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Shell, one of the world’s largest oil companies, warned that the low price of oil could reduce the value of its assets by as much as $ 22 billion (£ 17.9 billion).
He said he expects oil to change hands at $ 60 a barrel in the long term and to be priced at $ 35 this year and $ 40 next year.
Shell follows rival BP in telling investors that oil assets are no longer worth as much as they used to be.
BP told investors this month that its assets could be worth $ 17.5 billion less.
Countries around the world have ordered people to stay indoors and not travel as a result of the coronavirus pandemic, which has caused a drop in demand for oil.
As a result, the cost of oil fell to less than $ 20 a barrel at the peak of the crisis, less than a third of the $ 66 it cost at the beginning of the year.
For a brief period, buyers were paid to receive crude oil amid a storage shortage.
The price of Brent crude has recovered in recent weeks and is currently trading at $ 41.04 per barrel.
Before Tuesday’s update, Shell had been confident that oil would come in at $ 60 a barrel for the next three years. It has not previously stated a long-term price assumption.
‘Big challenge’
“How individuals, governments and companies respond to the Covid-19 crisis in the coming months will have long-term implications for the environment and the future of oil-producing companies and countries,” said Michael Bradshaw. , professor of global energy at Warwick Business College.
Much will depend on whether world leaders decide to rebuild the global economy with fossil fuels or invest in green energy, he said, according to the Paris climate agreement. It will also depend on the tastes of consumers, he added.
“For example, there is no guarantee that the transport sector will fully recover. After the pandemic, we may have a different attitude to international air travel or physical work.”
“This will create a major challenge for oil producers, especially if demand and prices do not recover sufficiently to support a managed transition to a more sustainable future.”
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Shell has slowly expanded to greener fuels such as solar, wind, and hydrogen.
Oil companies like Shell and BP are trying to reform themselves as energy companies, dabbling in greener energy and trying to steer investors away from the big dividends they traditionally pay.
In April, Shell cut its dividends for the first time since World War II, eliminating two-thirds of the payments.
Still, market watchers are considering whether these changes are coming fast enough, as Shell’s reduction in the value of its assets will make its debts look much larger.
“The real question to move forward is whether Shell’s rather pessimistic expectations are pessimistic enough,” said Nicholas Hyett, equity analyst at stockbroker Hargreaves Lansdown.
“Oil prices have spent much of the past five years below $ 60 a barrel, and while the collapse of several major names in US shale could reduce global supply, the prospects for demand are shaky.” .
