BAKU, Azerbaijan, July 1
By Leman Zeynalova – Trend:
Royal Dutch Shell’s impairments of up to $22 billion to its portfolio will hit the entire oil and gas sector, Luke Parker, vice president, corporate analysis at Wood Mackenzie, said, Trend reports.
Shell, which operates the Prelude FLNG in northern West Australia and the QCLNG plant in Queensland, has flagged potential impairments worth $22 billion for the second quarter.
The company said its integrated gas business, would account for impairments of up to $9 billion. This is primarily due to costs associated with QGC and the Prelude FLNG projects in Australia.
"These impairments are expected to have a pre-tax impact in the range of $20 to $27 billion. No impairment charge on Goodwill is expected to be recorded in the second quarter," Shell said.
Parker said the impairment Shell has announced is about more than an accounting technicality, or an adjustment to near-term price assumptions.
"It’s about fundamental change hitting the entire oil and gas sector. Within this write down, Shell is giving us a message about stranded assets, just like BP did a few weeks ago,” noted the analyst.
Parker sees this as part of a wider trend.
“Just a few years ago, few within the oil and gas industry would even countenance ideas of climate risk, peak demand, stranded assets, liquidation business models and so on. Today, companies are building strategies around these ideas,” he said.
“Demand might still grow from here, and many companies are still chasing a share of that growth. But make no mistake, the corporate landscape is changing, and the majors are changing with it.”
Follow the author on Twitter: @Lyaman_Zeyn
