Shell’s profits plunge despite addition of BG LNG sales

Falling LNG prices contributed to a 71% drop in Anglo-Dutch major Shell’s second-quarter earnings to $1.18bn, despite LNG sales rising after the company’s acquisition of BG Group, Shell said on Thursday.

The volume of LNG liquefied by Shell over the first half of 2016 rose by 3m tonnes year on year to 14.61m tonnes. This was supported by the addition of a fully operational QCLNG plant in Australia, run by BG Group, which only commenced operations at its first train at the start of 2015.

The increase in total LNG sales was larger, up by over 7m tonnes to 26.54m tonnes over the first half of the year.

The loss of BG’s own results has led to a reduction in transparency on the old company’s activity. BG typically used to break down LNG sales by region and by cargo number.

Shell did say, however, that BG contributed 2.42m tonnes of LNG liquefaction volumes in the second quarter out of a total of 7.57m tonnes.

Stripping out the BG element and comparing the figure to volumes in the second quarter of 2015, this indicates a small decline in output from the Shell side of the business. This in part ties in with the expiry of Shell’s stake in the Malaysia LNG Dua joint venture, which in August 2015 was transferred to Malaysian company Petronas.

Shell has slowed plans to develop new liquefaction capacity in line with the prevailing market conditions and as it works on the structure of its new business. Shell in July delayed a final investment decision (FID) in the US Lake Charles project which had been scheduled for 2016.

Also in July, the LNG Canada joint venture, which includes Shell with a 50% stake, PetroChina, Mitsubishi Corporation and KOGAS, delayed FID in the project.

A delay in the start-up of the Australian Gorgon plant has also hit Shell’s expected LNG volumes. Shell has a 25% stake in Gorgon.

Shell’s acquisition of BG Group was closed out on 15 February. ed.cox@icis.com