b/d Singapore refining and chemicals operations due to a lack of advantage in feedstock, energy and utility costs, starkly contrasting with the company's earlier enthusiasm for opportunities in Asia in the previous decade.

Shell's global indicative refining margin dropped from $15.72/b in Q3 2023 to $10/b in Q4, and it said it expected significantly lower results from chemicals and products trading compared with Q3, with the chemicals and products unit set for an adjusted earnings loss.

Results were also affected by a slump in refinery throughput to a range of 78%-82%, a level reminiscent of the pandemic, but due to planned maintenance at its North American refining operations.

Shell's North American downstream business is spread across two sites in Canada and one in the US: the 100,000 b/d Scotford refinery in Alberta, which processes synthetic crude derived from oil sands, and the 85,000 b/d Sarnia refinery near Ontario, as well as the 250,000 b/d Norco refinery in Louisiana. Scotford was expected to operate at reduced levels during maintenance in October, while Norco was expected to be under maintenance for most of that month, S&P Global Commodity Insights reported earlier.

Steadier upstream

Elsewhere in its business, there were some signs of more stable upstream production, with the midpoint of Shell's guidance for the upstream unit higher than output in Q4 2022. It forecast production in a range of 1.83 million-1.93 million b/d of oil equivalent, offset by a potential fall in production in the LNG-focused Integrated Gas unit, to 880,000-920,000 boe/d.

Shell's oil output declined significantly between 2019 and 2022, and particularly during 2022.

Shell confirmed its earlier guidance that LNG liquefaction volumes for Q4 2023 were higher than a year earlier, in a range of 6.9 million-7.3 million mt, although that is also significantly below pre-2022 levels.

It added that financial results from LNG trading were expected to be "significantly higher" than in Q3 2023 due to "seasonality and increased optimization opportunities."

The Platts Dated Brent benchmark was assessed $4.53/b lower on average in Q4 2023 compared with a year earlier at $84.34/b. Platts is part of S&P Global Commodity Insights.