Yahoo Finance Shell (SHEL) Hits Pause on Major Biofuels Plant in Europe
Shell plc SHEL, the British energy giant, has halted construction activities for one of Europe's largest biofuel plants amid weaker biofuel prices. Under CEO Wael Sawan, Shell has scrapped several renewable projects to focus on its more profitable ventures, primarily associated with fossil fuels. In recent months, Shell has abandoned many renewable and hydrogen projects, withdrew from European and Chinese power markets, and sold off its refineries. It did so to concentrate on oil and gas operations to boost profits.
In September 2021, Shell proceeded with the development of the biofuel plant, with a capacity of 820 thousand tons a year. The biofuel plant at Shell's chemicals park in Rotterdam, the Netherlands, was slated to start operations by 2025. However, due to the pause, it is expected to come online toward the end of the decade. The facility was intended to produce renewable diesel and sustainable aviation fuel.
While the energy giant’s decision to halt the construction work midway may seem odd, it is an indication that the advanced biofuels market is in a slump. Oil major BP also halted the progress of two biofuel facilities in Germany and the United States. This reflects the wider set of challenges faced by oil majors in the advanced biofuels market. Biofuel prices have recently taken a hit due to decreasing demand, especially in Europe, and rising supply in the United States. The market is expected to witness an increase in supply in the future with more production coming online.
Following the pause in construction, Shell mentioned that the number of contractors on-site will decrease alongside a slowdown in activities. The move is anticipated to help the company control costs and improve project sequencing. Shell believes that ceasing construction activities for the time being will enable it to determine a commercially viable way to proceed with the project. The company has also stated that it will consider impairment charges for the project, with more details to be released in its quarterly trading update.
The energy giant remains committed to achieving its net-zero emissions target by 2050. Shell has also added that low-carbon fuels will be a significant part of its overall strategy to reach the goal.
Zacks Rank and Key Picks
Currently, SHEL carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the energy sector are Sunoco LP SUN, SM Energy SM and Hess Midstream Partners LP HESM. Sunoco presently sports a Zacks Rank #1 (Strong Buy), while SM Energy and Hess Midstream carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
Sunoco LP is one of the largest distributors of motor fuel in the United States. The partnership distributes fuel to independent dealers, commercial customers, convenience stores as well as distributors. Its current distribution yield is greater than the composite stocks in the industry, providing unitholders with consistent returns.
SM Energy is an upstream energy firm operating in the prolific Midland Basin region and the South Texas region. For 2024, the company expects its production to increase from the prior-year reported figure, signaling a bright production outlook.
Hess Midstream owns, operates, develops, and acquires a wide range of midstream assets, providing services to Hess Corporation and other third-party customers. The partnership has a stable fee-based revenue model secured via long-term commercial contracts. Since Hess Midstream operates through 100% fee-based contracts, it is exposed to minimal commodity price risks.
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Shell PLC Unsponsored ADR (SHEL) : Free Stock Analysis Report
