MOSCOW (MRC) -- Shell trimmed Tuesday its estimated oil and gas production for the first quarter of 2020, warning of major uncertainty over the value and demand for its fuels due to the growing coronavirus pandemic, the company said on Tuesday.
Updating its Q1 guidance, Shell said it expects to report upstream production of between 2.65 million-2.72 million b/d of oil equivalent in the first quarter and between 920,000-970,000 boe/d of integrated gas for LNG.
It had previously guided for upstream production of between 2.63 million-2.76 million boe/d and integrated gas output of 950,000-980,000 boe/d in Q1.
Oil prices have collapsed by more than 50% since to the start of the year to near 18-year lows and Shell said its upstream margins have been impacted by the weak macro environment.
"As a result of COVID-19, we have seen and expect significant uncertainty with macro-economic conditions with regards to prices and demand for oil, gas and related products," Shell said in a statement.
The company estimates that its earnings sensitivity to the oil price collapse is USDS6 billion/year for each USD10/b Brent crude price movement.
Shell said it expects its LNG liquefaction volumes to be 8.8 million-9.2 million mt in the quarter, down from 9 million-9.5 million mt previously. Oil products sales are expected to be 6 million-7 million b/d, down from the previous guidance of 6.4 million-7 million b/d.
Shell said its marketing margins in the first quarter are expected to remain strong, however, as the impact on demand from COVID-19 is "not expected to be significant" in the first quarter. Refining margins are expected to be weaker compared with the fourth quarter of 2019 while refinery utilization is expected to be between 80% and 84%, with availability expected to be between 93% and 96%.
The consensus estimates for Shell's Q1 adjusted earnings are currently USD2.52 billion, down from $5.3 billion in the year-ago period. Shell is scheduled to release its full Q1 earnings results on April 30.
As MRC informed earlier, The COVID-19 outbreak has led Shell Chemical to temporarily suspend construction on the massive plastics and petrochemicals site it's building in Monaca, Pa. The complex will use ethane from shale gas produced in the Marcellus and Utica basins to make around 3.5 billion pounds of polyethylene resin per year. The complex will include four processing units, an ethane cracker and three PE units. Most of the resin made in Monaca is expected to be sold to Shell customers within North America.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 215,390 tonnes in the first month of 2020, up by 23% year on year. Shipments of all grades of high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) increased due to higher capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 127,240 tonnes in January 2020, up by 33% year on year. ZapSibNeftekhim's homopolymer PP accounted for the main increase in shipments.
Royal Dutch Shell plc is an Anglo-Dutch multinational oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the biggest company in the world in terms of revenue and one of the six oil and gas "supermajors". Shell is vertically integrated and is active in every area of the oil and gas industry, including exploration and production, refining, distribution and marketing, petrochemicals, power generation and trading.
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