Energy producer Royal Dutch Shell warned Tuesday it will slash the value of its assets by US$22 billion to account for lower oil and gas prices amid the coronavirus pandemic.
With the virus outbreak hurting the long-term prospects of the global economy, the company said it continues "to adapt to ensure the business remains resilient'' in challenging times. Earlier this month, its competitor BP, also cut the value of its own assets by up to US$17.5 billion.
The pandemic has hit the wider energy industry hard because it has placed onerous limits on business, travel and public life. There is little need in aviation for fuel, for example, since most planes are grounded.
Supply of oil and gas was particularly high when the outbreak began, creating a perfect storm for the industry. With storage facilities filling up, the U.S. price of oil went below zero in April for the first time ever.
Shell predicted prices for Brent crude, the international oil benchmark, would be at US$50 dollars a barrel in 2022, having earlier predicted a price of $60 a barrel. On Tuesday, it was trading near US$41 a barrel.
Shares in the company dropped by 2.5 percent on the news.
"In a world of falling oil demand and a bigger push towards renewables, these energy titans increasingly look like creatures from another era, something which should give investors pause for thought,'' said Chris Beauchamp, chief market analyst at IG.
``While neither Shell nor BP will be going anywhere soon, their importance as dividend payers will likely diminish relative to other sectors, and yield-hungry investors need to be prepared for this eventuality.''
The Anglo-Dutch company told investors in April that it intended to stop adding greenhouse gases to the atmosphere by 2050. BP made a similar announcement in February.
Shell also said it intended to set a stricter target to reduce the net carbon footprint of its energy products by 30 percent by 2030, from 20% currently, and aim for a cut of 65 percent by 2050, from 50 percent at present.-AP

Royal Dutch Shell takes US$22b hit on lower oil, gas prices