Is Shell PLC (LSE:SHEL, NYSE:SHEL) giving itself a potential headache from its determined push into liquified natural gas (LNG)
Shell has said it wants to expand its LNG business by 20-30% by 2030, with it expected by then to account for nearly a third of the company’s upstream output.
Some shareholders have already started to question the wisdom of the move and the recent weakness flagged today by the oil giant is unlikely to quell the unease.
Ahead of its full-year results on 30 January, Shell has trimmed its LNG production forecast for the fourth quarter to 6.8-7.2 million metric tons, citing lower feed gas deliveries into liquefaction facilities and fewer cargo deliveries.
The Anglo-Dutch group added that oil and gas trading results are also expected to be significantly lower than in the previous three months.
Shell, the world's largest LNG trader, said trading results for the division in the fourth quarter would be significantly lower than in the previous three months due to the expiry of hedging contracts taken out in 2022 following the invasion of Ukraine.
Shares were down by 1.5% as the market also reacted to $3 billion of impairments, including up to US$1.2 billion in its renewables division.
Shell’s update came just a day after a shareholder resolution was filed by four pension groups over the liquefied natural gas (LNG) strategy.
UK groups Brunel Pension Partnership, Greater Manchester Pension Fund and Merseyside Pension Fund, managing assets of US$86 billion and Australian fund ACCR filed the motion, which is backed by non-governmental organisation ShareAction plus 100 individual shareholders.
In essence, the resolution wants the rationale behind the LNG plans explained especially how they align with its climate commitments.
But it's not just the climate angle. The investors are concerned about the scale of the exposure to LNG with the resolution indicating the company already holds more product than any other non state-owned group.
Shell’s demand outlook for LNG is also questioned in the resolution, as it is higher than any scenario predicted by the International Energy Agency which recently predicted a glut from 2026.
Owen Thorne, responsible investment manager at Merseyside Pension Fund, said: “Given the direction of travel, investors urgently require enhanced disclosure to reconcile the high demand forecasts set out by Shell with the fundamentals of energy markets and the views put forward by independent energy forecasters.”
Shell can point to its last AGM when the expansion of LNG was voted through by investors as part of its Energy Transition Strategy, but having pinned its colours so tightly to the LNG mast management cannot afford too many statements like today.
Shares in Shell dropped 43p to 2,474p.