SHELL on Monday (Jan 8) flagged impairment charges of between US$2.5 billion and US$4.5 billion for the fourth quarter, mainly related to the Singapore refining and chemicals hub the oil major is looking to sell.

The assets include a 237,000 barrel-per-day (bpd) refinery and a one million metric-ton-per-year (tpy) ethylene plant on Singapore’s Bukom and Jurong islands, for which it had announced a strategic review last year.

Ahead of fourth-quarter results on Feb 1, the company also said gas trading would be significantly higher than in the previous three-month period, while upstream production volume would come in at between 1.83 million and 1.93 million barrels a day.

The London-based major said it benefited from seasonal shifts in the gas market and higher production of the liquefied form of the fuel, which has been a key driver of profits.

However, it said in a trading update on Monday (Jan 8) that its Chemicals and Products Division is expected to post an adjusted earnings loss for the period, it added.

Shell’s earnings met expectations in the prior quarter, in what was a mixed results season for oil majors. The company accelerated the pace of buybacks and chief executive officer Wael Sawan has committed to boosting shareholder returns. 

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RBC Europe analyst Biraj Borkhataria said in a note: “Overall, we see the statement as neutral, given a reasonable operational result. However, earnings continue to be dragged down by a weak performance from its chemicals division.”

Shell’s gas trading division has proved to be a major moneymaker since Russia’s invasion of Ukraine increased volatility in the price of the fuel. The company narrowed its production range for gas to 880,000 to 920,000 barrels equivalent of oil a day, and increased the lower end of its liquefaction forecasts to 6.9 million tons, from 6.7 million previously.

Trading and optimisation from Shell’s chemicals and oil products division “is expected to be significantly lower” than in the previous quarter, the firm said. 

Lower oil trading results in the fourth quarter are “typical” of the period because of “lower liquidity and volatility”, Borkhataria said.

Profit from Shell’s chemicals unit, which is a sizable part of its operations but plays second fiddle to oil and gas, is expected to be flat compared to the previous year. Chemicals utilisation is now seen lower at between 60 and 64 per cent, but the company’s indicative margin will increase on the quarter by US$10 to US$125 per ton. REUTERS, BLOOMBERG