Europe’s biggest oil company raised its target 2023 price for Brent crude, Europe’s benchmark, to $80 a barrel and said it would reverse up to $4.5 billion in writedowns previously taken for value of upstream oil and gas activity. The total value of Shell’s production and exploration assets was recorded at $125.5 billion at the end of 2021. “In the second quarter of 2022, Shell revised its medium- and long-term oil and gas commodity prices to reflect the current macroeconomic environment as well as updated energy market demand and supply fundamentals,” Shell said in a trading update before from the semester. results on July 28. Oil and gas majors have slashed the value of many of their assets by billions of dollars in recent years as the expected shift away from hydrocarbons and the Covid-19 pandemic dampened forecasts for fossil fuel demand. Shell is the first to review some of those writedowns, according to Biraj Borkhataria at RBC Capital Markets, who predicted more will follow. “It’s the first, but it won’t be the last,” he said. “Given where commodity prices are, I would expect more to come.” Oil soared to $139 a barrel earlier in the year after the Russian invasion, while natural gas is trading at record levels. Recession fears have since weighed on prices, with Brent falling below $100 a barrel on Wednesday for the first time in three months, but many analysts expect the period of high oil and gas prices to continue, due of constant demand and limited new supply. Restrictions on exports of Russian petroleum products after the invasion of Ukraine have exacerbated a shortage of global refinery capacity, pushing up prices for refined products such as diesel. Shell’s second-quarter refining margins nearly tripled to $28.04 a barrel from $10.23 in the first quarter of the year. The increase would boost earnings by $800 billion to $1.2 billion, Shell noted, although investment bank Jefferies said it was lower than it had expected. LNG production in the second quarter was expected to be 7.4-8 million tonnes, it said, compared with 8 million tonnes in the first three months of the year. This included removing its volume share from the Sakhalin-2 LNG project in Russia’s Far East, which would reduce earnings in the integrated natural gas division by $300-500 million. Shell, the world’s biggest LNG trader, pledged to divest its 27.5% stake in the project after the invasion of Ukraine and last week Moscow threatened to nationalize it. Global demand for LNG has soared this year as European buyers sought alternatives to natural gas from Russia. Shell expects earnings from oil and refined products trading to be “strong” in the second quarter, but lower than in the first three months of the year. It said results from natural gas trading would also be lower, compared to the “outstanding” performance the division recorded in the first quarter. The $8.5 billion in share buybacks announced for the first half of the year were completed on July 5, it said. Shares in the oil group rose 2.3 percent in early London trading on Thursday, taking their gains over the past 12 months to 38 percent.
