Shell has made a series of deals to replace the liquefied natural gas (LNG) volumes it lost after exiting Russia in 2022, as the company’s CEO Wael Sawan doubles down on the gas business and reduces the focus on renewable energy.
The new projects in the United Arab Emirates and Trinidad and Tobago, as well as the acquisition of a large trading portfolio, put Shell halfway to achieving its target to increase LNG volumes by up to 20 million metric tons per year (mtpa) between 2023 and 2030, according to analysts and Reuters calculations.
These deals allow Shell to recover the 2.5 mtpa of supplies it lost from the Sakhalin LNG project in Russia after Moscow’s invasion of Ukraine in 2022, which led to a 5% drop in Shell’s liquefaction volumes in 2023.
LNG has become Shell’s flagship division following the $53 billion acquisition of BG Group in 2016. The integrated gas division delivered nearly half of Shell’s $28 billion adjusted earnings in 2023, helped by strong results from its trading business, the world’s biggest LNG trader.
Shell forecasts the LNG market will grow by around 50% by 2040 from around 400 mtpa in 2023, as Asian economies grow and as gas, the least polluting fossil fuel, replaces coal in power generation. The company aims to grow its LNG sales volumes by 20% to 30% by the end of the decade to up to 87 mtpa from 67 mtpa in 2023.
The new deals include a 10% stake in Abu Dhabi National Oil Company’s Ruwais LNG project, which will more than double the plant’s output to 15 mtpa by 2028, and Shell’s agreement to develop its 2.7 trillion cubic feet Manatee natural gas field offshore Trinidad to feed the country’s under-utilized 15 mtpa Atlantic liquefaction facility.
Shell has also agreed to buy Singaporean LNG company Pavilion Energy, giving it access to new gas markets in Europe and Singapore as well as 6.5 mtpa of supply contracts.
These deals demonstrate Shell’s focus on growing its gas and LNG business, as the company reduces its investments in renewable energy projects under the leadership of CEO Wael Sawan.