Shell sees higher Q3 production as majors boost oil, gas output

Shell raised its guidance for expected third-quarter 2024 upstream production Oct. 7, estimating a year-on-year increase of up to 90,000 b/d of oil equivalent, as boosting output showed signs of reemerging as a priority for listed oil and gas majors.

The revisions came in an update ahead of Shell's Q3 results statement due Oct. 31.

In a results statement in August, Shell forecast a potential year-on-year drop in upstream output for Q3 but now says it expects to report upstream production of 1.74 million-1.84 million boe/d, compared with 1.75 million boe/d in Q3 2023.

In the integrated gas unit, which focuses on LNG, the company has slightly narrowed its guidance to 920,000-960,000 boe/d, up from 900,000 boe/d a year earlier. It raised its estimate of liquefaction volumes in Q3 to 7.3 million-7.7 million metric tons, compared with 6.88 MMt in Q3 2023.

The listed major producers have been stabilizing production after a period of decline, which was notably steep for Shell, as the boost from its 2016 purchase of BG faded. Shell's last strategy update said it aimed to keep its liquids production stable at around 1.4 million b/d through 2030 and to increase gas output.

TotalEnergies' production has continued to fall, but it expects annual increases of around 3% to 2030 propelled by six major projects due on stream this year, it said Oct. 2.

BP refused to confirm or deny on Oct. 7 a Reuters report that new CEO Murray Auchincloss is shelving the last guidance from his predecessor, Bernard Looney, that the company's oil and gas output would fall 25% from 2019 levels by 2030 in a switch to greener energy.

"As Murray said [earlier], the direction is the same, but we are going to deliver as a simpler, more focused and higher value company," a BP spokesperson said.

Shell has faced significant production declines in recent years. However, since taking office in 2023, CEO Wael Sawan has emphasized efficiency improvements rather than mergers and acquisitions as the key to stabilizing output.

Additionally, while Hurricane Francine in the US Gulf of Mexico impacted Shell's Q3 production, a boost is expected from new projects starting up production offshore the UK, US and Brazil in Q4, although the latest note did not address this.

Price weakness

Downstream, Shell confirmed weak conditions, as refining margins generally dropped close to levels seen in the depths of the pandemic in 2020-21. Shell estimated its indicative refining margin at $5.50/b in Q3, a quarterly low not seen since 2021, and down from $7.72/b in Q2 and $15.72/b in Q3 2023. It noted lower trading and optimization results compared with Q2.

Meanwhile, BP's regular trading updates showed its indicative marker margin hit $16.50/b in Q3, its lowest quarterly level since Q2 2020.

The industry experienced significantly lower crude prices in Q3 compared with a year earlier. The Platts Dated Brent benchmark averaged 7.4% lower year on year at $80.34/b.