Shell has warned it will slash up to $22bn (£18bn) from the value of its oil and gas assets as it counts the cost of falling energy prices during the Covid-19 pandemic.
In a market update on Tuesday, the oil company said it was likely to take a post-tax impairment charge of between $15bn and $22bn on global assets spanning Australia, Brazil and North America.
“Given the impact of Covid-19 and the ongoing challenging commodity price environment, Shell continues to adapt to ensure the business remains resilient,” the company said. “In light of this, Shell is announcing today a revised long-term commodity prices and margin outlook, which is expected to result in non-cash impairments in the second quarter results.”
It comes just weeks after rival BP announced it would slash the value of its own assets by $17.5bn (£14bn), its largest writedown in a decade, after cutting its own 30-year energy price forecasts by a third.
Shell now expects Brent crude prices to average about $35 per barrel for the rest of 2020, before rising to $40 next year and $50 by 2022. It was previously forecasting average prices of around $60 per barrel for each year to 2022 as recently as March.
Brent crude prices were trading at $41.47 per barrel on Tuesday morning.
The energy firm has already revealed plans to cut spending by $9bn to weather the collapse in oil market prices in the wake of the coronavirus outbreak. Global fuel demand has plunged to 25-year lows during the pandemic, as steps to fight the disease have grounded planes, cut vehicle usage and curbed economic activity.
The Anglo-Dutch oil business said it expects to take a $3bn to $7bn charge on its oil refinery assets and a $4bn to $6bn impairment on upstream assets, largely due to its Brazilian and North American shale business. The biggest impairment charge, worth $8bn to $9bn, will be linked to integrated gas assets, the bulk of which are based in Australia.
Shell’s update sent its shares down 2% to £13.10 on Tuesday morning, making it one of the the biggest fallers on the FTSE 100.
The announcement before of its second-quarter earnings release on 30 July.