Shell Plc said on July 7, 2022, that the second quarter of 2022 could have added more than $1 billion to the profits of its refining unit due to increasing margins from fuel production. Gasoline prices reached a record high in several countries during Q2 2022. The London-based oil giant said that the outlook for energy prices will enable it to recover $3.5–$4.5 billion in impairments that were made early in the COVID-19 pandemic when declining demand had a major impact on energy-price estimates. Since then, demand exploded, with the resumption of travel and other activities that were halted due to the pandemic.
Improving Fuel-Refining Margin
Despite anticipating losses from refining chemicals during the second quarter, the company said that it expects higher overall refining margins as a result of price inflation that is eroding the profit margins from refining those goods. Shell estimates that the higher fuel-refining margins in the second quarter could boost quarterly profitability by $800 million to $1.2 billion. The company issued a warning that fluctuations in commodity prices continue to hurt cash flows. While rising prices of commodities boosted the profits of oil and gas companies, they stoked broad political unrest due to increased energy costs. Shell will begin constructing a hydrogen plant in the Port of Rotterdam, which will be the largest green hydrogen power plant in Europe, producing 200MW of electricity without emitting any carbon.
Impact of Exit From Russia
According to the management, Shell's departure from Russia, which includes selling its interest in the Sakhalin-2 LNG project, could affect the latest results by $300–$350 million. Even though Shell asserted that increasing prices of oil are to its advantage, the company still faces certain effects of its withdrawal from Russia after the latter’s invasion of Ukraine. As a result of the decision to ignore the production at Sakhalin, the overall output and LNG volumes are expected to suffer.
On the Path to Cleaner Energy
For the second quarter of 2022, Shell expects profit of $400-$900 million from its Renewables and Energy Solutions division, “benefiting from greater trading and optimization margins for gas and power due to the sustained extraordinary market conditions in several regions.” Since 2019, Shell Plc regularly reduced its GHG emissions in an effort to become carbon neutral by 2050. The company focuses on the adoption of technologies such as low-carbon electricity and fuels.
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