Shell suffers $2 billion loss as it halts biofuel plant for green air travel

Shell has warned it could lose up to $2 billion after selling a Singapore refinery and suspending work on a major biofuels plant in the Netherlands.

The oil and gas major expects to take a hit of between $0.6bn and $1bn (£784m) from its decision to halt construction of a major energy transition site in Rotterdam.

The facility, which was initially approved in 2021, was to produce around 820,000 tonnes of biofuel a year, about half of which would be used for sustainable aviation fuel made from animal fats and used cooking oil.

It would also create enough renewable diesel to remove 2.8 million tons of carbon dioxide a year, equivalent to taking more than a million cars off the road.

However, Britain’s fossil fuel sector has been reconsidering its environmental plans amid pressure from investors to provide healthy returns.

Shell announced Tuesday that it would reduce the number of contractors on site to “control costs and optimize project sequencing” at the facility.

The FTSE 100 group also expects an impairment loss of between $0.6 billion and $0.8 billion from the decision to sell some assets in Singapore to a joint venture between Glencore and Indonesia-based Chandra Asri Capital.

The sale, agreed in May, includes a refinery producing 237,000 barrels a day and an ethylene cracker on Pulau Bukom island, as well as a petrochemical plant on Jurong Island.

In addition to the deteriorating forecasts, Shell expects integrated gas production to total 940,000 to 980,000 barrels per day in the second quarter, a slight improvement from its previous guidance.

Over the same period, the London-based firm believes it will produce between 1.72 and 1.83 million barrels of oil per day in its upstream segment.

Shell posted an impressive £6.1bn profit in the first quarter of 2024, down on the previous year but around £1bn higher than analysts had predicted.

Brent crude oil prices remained high, averaging $83 a barrel, amid continued tensions stemming from the war between Israel and Hamas and the conflict in Ukraine.

Prices also received support from many OPEC countries, including Saudi Arabia and the United Arab Emirates, which extended production cuts to try to avoid market volatility.

They have since risen to $87 a barrel on Friday following strong expectations of high summer fuel demand and reports that Russian oil producers Rosneft and Lukoil will cut oil exports from the Black Sea port of Novorossiisk this month.

Shell shares were down 0.4 percent at 2,887.5 pence on Friday morning, but have risen by around 24 percent over the past year.