Shell 'All in' on LNG Even as Capital Discipline Demands Mount

摘要

Royal Dutch Shell continues to bet big on natural gas despite the slowdown in global gas demand, sluggish economic growth and increasing competition from coal and renewable energies. Its integrated gas unit, under which LNG and gas-to-liquids (GTL) fall, is seen as a critical driver behind the European supermajor's free cash flow expansion goals despite the business' long lead times, high costs and significant complexities (EIF Feb.5'14). This commitment remains strong even as Shell concedes that investors are demanding lower and more flexible capital spending commitments - demands that seem to run counter to the very essence of greenfield LNG or GTL schemes (EIF Jan.8'14). One change that has emerged, however, is a more flexible and risk-taking LNG strategy, with Shell's purchase of Repsol LNG assets made despite the lack of equity production, and management taking a confident stance on the LNG Canada scheme despite competition from more than a dozen regional projects and the absence of any long-term supply agreement (EIF Jun.25' 14).