Refining Margins to Provide Buffer as Shell Gas Production Takes War Hit

Shell PLC said Wednesday it expects production in its Integrated Gas segment to fall to 880,000-920,000 barrels of oil equivalent a day (boed) in the first quarter (Q1) of 2026 from 948,000 boed in Q4 2025 due to "the impact of the Middle East conflict on Qatari volumes".

On the other hand, amid surging oil prices, the British energy giant expects its refining margins to increase to $17 per barrel in Q1 2026 from $14 per barrel in the prior three-month period.

On March 19 Shell said it has ceased production at its Pearl gas-to-liquids (GTL) facility in Ras Laffan, Qatar after one of the facility's two trains sustained damage from an attack that caused a fire. Pearl has a capacity of 140,000 boed of GTLs, produced by processing 1.6 billion cubic feet a day of gas from Qatar's North field, making it the world's biggest GTL facility, according to Shell. Shell owns 100 percent of Pearl under a production sharing contract with the Qatari government.

Shell made "an initial assessment of around one year for full repair of train two", Shell said in an update March 20.

Qatar, through state-owned QatarEnergy, has already declared force majeure on the production of liquefied natural gas (LNG) and other products since March 4 due to "military attacks" on energy infrastructure in Ras Laffan Industrial City and Mesaieed Industrial City.

The force majeure invocation means a production loss of 2.4 million metric tons per annum for Shell from its 30 percent stake in QatarEnergy LNG N(4), though the facility has escaped the March 18 attacks. That was according to Shell's update March 20, which said, "We also have LNG supply contracts from other QatarEnergy LNG facilities".

It would take up to five years to repair the damage from the March 18 attacks, which are expected to cause around $20 billion a year in lost revenue, QatarEnergy said in an online statement March 19.

However, in Wednesday's results guidance, Shell said its LNG output in the January-March 2026 period could still exceed its volumes in the previous quarter. The LNG production forecast of 7.6-8 million metric tons, compared to 7.8 million metric tons in Q4, "reflects the ramp-up of LNG Canada, offset by Australia weather constraints and Qatar LNG outages".

In Integrated Gas, under which Shell reports results for the upstream production and delivery of natural gas and its derivatives to the market, "Trading & Optimization is expected to be in line with Q4'25", Wednesday's statement said.

In its Upstream segment, Shell expects production to average 1.76-1.86 million boed (MMboed), compared to 1.89 MMboed in Q4. The forecast "includes reduced production following the Adura JV incorporation", Shell said. In the 50-50 joint venture Adura, Shell and Norway's majority state-owned Equinor ASA have combined their oil and gas activities on United Kingdom's side of the North Sea. They completed the transaction in Q4.

In Marketing, Shell expects sales volumes to decrease to 2.55-2.65 MMbd from 2.7 MMbd in Q4. However, it said, "Marketing adjusted earnings are expected to be significantly higher than Q1'25".

In Chemicals and Products, while refining margins have risen, chemicals margins are poised to slide to $139 per metric ton from $140 per metric ton in Q4. Shell expects refinery utilization to level up to 95-99 percent from 95 percent in Q4. "Trading & Optimization is expected to be significantly higher than Q4'25", it said.

Due to the "impact of unprecedented volatility in commodity prices on inventory and receivables", Shell expects a negative working capital of $15-10 billion in Q1 2026.

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