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Shell CEO Confident on Long-Term LNG Demand

Shell Plc remains confident on the long-term outlook for LNG demand, especially in Europe, despite recent supply constraints, the company’s CEO Ben van Beurden and CFO Sinead Gorman concurred during a virtual webcast with various media outlets.

Shell’s LNG trading and optimization was “impacted by a combination of seasonality and supply constraints, where the business is geared towards supplying the northern hemisphere during the winter,” the company revealed in its third-quarter results.

Van Beurden continues to see LNG as a long-term growth segment with typical growth of 4% per annum and thinks the figure could be higher given higher energy consumption in Europe. In parallel with higher energy demand, the company has boosted its positioning in LNG in projects in Qatar from the North Field South and North Field East developments to Mexico, the executive said.

“We’ve signed up 8 million tons of new supplies for our portfolio coming on stream in the course of this decade. And we are very confident that LNG, of course, is going to be needed,” van Beurden said.

Shell has started commissioning a new LNG import terminal in the Netherlands “on the back of the confidence that we have in there being a long-term demand for LNG in Europe,” he added.

“And indeed, some of these long-term demands are in the form of long-term contracts as well. So yes, we stay with our confidence in the sector, particularly also in Europe,” he said.

Moscow’s military invasion in Ukraine earlier this year and the resulting geopolitical flare up has resulted in fewer oil and gas supply flows into Europe and the U.K. The situation has forced Russian energy dependent regions to pivot quickly to seek out other supply sources, such as U.S. LNG imports, to fill the immediate supply gaps that are likely to remain this winter and next, many energy and political pundits agree.

Shell continues to assist in the filling of gas storage in Europe ahead of winter, said Gorman, the company’s CFO, while adding that it is also taking initiatives to reduce its gas usage.

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“We’ve very much made sure that we have stepped back where we can,” she said. “We’ve used alternatives, and you’ve seen across particularly our refineries across Europe and elsewhere in the world, more than a 40% reduction in our own gas usage as well, which is making sure that we play our part in making sure the gas goes to where it needs to be as well.”

Amid the gas and LNG supply reductions experienced across Europe due to the conflict in Ukraine, the region has reacted quickly to assure it has “capacity to both land the energy that it needs, but also to regasify [it] and get it to where it needs to be,” Gorman said. Shell has access where it needs it in Spain, the Netherlands and the U.K., she added.

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Windfall taxes

U.S. President Joe Biden continues to argue that the strong profits reported by energy companies need to benefit citizens as well in the form of lower energy bills and fuel prices. In the U.K., the discussion about the issue is also ongoing.

For its part, Shell reported third-quarter 2022 adjusted earnings of $9.5 billion. In comparison, its U.S.-based counterpart Exxon Mobil Corp. reported earnings of $19.7 billion.

“With winter coming for many people and energy prices high, consumers and businesses have been trying to find solutions. This requires collaboration across all parts of our society,” Gorman said. “So, we continue to engage with governments to help make their new policies effective. And avoid unintended consequences in the energy markets.”

In terms of windfall taxes, Shell’s CEO argued that high prices are impacting many vulnerable people.

“A lot of people would say the best remedy against high prices is high prices but the reality, of course, is with the prices that we are seeing today is that many, many people in society, particularly, of course, the most vulnerable, are suffering very badly as a result of it,” van Beurden said. “So, I think it is only sensible, it’s a societal reality that, of course, governments intervene and alleviate the pressure on those who need the alleviation most.”

Shell remains willing to help governments to design the right policies related to windfall taxes, special levies, as well as contributions, its CEO said, reiterating that taxation was the prerogative of governments and that his company doesn’t “negotiate with them on taxation.”

While talking about taxes there is also a need to make sure governments “continue to encourage the industry not only to invest in more oil and gas production, but particularly also to invest in the transition to greener forms of energy,” van Beurden added.