Royal Dutch Shell on Tuesday said it will write 22 billion U.S. dollars off the value of its assets after sharply lowering its oil and gas price outlook in the wake of the coronavirus pandemic.

The decision also comes as the Anglo-Dutch company reviews its operations after CEO Ben van Beurden laid out plans in April to reduce greenhouse gas emissions to net-zero by 2050.

Shell, which has a market value of 126.5 billion U.S. dollars, said in an update ahead of its second-quarter results on July 30 that it will take an aggregate post-tax impairment charge in the range of 15 billion to 22 billion U.S. dollars in the quarter.

Shell's shares were down 0.4 percent in early trading.

The world's largest fuel retailer said it expects a 40 percent drop in fuel sales in the second quarter from a year earlier to 4 million barrels per day (bpd) due to a sharp fall in consumption due to coronavirus-related travel restrictions.

Upstream oil and gas production is expected to average of 2.35 million bpd in the second quarter, down from 2.71 million bpd in the previous quarter.

Lower prices

Shell's writedown mirrors rival BP's move to take up to 17.5 billion U.S. dollars off the value of its assets as it prepares to shift to low-carbon energy.

Shell reduced its expected average benchmark Brent crude oil price for 2020 to 35 U.S. dollars a barrel, down from 60 U.S. dollars. For 2021 and 2022 it cut its forecast to 40 U.S. dollars and 50 U.S. dollars a barrel, respectively, also down from 60 U.S. dollars.

Its long-term oil price outlook now stands at 60 U.S. dollars a barrel, Shell said in an update ahead of its second-quarter results on July 30. It previously did not disclose its long-term value.

The company also cut its long-term refining profit margin outlook by 30 percent.

Its long-term natural gas price was set at 3 U.S. dollars per million British Thermal Units.

BP cut its long-term Brent forecast to 55 U.S. dollars a barrel from a previous 70 U.S. dollars.

(Cover image: Shell branding is seen at a petrol station in west London, January 29, 2015. /VCG)