Integrated Gas

Integrated Gas (IG) includes liquefied natural gas (LNG) and the conversion of natural gas into gas-to-liquids (GTL) fuels and base oils. IG activities also include natural gas exploration and extraction, and the operation of the upstream and midstream infrastructure necessary to deliver gas and gas products to market. The marketing, trading and optimisation of LNG is also part of IG. We are committed to investing in our IG activities and plan to continue growing our LNG portfolio.

Business conditions

For the business conditions relevant to Integrated Gas, see "Market overview".

Production available for sale

In 2023, natural gas production increased by 2% compared with 2022, mainly because of the new fields and ramp-up in Oman, Canada, Australia and Trinidad and Tobago. Lower levels of maintenance at Pearl GTL in Qatar, and in Trinidad and Tobago also contributed to the higher production levels. These were partly offset by the derecognition of Russia's Sakhalin-related volumes and production-sharing contract effects in Egypt and at Pearl GTL. In 2023 and 2022, natural gas and liquids made up 86% and 14% of total production, respectively.

LNG liquefaction and sales volumes

LNG liquefaction volumes decreased by 5% compared with the previous year, mainly as a result of the derecognition of Sakhalin-related volumes.

LNG sales volumes increased primarily because of higher purchases from third parties but this was partly offset by the derecognition of Sakhalin-related volumes.

Through our trading organisation, we market and sell a portion of our share of equity production of LNG together with third-party LNG through our hubs in the UK, the UAE and Singapore. Shell has term sales contracts for the majority of our LNG liquefaction and term purchase contracts. We are able to optimise the income we generate from our LNG cargoes through our shipping network, regasification terminals and ability to purchase and deliver LNG spot cargoes from third parties. For example, if one customer does not need a scheduled cargo, we can deliver it to another customer who does need it. Similarly, if a customer needs an additional cargo not available from our production facilities, we contract with third parties to deliver the additional cargo. We conduct paper trades, primarily to manage commodity price risk related to sales and purchase contracts. We also sell LNG for trucks in India, China and Europe, and LNG for shipping in the USA, Europe and Singapore.

Earnings 2023-2022

Segment earnings in 2023 were lower in comparison to 2022 and reflected the net effect of lower realised prices and higher contributions from trading and optimisation (decrease of $1,143 million), lower volumes (decrease of $466 million), and unfavourable deferred tax movements (decrease of $728 million).

Segment earnings included identified items: mainly unfavourable movements of $4,407 million due to the fair value accounting of commodity derivatives and net impairment charges and reversals of $2,247 million. In 2022, identified items included favourable movements of $6,273 million due to the fair value accounting of commodity derivatives and net impairment reversals of $779 million. In 2022, these were partly offset by other impacts of $608 million, mainly loan write-downs, as well as charges of $387 million as provisions for onerous contracts.

Adjusted Earnings and Adjusted EBITDA were driven by the same factors as the segment earnings, and adjusted for identified items.

Prior year earnings summary

Our earnings summary for the financial year ended December 31, 2022, compared with the financial year ended December 31, 2021, can be found in the Annual Report and Accounts (page 39) and Form 20-F (page 43) for the year ended December 31, 2022, as filed with the Registrar of Companies for England and Wales and the US Securities and Exchange Commission, respectively.

Cash flow from operating activities

Cash flow from operating activities for 2023 was primarily driven by Adjusted EBITDA and a working capital inflow of $2,023 million, partly offset by net cash outflows, related to derivatives of $4,668 million, and tax payments of $3,574 million.

Cash capital expenditure

Our cash capital expenditure in 2023 was at the same level as in 2022. Our cash capital expenditure is expected to be around $5 billion in 2024.

Portfolio and business development

Significant portfolio and business developments:

• In January 2023, we produced first gas from Oman's Mabrouk North-East field in Block 10 (Shell interest 53.45%).
• In June 2023, we completed the purchase of 25% of the shareholding in the QatarEnergy LNG NFS(2) joint venture, which owns a 37% interest in the North Field South (NFS) project. Shell's ownership of NFS via its joint-venture shareholding is 9.375%.
• In October 2023, we sold our 35% interest in Indonesia's Masela PSC to Indonesia's PT Pertamina Hulu Energi and PETRONAS Masela Sdn. Bhd. The sale included the Abadi gas project.
• In October 2023, we and our partners in the Oman LNG LLC venture signed an amended shareholders' agreement for Oman LNG LLC (Oman LNG), extending the business beyond 2024. We will remain the largest private shareholder in Oman LNG, with a 30% interest.
• In December 2023, Shell entered into agreements with the government of the Republic of Trinidad and Tobago and Atlantic LNG shareholders to restructure the Atlantic LNG facility, which will change Shell's overall shareholding in Atlantic LNG. These changes aim to take effect in a phased approach, starting on October 1, 2024, and are expected to be completed by May 2, 2027. On completion, Shell is expected to have a 45% share in Atlantic LNG.

* Non-GAAP measure (see Non-GAAP measures reconciliations).