The energy and petrochemical giant Shell plans to pull back from the chemical industry and instead focus on its liquified natural gas business. Speaking at the firm’s capital markets day meeting on March 25, Shell CEO Wael Sawan said that the chemical business is “not delivering adequate returns” and that “we do not believe we are the natural owners of this chemicals portfolio.”
Shell sold almost 12 million metric tons of chemicals in 2024 but posted a net loss of about $102 million for the year. Sawan flagged a number of issues relating to Shell’s chemical portfolio, including a lack of scale in some areas and competition for capital within the wider company.
The company will take a regional approach to its chemical activities. In the US, where in 2022 Shell opened a $14 billion ethylene and polyethylene plant in Monaca, Pennsylvania, “we will be pursuing strategic and partnership opportunities,” Sawan said. In Europe, the firm “will pursue closures where necessary.”
Any closures in Europe would be part of a growing trend. Several companies have closed plants in Europe or say they are on the verge of doing so due to weak demand and persistently high energy and gas prices.
During the meeting, Palissy Advisors stock analyst Anish Kapadia asked whether Shell would be looking to spin off chemical assets. “We will look at any opportunities to extract value . . . and we don’t rule out any option,” replied Shell’s chief financial officer, Sinead Gorman.
“If you look to the east and what we have with China,” Gorman says, “it is basically local--locally financed and local products being sold with a partner who knows how to build the stuff and manufacture it well. So that is well suited.
“You then go to Europe and what you see in Europe of course is, actually, it’s a really challenged market,” she said. “What we are looking for . . . is make sure we are the most competitive—which we are doing pretty well at that. And then looking at whether we want to stay and whether that would be with partners, or full exit.
“You then look to the US, and it could be different whether you go toward the specialties versus the polyethylene. Is it our intention to write it all off to zero? Absolutely not. That’s not the way to do this,” Gorman said.
Shell has given itself a deadline of 2030 to complete the pullback from its chemical activities.