Shell has warned investors that it will take an impairment charge of up to $2bn (£1.6bn) in its next set of results after it was forced to halt work on Europe’s largest biofuel project and sell off a Singapore refinery.
The oil company told investors to expect a non-cash writedown of between $600m and $1bn when it publishes its second-quarter results next month because of trouble at a major biofuel project in Rotterdam in the Netherlands.
The company also expects to take a hit of between $600m and $800m on the Singapore refining and chemicals hub that it agreed to sell in May.
The company’s share price edged down 0.8% on Friday, making it one of the biggest fallers on the FTSE 100.
Shell announced on Tuesday that it had “temporarily paused” the construction of a big biofuel plant in Rotterdam, which was expected to convert waste into green jet fuel and biodiesel by the end of the decade.
The oil company’s biggest energy transition project has struggled with technical difficulties that have delayed its progress so far. It had expected to start producing up to 820,000 tonnes of biofuels a year in April, before this was pushed back to 2025.
“We’re taking the tough decision now to temporarily pause on-site construction,” a Shell spokesperson said on Tuesday. “This gives us the opportunity to take stock, complete engineering, optimise project sequencing and, in doing so, maintain capital discipline.”
The spokesperson added: “Low-carbon fuels form a key part of Shell’s ambitions to provide affordable and sustainable products to our customers.”
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The writedown marks another worrying sign for the development of sustainable aviation fuel, which is seen by some as crucial if airlines are to cut their carbon emissions in line with global climate targets.
Last month, BP said it was scaling back its plans for the development of new SAF and renewable diesel biofuels projects at its existing sites. It set out plans to pause two potential projects while continuing to assess the viability of another three. BP said the decision was aligned with the oil company’s drive to “simplify its portfolio, focusing on value and returns”.
