Shell LNG Sales Sink as Key Project Advances

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No. 1 LNG portfolio player Royal Dutch Shell reported a decline in LNG sales in the first quarter, as its key Pacific-facing project, LNG Canada, lined up shipping. Sales of LNG fell by 17% in the first quarter to 15.8 million tons, down from 19 million tons a year earlier, Shell said in its first quarter results. Volumes fell on the back of feed gas constraints and maintenance activities. LNG production volumes in the first quarter fell by 8% compared with year ago levels. High production at its long-troubled Prelude floating liquefaction terminal (FLNG) in Australia was a bright spot (LNGI Feb.25'21). In its first quarter results, the major noted that the global Covid-19 pandemic continued to create "significant uncertainty" in macro-economic conditions with "an unexpected negative impact on demand for oil, gas and related products." LNG Canada Orders Ships The 14 million ton per year LNG Canada, under construction on the coast of British Columbia, has assumed greater importance for Asian markets in light of rival project hold-ups and Panama Canal congestion (LNGI Apr.9'21). Shell's partner, Malaysia's Petronas, this week ordered three newbuild LNG vessels and signed corresponding time charters to meet the firm's shipping requirements for LNG Canada. The deal, which was signed on Apr. 29, details the order of three LNG carriers each with a capacity of 174,000 cubic meters from South Korea's Hyundai Heavy Industries (HHI), as well as the corresponding time charter agreement with Hyundai LNG Shipping. The newbuild vessels are expected to be delivered from the second quarter of 2024 on a staggered basis, Petronas said. The vessels "will primarily be used to lift cargoes from LNG Canada, which will further contribute towards the competitive and uninterrupted supply to Petronas customers," the company said. Petronas, alongside Royal Dutch Shell, PetroChina, Mitsubishi and Korea Gas pulled the final trigger on the C$40 billion (US$30 billion) LNG Canada project on Oct. 2, 2018, with significant site work starting a day later (LNGI Oct.3'18). Petronas added that upon completion, the new vessels would be amongst the most energy-efficient LNG carriers ever built, with shaft generators powered by LNG. Shell Earnings Shell is staying cautious even after doubling its cash flows during the first quarter. The Anglo-Dutch major’s executive team sees the recovery from the Covid-19 pandemic as “a mixed bag." Shell’s cash flow from operating activities, excluding working capital movements of $4.4 billion, was $12.7 billion -- which analysts noted was almost double that of fourth-quarter 2020. The improved performance was a result of the company’s Upstream and Oil Products business segments rebounding strongly, a resilient Integrated Gas segment that includes LNG, and an “outstanding” showing from its Chemicals business. CFO Jessica Uhl said that while demand in China looks strong across the board, whether looking at LNG imports, oil demand or retail, Shell is seeing softer demand other parts of the world, such as India and Brazil (LNGI Apr.28'21). Alexandra Chapman and Jon Mainwaring, London Shell Q1'21 Earnings ($ million) Q1'21 Q1'20 %Chg. Q4'20 Revenue 59,115 60,959 -3.0% 45,028 Operating Cash Flow 8,294 14,851 -44.2 6,287 Net Income 5,784 -23 NA -3,956 Adjusted Income 3,234 2,860 13.1 393 Integrated Gas* 2,527 1,812 39.5 20 Upstream 1,096 -863 NA -2,091 Oil Products 650 2,211 -70.6 -1,775 Chemicals 689 146 371.9 367 Oil Production ('000 b/d) 1,749 1,892 -7.6 1,693 Gas Production (MMcf/d) 9,747 10,276 -5.1 9,392 Oil and Gas Output ('000 boe/d) 3,429 3,665 -6.4 3,313 Refinery Processing Intake ('000 b/d) 1,751 2,397 -27.0 1,940 Oil Products Sales ('000 b/d) 4,164 5,278 -21.1% 4,781 *CCS (current cost of supplies) earnings. Source: Royal Dutch Shell

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