KUALA LUMPUR: The liquefied natural gas (LNG) market currently exhibits signs of softness in the short term, according to Shell integrated gas and upstream director Zoë Yujnovich.
One key indicator is the relatively high levels of inventory in both North Asia and Europe.
Furthermore, there has been a lacklustre performance in terms of spot market purchases, especially in Asia, with China as a notable example.
When it comes to the medium term, Yujnovich observes a potentially vulnerable situation, especially as we approach the end of summer.
"Currently, things seem to be in relatively good balance. However, we can anticipate that, as we enter the winter months, these stocks could be depleted rapidly. Any additional strength in the Chinese economy may lead to an increase in spot purchases.
"Therefore, it's possible to foresee a swift change in the supply and demand balance as inventory levels fluctuate during the winter months in Europe and North America, while China may experience heightened activity," she said in a recent interview.
Looking at the long-term horizon, Yujnovich expressed optimism regarding the prospects of LNG.
She highlighted LNG's pivotal role in coal switching, a critical component of global efforts to reduce carbon emissions.
LNG's carbon intensity is about half that of the global coal average when used for power generation.
Nevertheless, Yujnovich pointed out the possibility of a supply-demand imbalance in the LNG market.
The projected demand for LNG may outstrip the available supply in the coming years.
This bodes well for the long-term future of LNG, and Shell is poised to play a significant role, not only in trading but also in the development of its projects in the LNG sector.
In contrast to the LNG market, Yujnovich discussed the crude oil market, which she described as more liquid and influenced by various factors, including the decisions of the Organisation of the Petroleum Exporting Countries (Opec).
Presently, Opec is restraining oil supply, providing support for crude prices.
Yujnovich expects crude oil prices to remain stable, but she cautions that this market's liquidity exposes it to a multitude of variables and players.
Speaking on investments, Yujnovich said Shell still maintains significant ambitions regarding further investments in integrator gas and upstream.
"We want, of course, to hold our liquids production flat. That requires quite some significant investment given the decline ratios that you naturally get out of the reservoirs.
"So, to hold liquids production flat through to 2030 requires a significant ongoing investment, and significant maturation of propositions whether that be from exploration, or from acquisitions, that may be available."
Shell has set an ambitious growth target of 20 to 30 per cent in its integrated gas segment. This growth will come from various sources, including increasing equity in projects like LNG Canada.
The company will also explore performance opportunities and potential purchases of additional sales in regions such as North America.
Yujnovich said Shell has communicated a substantial financial commitment of US$13 billion annually for these endeavours.
The company is committed to a "value over volume" mantra, emphasising discipline in capital allocation.
"We certainly won't be chasing volumes. We have learned our lessons from the heady days of the past and we will maintain strict discipline in our capital allocation. We will ensure that the projects we invest in are resilient and provide us with a competitive advantage," she noted.
Recently, Sarawak Shell Bhd, a subsidiary of Shell plc, started gas production at its Timi gas field located around 252 km north-west of Bintulu and 202 km north-west of Miri, Sarawak, under the SK318 production sharing contract (PSC).
Timi is designed to produce up to 50,000 barrels of oil equivalent per day of gas at peak production and will evacuate its gas through a new 80-kilometre pipeline to the F23 production hub.
It features Shell's first wellhead platform in Malaysia that is powered by a solar and wind hybrid power system.
This unmanned platform is also more cost-efficient as a result of being around 60 per cent lighter in weight than a conventional tender-assisted drilling wellhead platform that relies on oil and gas for power.