Anglo-Dutch oil major Royal Dutch Shell has announced its intention to write down its oil and gas assets by $3.5 billion as it adapts to a new outlook following a series of impairments.
Shell is, of course, not the only oil major to do this. The pandemic has presented many challenges for the oil industry, with oil prices even turning negative as demand dropped due to lockdowns to tackle the pandemic. COVID-19 has also presented operational challenges, especially for offshore facilities. The top global oil producers – such as Exxon Mobil, BP, and Total – have collectively written off $80 billion as a result.
Shell, which also makes derived products like gas engine oil, partially attributed the write-down to contracts for liquefied natural gas (LNG), impairments in the US Gulf of Mexico Appomattox field and the closure of refineries.
The oil major had already made a $16.8 billion write-down in the second quarter, followed by a $1 billion write-down for its LNG portfolio. Shell is the world’s largest trader of LNG. Combined with more modest write-downs from earlier in the year, the total now stands at $22 billion.
With the ongoing energy transition, it is a time of great change for the oil majors, many of which are seeking to migrate from hydrocarbons towards renewable sources of energy. On February 11, Ben van Beurden, Shell’s CEO, will lay out the company’s long-term plan to broaden its low-carbon power business and reduce its emissions of greenhouse gasses.
