Royal Dutch Shell has announced that it will write down the value of oil and gas assets by $3.5 billion to $4.5 billion following a string of impairments this year as it adjusts to a weaker outlook.

In an update ahead of its fourth quarter results on February 4, Shell said: “Post-tax charges, in aggregate, between $3.5 to $4.5 billion in relation to impairments, asset restructuring and onerous contracts are expected in the fourth quarter. These expected charges, reported as identified items, relate to Upstream (including partial impairment of appomattox asset in the US Gulf of Mexico due to subsurface updates), oil products (including charges related to announced transformation of the refinery portfolio) and integrated gas (onerous contracts).”

Shell said that charges linked to reshape organisational restructuring are expected to be recognised in 2021.

The company said that it expects oil and gas production is expected to be between 2,275 and 2,350 thousand barrels of oil equivalent per day, reflecting hurricane impacts in the US Gulf of Mexico (between 60 and 70 thousand barrels of oil equivalent per day) and the effect of mild weather in Northern Europe in the first half of the fourth quarter.

With this, the refinery utilisation is expected to be between 72% and 76% and sales volumes are expected to be between 4,000 and 5,000 thousand barrels per day.

It said that the LNG liquefaction volumes are expected to be between 8.0 and 8.6 million tonnes.” Approximately 80% of our term sales of LNG in 2020 have been oil price linked with a price-lag of up to 6 months,” it said.

Also, the chemicals manufacturing plant utilisation is expected to be between 77% and 81% and chemicals sales volumes are expected to between 3,600 and 3,900 thousand tonnes.”Chemicals base and intermediate margins are expected to improve compared with the third quarter 2020,” the company said.