One after the other major international oil companies (IOCs) are announcing new and massive asset write-downs as a result of the low global oil and gas prices and their impact on their business. These are in effect ‘stranded-assets’ that once had a value but can no longer be produced as a result of low prices and may have to be ‘left in the ground.’
The latest to do so is Shell that announced on June 30 that it is writing off up to $22 billion of the value of its oil and gas assets – about 15 per cent of its market capitalisation. It based this on a reassessment of its long-term oil price forecasts to reflect “the expected effects of the Covid-19 pandemic and related macroeconomic, as well as energy market, demand and supply fundamentals”.
Shell now expects the Brent crude oil price to average $35/barrel this year, $50/barrel in 2021 and only return to around $60/barrel after 2023 –
been close to $70/barrel in December. It also expects US Henry Hub gas price at $2.50/mmbtu (per about 1000 cubic feet), rising to $3/mmbtu after 2023.