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Shell reports unexpected dip in upstream output, LNG output jumps

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Shell reports unexpected dip in upstream output, LNG output jumps

Royal Dutch Shell PLC's upstream oil and gas production dipped by as much as 2.7% in the third quarter compared with a year earlier, while its LNG liquefaction increased by at least 10%, the supermajor said in a preliminary disclosure for the quarter ending Sept. 30.

In a partial snapshot of results ahead of its full quarterly earnings statement, Shell put its third-quarter upstream production at 2.60 million barrels of oil equivalent per day to 2.65 million boe/d, down from 2.67 million boe/d in the third quarter of 2018, without indicating the oil and gas split.

It had forecast in its last results statement that upstream production would be up in the third quarter, by 50,000 boe/d to 100,000 boe/d, compared with a year earlier.

Shell also noted prices for gas and natural gas liquids continued to be "disconnected" from Brent benchmark oil prices, reflecting exceptionally weak gas market conditions. The company also indicated an uptick in write-offs for unsuccessful exploration drilling, saying well write-offs would be $250 million to $350 million higher than in the third quarter of 2018, when the write-off level was $149 million.

The company estimated its LNG liquefaction volumes at 9.00 million tonnes to 9.30 Mt, up from 8.18 Mt in the third quarter of 2018. Production in its "integrated gas" unit, which provides gas for LNG, was 930,000 boe/d to 960,000 boe/d in the third quarter, up from 924,000 boe/d a year earlier. Shell also reported a strong trading and optimization performance in LNG.

In the downstream, Shell said its refinery availability had been in the range of 90% to 92%, roughly in line with a year earlier. Oil product sales were up compared with a year earlier, at between 6.70 million barrels per day and 7.35 million bbl/d, while chemical sales were down, at 3.90 Mt to 4.00 Mt, it said, noting it had completed the sale of its stake in Saudi refining joint venture Saudi Aramco Shell Refinery Co. in September.

Shell plans to publish full third-quarter results on Oct. 31 but said the Sept. 30 end-of-quarter statement was in response to investor feedback and part of efforts to increase transparency.

The integrated oil and gas major also expects corporate earnings, excluding identified items, to be a net charge between $700 million and $850 million for the third quarter.

Nick Coleman is a reporter with S&P Global Platts. S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.