Shell is experiencing a general decline in production in 2022. This is due to the recent international unrest and the inefficiency of the political field with regard to the energy field.
Shell criticizes European energy policy
Shell CEO Ben van Beurden questions the energy policy of European states. According to him, Europe’s problems are the direct result of underinvestment. He then questioned a gap between the declared will to be part of an energy transition dynamic and its application.
He states:
“The supply shortfall is a global problem and also a problem that results from (government) policy decisions. The industry has significantly underinvested collectively, whether it’s publicly traded international oil companies or national oil companies. In recent years we have invested about $1 trillion less than we would have under normal circumstances.”
The company then criticizes the British government. It is aimed at an energy profits tax that does not provide relief for energy transition expenses. Furthermore, Ben van Beurden deplores the lack of measures to reduce the demand for hydrocarbons.
He comments:
“While part of the supply problem is related to the bottlenecks of the pandemic, part of it is also due to the fact that there is a lot of expectation and pressure for us to move away from an oil- and gas-dominated system (…) but at the same time there have not been sufficient policies to deal with the demand.”
In addition, the Shell CEO points out an inconsistency and a certain dilettantism of the European political class. It underlines an unpreparedness and a lack of support for companies, but also a lack of attractiveness that is detrimental to large companies.
Weakening of energy production and consumption
Shell recorded a production decline of around 13% in the second quarter. It reaches 1.92 million boe/d. Oil production fell by 15% to 1.33 million b/d. However, Shell announced good financial results.
In the third quarter, upstream production is expected to reach levels close to or below those of last year. This is between 1.7 and 1.9 million b/d. Integrated gas production is similarly declining, between 890,000 and 940,000 bpd.
This decline in production is also caused by the cessation of the group’s activities in Russia. The Russian crisis has also introduced a need to reduce Shell’s consumption in Europe, especially in Germany.
Ben van Beurden explains:
“We have already reduced gas consumption in our Rotterdam refinery by about 40% (…) We have also halved gas consumption in our large chemical complex in the Netherlands. In Germany we have reduced natural gas consumption in our energy and chemical production plant by 70% [du Rheinland].”
What are Shell’s development prospects?
New investment destinations are being considered by the group. The group cites a few countries, all outside OPEC, such as Namibia and Suriname. In addition, Brazil and Oman appear as the main target markets.
In addition, Shell’s assets, particularly in Kazakhstan, are performing well. Production has been stable since the restart of the Kashagan field and fears of exports of the CPC blend. A similar development is taking place in the Gulf of Mexico.
In addition, the forecast is for an increase in production potential from 90% to 98% compared to 84% in the second quarter. Production levels in the above-mentioned areas are stabilizing Shell’s export market.
The Trinidad and Tobago field also provides a boost to regional LNG supply. A memorandum of understanding was also signed for the Brunsbuttel project in Germany.
Illustration by Anastasia Vystorobska
