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Shell (NYSE:SHEL) expects to book a post-tax impairment charge of up to $2 billion after pausing construction of a major biofuels production facility in the Netherlands earlier this week.
The British oil major estimates an impairment after tax between $1.5 billion and $2 billion mainly due to the divestment of its chemicals refinery in Singapore and pausing construction of its biofuels facility in Rotterdam.
The company said on Tuesday it will temporarily stop construction of its Rotterdam facility as it seeks to ensure the project’s competitiveness in a market that faces an anticipated flood of sustainable fuels from the U.S.
The site was expected to produce 820K metric tons/year of biofuels, including sustainable aviation fuel and renewable diesel made from waste such as cooking oil, with production anticipated to begin in 2025.
As a result, the firm expects to record non-cash post tax impairment in the range of $600M and $1B for the Rotterdam hub when it reports its Q2 results on August 1, 2024. For the Singapore Chemicals & Products assets, Shell (SHEL) expects to record charges of $600M – $800M.
In addition, the energy company expects its integrated-gas segment to bring in lower profits sequentially for Q2, due to seasonality. The Q2 earnings from its otherwise most profitable segment will still be in line with numbers from the same quarter last year.
Shell (SHEL) has also slightly narrowed its LNG production outlook upward to 940,000-980,000 boe/d for Q2, from a previously guidance of 920,000-980,000 boe/d. It expects quarterly LNG volumes between 6.8M and 7.2M mt, compared with 7.2M tons in Q2 2023 and 7.6M mt in Q1 2024. Upstream will produce between 1.72M and 1.82 M boe/d ready for sale, compared with 1.7M a year ago and 1.87M in Q1.