Revised LNG Outlook for Q4 2024

Shell has cut its liquefied natural gas (LNG) production estimates for the final quarter of 2024, projecting a range of 6.8-7.2 million tonnes, a notable decrease from the previous forecast of 6.9-7.5 million tonnes. The revision comes as a result of fewer LNG cargo deliveries and reduced feedgas availability, which is essential for LNG production. For context, Shell produced 7.5 million tonnes in the third quarter of 2024. This downward adjustment signals challenges in the LNG sector, impacting the company’s short-term output and expected revenue.

Financial Projections and Write-offs

Alongside the production cut, Shell has revised its financial outlook, projecting integrated gas earnings between $1.2 billion and $1.6 billion, and upstream earnings in the range of $2.4-$3.1 billion for Q4 2024. However, these figures are overshadowed by significant write-offs, which are expected to total approximately $400 million for upstream exploration wells and $300 million for integrated gas wells. These financial setbacks led to a 2.12% drop in Shell’s stock price following the release of the update, indicating investor concern about the company’s fourth-quarter performance.

Challenges in the LNG Market and Investor Sentiment

Experts, such as Russ Mould from AJ Bell, have voiced disappointment over the revised LNG production estimates, given Shell’s historically strong position in the LNG market. The reduction in production expectations, combined with financial concerns in the trading business and cash flow issues, has caused a bearish outlook for the company. Despite these challenges, oil prices have shown signs of improvement in early 2025, driven by a slowdown in OPEC production and continued strength in the US economy, which may offer some relief to Shell.

Shell Reassesses Offshore Wind Strategy Amid Increased Pressure

In addition to scaling back its LNG forecasts, Shell is also reducing its investment in new offshore wind projects. Rising interest rates, regulatory challenges, and ongoing supply chain disruptions in the renewable energy sector have made financing and executing these projects more expensive and risk-laden. This strategy shift reflects growing pressure from investors, who have increasingly demanded that Shell focus on its more profitable oil and gas operations. The move comes at a time when concerns about the ethical implications of fossil fuel investments are rising, with some investors distancing themselves from sectors deemed harmful to the environment.

Diversification Helps Buffer the Impact of Setbacks

While LNG and offshore wind projects face headwinds, Shell’s diversified portfolio, spanning oil, gas, chemicals, and renewable energy, provides some protection against significant losses in any one division. Shell’s ability to balance performance across various sectors has helped the company weather turbulence in specific markets, though ongoing external challenges—such as energy demand forecasts, regulatory pressures, and fluctuating oil prices—will continue to shape its trajectory in 2025.