Shell CEO Says a Coming LNG Glut Could Be 'a Good Thing' — Barrons.com

Barron's

By Avi Salzman

Shell is betting big on natural gas as the best-positioned fossil fuel for the transition to cleaner energy sources. The problem is that some analysts say the market for liquefied natural gas may be oversupplied as soon as next year, so prices could fall sharply.

That actually could be a positive for Shell, one of the world's biggest suppliers of LNG, CEO Wael Sawan said in an interview with Barron's on Wednesday.

"A period of lower LNG prices is a good thing," he said. "It means that we are able to continue to shift some of the coal demand that's out there to lower-carbon gas."

Sawan said that Shell has noticed a "swell of demand" from China and India — both markets have big potential for growth in LNG use — when prices dip below $9 to $10 per million British thermal units. Today, LNG prices in Asian markets are around $13, which has made coal more attractive than LNG for power generation in those places.

But the futures market shows that investors expect prices to fall below $10 by March 2027 and below $9 by April 2028. At those prices, natural gas use could surge by displacing coal.

"Those are the attractive opportunities to continue to build more markets," he said. "My job is not to worry just about the short-term, but fundamentally to build a business that is resilient for the decades ahead."

LNG capacity could soar 40% between 2025 and 2028 because of a slew of projects that were planned after natural-gas prices rose in 2022, according to Bank of America. The market could be oversupplied starting in 2026, the bank says.

Sawan says the company is somewhat insulated from price swings through its long-term contracts. It makes money off the spread between the price of the LNG it produces itself or buys at export terminals, and the price that international buyers are willing to pay. Shell's contracts have several structures, but the most common one allows Shell to sell LNG at a percentage of the price of Brent crude oil instead of at the market rate for the gas. That means Shell doesn't get hit as hard by fluctuations in LNG pricing, which has been more volatile than oil in recent years.

Investors seem to like Shell's emphasis on investments in LNG over oil, in part because LNG consumption is likely to grow for much longer.

"I think most people would agree that peak oil is sometime in the 2030s, peak gas is probably sometime in the 2040s," said Paul Gooden, a portfolio manager at London-based investment manager Ninety One, which owns Shell stock. "So I think it's quite a compelling story."

A few years ago, LNG was considered a "bridge fuel" that would be useful for a decade or so until renewable power took over. Lately, that view has shifted. Renewables are indeed growing quickly, but overall electricity demand is rising too, because of factors such as power-hungry artificial-intelligence data centers.

So far, renewables have been additive to the power mix, but they aren't really displacing fossil fuels. LNG in particular is attractive because it is cleaner than coal, which most countries are phasing out for environmental reasons.

By 2040, Sawan sees a 60% increase in global LNG demand. The company says its LNG revenue can rise 4% to 5% a year through the end of the decade, a period when its oil production is expected to remain flat.

One other big risk to the LNG story is political. Russia supplied about 40% of Europe's natural gas before it invaded Ukraine. Since then, Europe has mostly moved away from Russian fossil fuels. But an end to the war could result in Russian gas being welcomed once again on the continent, displacing LNG from companies like Shell.

Sawan says that European policymakers appear reticent to follow that path at the moment. He has noticed "an aversion to going back to what was essentially a dependence" on Russia, he said.

Some Shell shareholders agree. TVR Murti, a portfolio manager at Pzena Investment Management, said in an interview that much of Russia's natural gas infrastructure was damaged in the war, so it would be very difficult for it to resume shipments at anywhere near the level seen before 2022. That means demand for LNG from other sources should stay strong, he said.

With so much uncertainty over gas supplies, and trade conflicts spreading around the world, Sawan said the best thing Shell can do is to diversify both its supply and demand. Few companies have their hands in as many markets. Shell is a major player in LNG projects in the U.S., Qatar, and Australia, the three biggest global suppliers. It can shift deliveries from Europe to Asia and back as needed.

The company recognizes "there will be more and more discontinuities in a world that is in some cases fragmenting, and other cases trade policies are impacting trade flows," Sawan said. "The best thing we can do is to make sure that we have all those diversified points to be able to supply our customers."

Write to Avi Salzman at avi.salzman@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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U.K. stocks higher at close of trade; Investing.com United Kingdom 100 up 0.28%

Investing.com

Investing.com – U.K. stocks were higher after the close on Wednesday, as gains in the Oil & Gas Producers, Gas, Water & Multiutilities and Electrical sectors led shares higher.

At the close in London, the Investing.com United Kingdom 100 gained 0.28%.

The best performers of the session on the Investing.com United Kingdom 100 were Shell PLC (LON:SHEL), which rose 2.36% or 65.20 points to trade at 2,830.20 at the close. Meanwhile, Next PLC (LON:NXT) added 1.94% or 190.00 points to end at 9,986.00 and Kingfisher PLC (LON:KGF) was up 1.75% or 4.20 points to 244.50 in late trade.

The worst performers of the session were Vistry Group PLC (LON:VTYV), which fell 7.25% or 47.00 points to trade at 601.50 at the close. Admiral Group PLC (LON:ADML) declined 2.56% or 74.00 points to end at 2,818.00 and Smiths Group PLC (LON:SMIN) was down 2.28% or 46.00 points to 1,974.00.

Rising stocks outnumbered declining ones on the London Stock Exchange by 884 to 879 and 612 ended unchanged.

Gold Futures for June delivery was down 0.08% or 2.36 to $3,051.94 a troy ounce. Elsewhere in commodities trading, Crude oil for delivery in May rose 1.14% or 0.79 to hit $69.79 a barrel, while the June Brent oil contract rose 1.05% or 0.76 to trade at $73.15 a barrel.

GBP/USD was unchanged 0.38% to 1.29, while EUR/GBP unchanged 0.28% to 0.84.

The US Dollar Index Futures was up 0.20% at 104.04.

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Netherlands stocks lower at close of trade; AEX down 0.42%

Investing.com

Grupo Aeroportuario del Sureste SAB de CV

-0.39%

Investing.com – Netherlands stocks were lower after the close on Wednesday, as losses in the Technology, Basic Materials and Healthcare sectors led shares lower.

At the close in Amsterdam, the AEX lost 0.42%.

The best performers of the session on the AEX were Shell PLC (AS:SHEL), which rose 1.90% or 0.64 points to trade at 34.01 at the close. Meanwhile, Randstad NV (AS:RAND) added 1.77% or 0.72 points to end at 41.34 and ASR Nederland NV (AS:ASRNL) was up 1.01% or 0.54 points to 54.22 in late trade.

The worst performers of the session were BE Semiconductor Industries NV (AS:BESI), which fell 3.14% or 3.40 points to trade at 104.90 at the close. ASML Holding NV (AS:ASML) declined 2.59% or 17.50 points to end at 657.20 and Adyen NV (AS:ADYEN) was down 2.10% or 31.60 points to 1,472.80.

Rising stocks outnumbered declining ones on the Amsterdam Stock Exchange by 53 to 41 and 10 ended unchanged.

Shares in ASR Nederland NV (AS:ASRNL) rose to all time highs; gaining 1.01% or 0.54 to 54.22.

The AEX Volatility, which measures the implied volatility of AEX options, was unchanged 0.00% to 21.09.

Crude oil for May delivery was up 1.14% or 0.79 to $69.79 a barrel. Elsewhere in commodities trading, Brent oil for delivery in June rose 1.06% or 0.77 to hit $73.16 a barrel, while the June Gold Futures contract fell 0.09% or 2.66 to trade at $3,051.64 a troy ounce.

EUR/USD was unchanged 0.05% to 1.08, while EUR/GBP unchanged 0.30% to 0.84.

The US Dollar Index Futures was up 0.17% at 104.01.

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European Equities Traded in the US as American Depositary Receipts Decline in Wednesday Trading

MT Newswires

European equities traded in the US as American depositary receipts were modestly lower late Wednesday morning, declining 0.31% to 1,424.06 on the S&P Europe Select ADR Index.

From continental Europe, the gainers were led by furniture manufacturer Natuzzi and biotech firm Evaxion Biotech E, which rose 6.1% and 4.5% respectively. They were followed by biopharmaceutical company Genfit and oil and gas company TotalEnergies , which were up 3.5% and 2.8% respectively.

The decliners from continental Europe were led by software firm SAP and medical device maker EDAP TMS , which fell 2.7% and 1.4% respectively. They were followed by biopharmaceutical company argenx and internet browser company Opera , which lost 2.5% and 1% respectively.

From the UK and Ireland, the gainers were led by oil and gas company Shell and biopharmaceutical company Biodexa Pharmaceuticals B, which increased 1.9% and 0.3% respectively. They were followed by oil and gas company BP and medical device maker Smith & Nephew , which rose 1% and 0.8% respectively.

The decliners from the UK and Ireland were led by biopharmaceutical companies Adaptimmune Therapeutics and Mereo BioPharma Group , which dropped 5.8% and 3.2% respectively. They were followed by biotech firm Trinity Biotech and biopharmaceutical company NuCana , which were down 2.7% and 1.9% respectively.

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Tariff Uncertainty Drives Quiet Premarket Action for Equity Futures

MT Newswires

SurgePays, Inc. Warrant

0.00%

Humacyte

0.00%

US equity futures were flat ahead of Wednesday's opening bell as traders awaited President Donald Trump's announcement next week on reciprocal trade tariffs.

The Dow Jones Industrial Average futures gained 0.1%, S&P 500 futures flatlined, and Nasdaq futures were down 0.1%.

Investors remained focused on tariffs as the Trump administration attempts to reshape US trade policy. The White House is expected to deploy additional measures on April 2.

Oil prices were higher, with front-month global benchmark North Sea Brent crude up 0.9% at $73.00 per barrel and US West Texas Intermediate crude up 0.9% at $69.62 per barrel.

New orders for durable goods, released at 8:30 am ET, rose by 0.9% in February following a 3.3% jump in January, compared with estimates compiled by Bloomberg for a 1% decline.

In other world markets, Japan's Nikkei closed 0.7% higher, Hong Kong's Hang Seng ended 0.6% higher, and China's Shanghai Composite finished 0.04% lower. Meanwhile, the UK's FTSE 100 gained 0.3%, and Germany's DAX index fell 0.5% in Europe's early afternoon session.

In equities, shares of TechnipFMC were 1.4% higher pre-bell after the company said late Tuesday it secured a "major" contract from Shell for its Gato do Mato project in offshore Brazil. SurgePays stock was 76% higher, a day after the company said it expects revenue to exceed $200 million over the next 12 months, compared with 2024 revenue of $60.9 million.

On the losing side, Humacyte shares slumped 30% after the company said late Tuesday it priced a $50 million stock offering.

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Shell Is Maintained at Overweight by Wells Fargo

Dow Jones Newswires

Shell

-0.73%

(12:49 GMT) Shell Price Target Raised to $87.00/Share From $81.00 by Wells Fargo

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Market Talk Roundup: Shell's Updated Strategy to Improve Operational Performance

Dow Jones Newswires

Shell

-0.73%

Shell delivered its updated strategy at its 2025 Capital Markets Day on Tuesday. Overall, analysts view the updated strategy as focused on improving operational performance. Below is a selection of analysts' comments:

Shell's Free Cash Flow a Share Target at the Center of Its Strategy

0842 GMT - The centerpiece of Shell's updated strategy remains its plan to grow free cash flow a share by 10% a year through 2030, Berenberg analysts write. Buybacks are central to this target and Shell's executives gave extended visibility on their plans, the analysts write. Shell also increased the shareholder payout ratio to between 40% and 50% of cash flow from operations over the cycle. Its current quarterly buyback of $3.5 billion is equivalent to 7% of its market cap annually, the analysts add. Shares trade up 0.6% at 2,782.00 pence. (adam.whittaker@wsj.com)

Shell's Preference for Buybacks Could Be Questioned if Shares Fail to Re-Rate

1027 GMT - Shell's preference for share buybacks over dividends will remain a significant topic of discussion if it fails to lead to a re-rating of its shares, Jefferies analysts Giacomo Romeo and Kai Ye Loh write. The London-listed energy company increased its shareholder payout target to 40%-50% of cash flow from operations and management said it would favor buybacks over dividends. Management also said the market undervalues the shares. Dividends will continue to grow at 4% a year but a one-off increase in 2025 or 2026 shouldn't be ruled out, the analysts write. Shares trade 1.45% higher at 2,805.00 pence. (adam.whittaker@wsj.com)

Shell Might Need to Acquire Assets to Meet Production Target

1052 GMT - Shell might require acquisitions to keep liquids production flat at 1.4 million barrels a day through 2030, Jefferies analysts Giacomo Romeo and Kai Ye Loh write. Falling production in the Gulf of Mexico and Brazil make meeting this target a challenge, they write. The London-listed energy company said Tuesday that it will grow top-line production by 1% a year through the period. It also said it has projects in the pipeline which can deliver over 1 million barrels of oil equivalent a day through 2030 at an average break-even price of $35 a barrel. These new projects are focused on LNG and deepwater assets, it said. Shares trade 1.6% higher at 2,809.50 pence. (adam.whittaker@wsj.com)

Shell's Updated Strategy Offers a Compelling Investment Case

1125 GMT - Shell's updated strategy builds on its 'Sprint to 2025' momentum and throws down the gauntlet to its peers, RBC Capital Markets analysts Biraj Borkhataria and Adnan Dhanani write. The London-listed energy major's investment case is compelling as portfolio simplification, capital-expenditure discipline and operational optimization will deliver improved returns, they write. Its fortress balance sheet will allow for sector-leading returns, they add. The analysts raise the stock's target price to 3,800 pence from 3,500 pence. Shares trade up 1.8% at 2,814.00 pence. (adam.whittaker@wsj.com)

Shell to Improve Operational Performance Ahead of Potential Portfolio Changes

1141 GMT - Shell's leadership is presumably planning to optimize operational performance before launching more radical portfolio changes at a future capital markets day, RBC Capital Markets analysts Biraj Borkhataria and Adnan Dhanani write. The analysts question whether a future strategy overhaul could take place at a CMD in 2027. Despite outperforming peers since 2023, around 20% of Shell's deployed capital still generates negative returns--especially in its chemicals, power and low-carbon fuels assets, they write. Self-help improvements in these divisions is the next step to improving performance ahead of future strategic changes, they write. Shares trade up 1.8% at 2,814.00 pence.(adam.whittaker@wsj.com)

Shell's Management Team Untested by Downturns, M&A Activity

1155 GMT - Shell's leadership team have yet to prove they can navigate downturns in the cycle or successfully execute merger and acquisition activity, RBC Capital Markets analysts Biraj Borkhataria and Adnan Dhanani write. Despite developing a track record of improved results and consistent shareholder returns, questions remain over how management would navigate challenging periods, they write. In particular, it is unknown how well the company would be able to execute acquiring and divesting assets, they write. It is clear the balance sheet has been solidified ahead of downturns but Shell's management has a limited track record in this area, they add. Shares trade up 1.7% at 2,813.00 pence.(adam.whittaker@wsj.com)

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