By Gerard Kreeft
The abrupt announcement that Zoe Yujnovich, Shell’s Integrated Gas & Upstream Director, directly responsiblefor its LNG and Upstream divisions is departing the end of March 2025, indicates that not all is well in Shell’s two most important portfolios:
Firstly, the impending oversupply of LNG in global markets is quickly changing the dynamics of the LNG marketplace: can Shell continue to maintain its pole position in this low price environment?
Secondly, Shell’s seeming inability to deliver on many upstream exploration projects is highlighted by two key projects in Namibia–Graff and Jonker.
In the period January 2021-December 2024 the Shell share has moved up 55%: from $40 in 2021 to $62 in December 2024. Yet the chief obsession of Wael Sewan, Shell CEO since January 2023, is to drive up the company share price, which has barely moved in the two year period that he has been CEO. In January 2023 it was $57 and December 2024 was only $62.
In comparison, two of Shell’s main competitors— ExxonMobil and Chevron—have experienced high growth rates: between January 2021 and December 2024.
ExxonMobil’s growth was 130%; in 2021 its share price was $46 and in 2024 it was $106. Chevron’s share price went up 55%: in January 2021 it was $91 and in December 2024 it was $144.
The key however is market capitalization: Shell must play financial catch-up. Shell’s market capitalization is only $208Billion; Chevron has a market cap of $281Billion and ExxonMobil $490Billion.
Shell’s growth is tied directly linked to its LNG and Upstream portfolios.
The reckoning has been swift and brutal. This is a story of the drama behind the scene. The reasons why Zoe Yujnovich had to fall on her sword.
LNG: Becoming a low cost marketplace?
The latest LNG forecast published by the Institute for Energy Economics and Financial Analysis (IEEFA) in April 2024 for the period 2024-2028, indicates that storm clouds are emerging.
“Lackluster demand growth, combined with a massive wave of new export capacity is poised to send global liquefied natural gas (LNG) markets into oversupply within two years”, the report says. “In Japan, South Korea, and Europe—which together account for more than half of the world’s LNG demand—combined imports fell in 2023 and will likely continue falling through 2030.”
IEEFA expects global LNG supply capacity to rise to 666.5 MTPA by the end of 2028, which exceeds International Energy Agency (IEA) demand scenarios through 2050.
“In Japan, formerly the world’s largest LNG importer, demand fell 8% in 2023. Since 2018, Japan’s annual LNG imports have fallen 20%. A planned increase in nuclear and renewables generation—spurred by climate and energy policies, along with years of high LNG prices— will likely send demand even lower.In South Korea, historically the largest buyer of U.S. LNG, imports fell almost 5% last year. Long-term climate and energy plans in South Korea envision LNG imports falling 20% through the mid-2030s, as solar, wind and nuclear plants come online.Europe’s LNG imports stagnated in 2023, defying expectations of rising imports to replace lost Russian gas supplies. Europe’s overall gas consumption fell 20% in the past two years due to high prices, energy security mandates and climate policies. IEEFA expects Europe’s LNG demand to peak by 2025 and decline through 2030.IEEFA expects global LNG supply capacity to rise to 666.5 MTPA by the end of 2028, which exceeds International Energy Agency (IEA) demand scenarios through 2050.
The Case of China
In 2023 China consumed 14Trillion cubic feet (Tcf) of natural gas consisting of:
Domestic production of 8Tcf
Piped imports 2.5Tcf
Imported LNG 3.5Tcf
China’s appetite for future imported LNG could well be put on hold for the time being. As the country’s overall gas demand rises, domestic gas production and pipeline imports may limit LNG imports until prices fall to more competitive levels. Only then will China increase LNG purchases from spot and short-term markets. Also because of increases in long-term contracts, however, China may seek to mitigate a growing surplus of term volumes by selling excess supplies abroad.
Not surprising. China, along with Japan and South Korea are already intra-partners selling their excess gas supplies, often in competition with Shell.
“IEEFA estimates that LNG prices would have to fall below $8-$9/MMBtu to compete with the cost of China’s pipeline gas imports and below $6/MMBtu to compete with domestically produced gas. Until then, China will continue to have an economic incentive to favor pipeline gas imports over imported LNG.”
Renewables, which are proving to be cheaper than imported LNG, are also a major reason why imported LNG will be much less in demand . China has been the world’s largest and fastest-growing producer of renewable power for more than a decade. In 2020, China committed to have 1,200 GW of renewable capacity by 2030, but is on track to meet that goal five years early.
The Case of India
According to IEEFA…” The government of India has set ambitious targets to increase the country’s overall natural gas consumption from 51.3 Million Tonnes Per Annum (MMTPA) to 139MMTPA by 2030, with the majority of growth expected to be met by LNG imports. In 2022, however, LNG imports fell 17% due to LNG price spikes, demonstrating the country’s sensitivity to volatile prices. As markets eased in 2023, India’s LNG demand rebounded by 9% to 22 MTPA. However, demand remains well below levels seen before the Russian invasion of Ukraine.”
USA and Qatar
Currently the US has five LNG projects totaling more than 71MMTPA under construction.
Development of Qatar’s North Field complex will boost the country’s liquefaction capacity by 64 MMTPA through 2030. The first of the North Field trains is expected to come online in 2025 or 2026, with 48 MMTPA likely to come online by 2028 and an additional 16 MMTPA coming into service by 2030.
Qatar’s LNG industry boasts the cheapest LNG production costs in the world, due to its abundant, inexpensive and liquids-rich gas supplies.
LNG Canada
The 14-MMTPA LNG Canada project, spearheaded by Shell, PetroChina, Mitsubishi Corporation and KOGAS, saw its pipeline costs more than double. This project will commence production in 2025.
Africa
TOTALEnergies plans to restart its long-delayed $20Billion Mozambique liquefied natural gas (LNG) project has received positive news: the board of the U.S. Export-Import Bank has approved a nearly $5Billion loan for the project, moving the project closer to the starting gate.
Rovuma LNG was supposed to become ExxonMobil’s futuristic model LNG project. Security issues remains the key reason that this project has been halted.
Shell’s Upstream Dilemma
If your direct responsibility is to ensure that exploration brings in lucrative projects and you fail to achieve this you have a bitter pill to swallow especially when your competitors—TOTALEnergies and Galp Energia—do succeed.
Shell’s total capex for 2025 is between $22Billion-$25Billion per year, of which some 80% is earmarked for oil and gas. Earlier industry sources indicated that Shell was devoting 25% of its deepwater exploration budget for Namibia.
However, in January 2025 Shell shocked the oil industry and the Government of Namibia by announcing that it was writing off $400Million on its Namibian campaign. Yet paradoxically on March 10, 2025, Shell announced that it planned to drill up to 5 exploration wells on the southern extension of the Orange Basin offshore South Africa. This is the same geological play which they wrote off in Namibia and despite that they plan to go full steam ahead almost next door in South Africa. Certainly, the message that Shell is sending is very confusing to oil industry observers and even to its frustrated shareholders.
The earlier optimism of Shell’s Graff and Jonker projects was dialed back by Maggy Shino, Namibia’s Petroleum Commissioner, Ministry of Mines and Energy who stated that the Graff project apparently only has 200Million barrels and Jonker has 300Million barrels recoverable.
Tako Koning, a renowned Calgary-based geologist familiar with Namibian oil and gas matters, offers this explanation in the January 25, 2025 issue of Africa Oil + Gas Report:
“ Shell’s CEO Wael Sawan spoke to analysts in Shell’s meeting reviewing second-quarter results and said …: ‘It’s a complex subsurface. While there is no shortage of hydrocarbon volume, the question is going to be the commercial producibility and the mobility of these molecules. That’s why we are taking our time. We’re thinking through it and making sure we have a good enough picture before we commit our shareholders’ capital to this development. He also said that ‘Time is our friend, as we are learning from both our own analysis as well as the analysis and activities of others’”.
In the same period TOTALEnergies announced the Venus-1X discovery of oil and associated gas.
According to Koning…”TOTALEnergies recently announced plans to bring Venus onstream at the end of this decade at 180,000 barrels of oil per day through an FPSO. TOTALEnergies CEO Patrick Pouyanne envisions that one day as many as seven floating FPSOs could be operating on his company’s acreage in the Orange Basin. In the meanwhile, TotalEnergies has stated that by end of 2025 they will be able to announce where they are with the development of their discoveries.”
In the same timeframe Galp Energia announced their Mopane oil discovery estimated to holds over 10 billion barrels of oil in-place. According to Koning ..” using a recovery factor of 25 percent, ‘first pass estimates of the reserves for Mopane are 2.5 billion barrels of oil”. Indeed, since that time Galp Energia completed the Mopane-3X appraisal well which achieved very favorable results.
Some Final Thoughts
No doubt Shell’s top priority is to ensure shareholders that their golden dividends will continue to be paid out. Shell current dividend yield is 4.22%, which above all must be maintained.
Yet shareholders will want to know how their dividends will fare in the coming 5 to 10 years. Shell’s strategy is not re-assuring.
The future is an evolving low price environment which will in the coming decade be oversupplied by excess LNG; and Asian and EU countries requiring less LNG because of energy efficiency, renewables, and cheaper piped gas.
The company, unfortunately, aside from its LNG and Upstream portfolios which controls 80% of Shell’s capital budget cannot be judged to be a serious company in terms of new energy. It has since the appointment of Wael Sewan as CEO frittered away any prospects of appearing to being a serious renewable energy player.
No Shell’s future game plan is not obvious and no doubt will be critically examined by analysts and shareholders in the future.
Gerard Kreeft, BA (Calvin University, Grand Rapids, USA) and MA (Carleton University, Ottawa, Canada), Energy Transition Adviser, was founder and owner of EnergyWise. He has managed and implemented energy conferences, seminars and university master classes in Alaska, Angola, Brazil, Canada, India, Libya, Kazakhstan, Russia and throughout Europe. Kreeft has Dutch and Canadian citizenship and resides in the Netherlands. He writes on a regular basis for Africa Oil + Gas Report, and guest contributor to IEEFA(Institute for Energy Economics and Financial Analysis). His book ‘The 10 Commandments of the Energy Transition ‘is on sale at https://books.friesenpress.com/store/title/119734000211674846/Gerard-Kreeft-The-10-Commandments-of-the-Energy-Transition