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Shell LNG glut ‘conspicuously absent’: Shell CEO Ben van Beurden

by Angela Macdonald-Smith: Feb 2 2018 at 12:03 PM: Updated Feb 2 2018 at 3:19 PM

Royal Dutch Shell chief executive Ben van Beurden has declared that the energy giant’s confidence in the LNG market has been justified with no sign of the oversupply that others had warned of.

“The LNG glut is conspicuously absent isn’t it, much to the surprise of those that thought this was inevitable,” Mr van Beurden told reporters at Shell’s fourth-quarter results briefing in London.

He said the “very visible build-up of LNG supply” from new export projects is being absorbed by rising demand, with Chinese consumption particularly strong compared to expectations 12 months ago. As a result the market is actually “rather tight”, giving grounds for optimism about the outlook.

“We have said all along, there is not going to be a glut, there is going to be ample capacity actually needed for the market to absorb,” Mr van Beurden said after Shell reported record LNG production and sales volumes in the December quarter of 2017.

The positive fundamentals of the market present a “very good opportunity” for Shell to focus on LNG and also perhaps to continue to invest in new supply, he told reporters.

As one of Woodside Petroleum’s key partners in the planned Browse LNG project, Shell’s position on the venture will be critical to the investment going ahead. Several analysts are cautious on the LNG outlook – and the prospects for Browse LNG – given new plants coming into production and expected high costs at Browse.

Bullish project

Meanwhile, Mr van Beurden was bullish about the prospects for a 2018 start-up of Shell’s groundbreaking Prelude floating LNG project off Western Australia, despite signs late last year that the timing may slip.

“We’ve always said, expect cash this year [from Prelude]: there’s no change to the outlook,” he said, while emphasising that the priority lies on “safety and quality” in the start-up of the project, which involves the world’s largest floating structure. 

“Everything is going well, according to plan,” he said. “When I will travel to Australia [for the start-up], well, let’s see, when it’s ready to do so.”

Mr van Beurden’s commentary also revealed more on Shell’s ambitions to move into energy retailing to households, which took a leap forward with the deal it struck in December to acquire British household energy and broadband supplier First Utility.

He said Shell would use First Utility to take on the UK’s “Big Six” companies that dominate the energy retail market, supplying about 95 per cent of all household gas and electricity.

Solar farm

Mr van Beurden made it clear Shell wants to replicate the strategy of creating an integrated power business – spanning renewable energy generation, trading and retailing – in North America and in other markets “when they open up”. Acquisitions are envisaged to form the base from which Shell could then expand organically in this area, he signalled.

Shell has earmarked between $US1 billion ($1.25 billion) and $US2 billion a year on investments in the New Energy space, where it is focusing on power and low-carbon fuels, including hydrogen, biofuels and electric vehicle charging.

In Australia, Shell has built up an east coast gas trading business and is developing a 250-megawatt solar farm near Wandoan in Queensland as it eyes taking on a “utility of the future” role in the eastern states.

Shell reported a more-than-doubling in fourth-quarter profit as commodity prices recovered and chief financial officer Jessica Uhl suggested there was more to come, with the benefit of the recent rise in oil prices mostly yet to flow through to LNG revenues. 

The energy major said it had completed $US24 billion of asset sales since early 2016, well on the way to its $US30 billion target. Divestments included Shell’s remaining stake in Woodside, a deal done in November, which yielded pretax proceeds of $US2.7 billion.

Read more: http://www.afr.com/business/energy/gas/lng-glut-conspicuously-absent-shell-ceo–ben-van-beurden-20180201-h0sbji#ixzz55xG5qa2p
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