Royal Dutch Shell said its natural gas trading business overcame supply disruptions to post “significantly higher” earnings for the fourth quarter compared with the previous three months amid record gas prices – but oil product sales were less buoyant.
The energy company said the "high liquid natural gas spot price environment" gave the company a boost, according to a trading update ahead of its fourth-quarter results on February 3, making it one of the few winners during the energy crisis gripping Britain and wider Europe.
However, when it came to oil product sales, the FTSE 100 listed company expects to post a loss as it is hit by "seasonal trends, the demand impact due to the Omicron virus and foreign exchange impacts in Turkey” after a plunge in the Turkish lira.
The company also expects its oil business to be affected by maintenance at its Scotford refinery in Canada as well as the "Hurricane Ida recovery efforts in Norco", Louisiana.
Natural gas and electricity prices around the world have risen sharply since the middle of last year on tight gas supplies and higher demand as economies rebounded from the Covid-19 pandemic with benchmark European gas and Asian LNG prices hitting all-time highs in the fourth quarter.
Shell, like its rivals, suffered a huge loss in 2020 when the Covid-19 pandemic slashed energy demand and sent crude prices plummeting and the focus shifted to a net zero future.
Shell has a large global portfolio of natural gas, which is supplied by pipeline or carried in its liquefied form by ocean-going vessels.
Despite soaring prices, earnings from the fuel fell short in the third quarter because of production problems in several locations.
However, the company said it had overcome these challenge, allowing it to benefit from a rally in which gas prices more than tripled in 2021 when demand surged as economies reopened from lockdowns.
This combined with lower supplies from Russia sent wholesale gas prices to record highs, which led to the collapse of more than 25 energy providers in Britain.
There are now fears of a cost-of-living crisis with average UK household bills expected to more than double in April when the domestic price cap goes up, putting pressure on the government to step in to protect consumers.
Shell's profits may fuel further calls from the UK's Labour Party for a windfall tax to be applied on energy companies in an effort to ease the cost-of-living crunch.
Separately, Shell is distributing $7 billion to shareholders from the sale agreed last year of its assets in the shale-oil-rich US company Permian Basin to rival ConocoPhillips.
The company said it would distribute the remaining $5.5bn of the proceeds in the form of share buybacks.
Later this month, Shell will move its head office from The Hague to London, scrapping its dual share structure in the process and changing its name to Shell – as it moves to simplify its structure and shift its tax residence from the Netherlands.
The news comes after Shell shareholders voted overwhelmingly last month to switch the location of the group's headquarters after a century and drop Royal Dutch from the name.
Europe's biggest energy company said the move will also speed up its transition from fossil fuels that cause climate change.