Shell LNG trading to lift quarterly profits despite output drop

  • LNG trading significantly higher in fourth quarter
  • Austrlia plant outages reduce output
  • Shell to incur $2.4 bln charge related to windfall tax

LONDON, Jan 6 (Reuters) - Earnings from Shell's (SHEL.L) liquefied natural gas (LNG) trading operations are likely to have been significantly higher in the fourth quarter of last year despite an output drop caused by plant outages, it said on Friday.

Europe's largest oil and gas company's update ahead of its full-year results on Feb. 2 also flagged a $2 billion accounting hit in 2022 as a result of European Union and British windfall taxes on the energy sector.

Fourth-quarter LNG liquefaction volumes are expected to be the lowest since the company acquired BG Group in 2016 for $53 billion, dropping to between 6.6 million and 7 million tonnes after prolonged outages at two major plants in Australia.

But Shell, the world's top LNG trader, said its LNG trading results are set to be "significantly higher" than in the previous quarter.

Shell shares rose nearly 1.5% at 1330 GMT.

Shell's third-quarter results were dented by weaker refining performance and a slump in LNG trading.

The LNG trading division recorded a loss of nearly $1 billion in the third quarter after traders were caught out by a rally in European gas prices when Russia halted supplies following its invasion of Ukraine.

Yet Shell remained on track for record annual profit in 2022, having posted earnings of $30 billion in the first three quarters, just shy of the 2008 record profit of $31 billion.

Shell said it expects fourth-quarter oil product trading results to be "significantly lower" than the third quarter.

Reuters Graphics

London-based Shell, whose Chief Executive Wael Sawan on Jan. 1 succeeded Ben van Beurden, who spent nine years in the job, said in October that it intends to increase its dividend by 15% in the fourth quarter.

Several governments across Europe and Britain have imposed windfall taxes on energy companies to limit excess profits from the surge in energy prices that is a burden, not a benefit, for most of the population.

Shell expects to incur $2 billion in accounting costs related to the windfall levies on top of $360 million it announced earlier in 2022, but the charge will not impact the company's adjusted earnings.

Reporting by Ron Bousso Editing by David Goodman and Barbara Lewis

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Ron has covered since 2014 the world’s top oil and gas companies, focusing on their efforts to shift into renewables and low carbon energy and the sector's turmoil during the COVID-19 pandemic and following Russia's invasion of Ukraine. He has been named Reporter of the Year in 2014 and 2021 by Reuters. Before Reuters, Ron reported on equity markets in New York in the aftermath of the 2008 financial crisis after covering conflict and diplomacy in the Middle East for AFP out of Israel.