Another Write Down To Be Taken By Shell, Total Cuts Now Over $22 Billion

After a slew of impairments this year and with the company trying to adjust to a weaker outlook, the value of oil and gas assets by $3.5 billion to $4.5 billion will be written down by Royal Dutch Shell, the company said on Monday.

The impairments on its Appomattox field in the US Gulf of Mexico, the closing down of refineries and liquefied natural gas (LNG) contracts were partly responsible for the post-tax charge, the company said in an update ahead of its fourth quarter results on February 4.

The company would recognize some of charges involved in its restructuring in next year, Shell said.

Shifting focus to its flagship Prelude project in Australia, the value of its LNG portfolio was written down by just under $1 billion by the company, the biggest LNG trader of the world, in October. And in the second quarter of the current year, the company also took a $16.8 billion writedown which also included Prelude and a sharp cut in its price outlook.

The company on Monday also announced its decision to sell a 26.25 per cent stake in its Queensland Curtis LNG (QCLNG) facilities for a deal worth $2.5 billion. The stake will be sold to Global Infrastructure Partners Australia. The money raised from the sale of the stake will help the company to achieve its annual target of divestments.

A minority stake in the asset was put up for sale earlier this year by Shell on the advice of Rothschild & Co. That was preceded by interest in the asset being expressed by infrastructure investors, as the asset has been a constant and steady stream, of earnings for the company for the last 15 years.

The sale price was in line with analysts’ expectations.

“This decision is consistent with Shell’s strategy of selling non-core assets in order to further high-grade and simplify Shell’s portfolio,” the company said in a statement.

The target for Shell is to raise a total of $4 billion annually from the sale of its assets. The company will be achieved its this year’s target by the sale to Global Infrastructure Partners. Other divestments undertaken this year included the sale of its Martinez refinery and Appalachia shale gas assets.

Shell owns majority stake at the QCLNG plant while China National Offshore Oil Corp and Tokyo Gas Co both own a minority stake in the project.

Through the purchase of the stake, Global Infrastructure Partners will be able to gain access to a piece of a US-dollar denominated, inflation-linked usage fee paid by CNOOC and Tokyo Gas over about 15 years, irrespective of the LNG plant’s throughput.

There were no comments on the deal made by Global Infrastructure Partners.

The remaining 73.75 per cent stake of Shell in the common facilities aligns with its stake in the overall QCLNG venture. The venture produces liquefied natural gas at an 8.5 million tonnes a year plant for export mostly to China and Japan.

(Adapted from Reuters.com)

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