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How Is Shell’s Downstream Portfolio Being Re-churned?

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Mar. 24 2016, Updated 10:06 a.m. ET

Shell’s Downstream portfolio

Shell plans to retain only the most competitive projects that fit its long-term strategy. With this aim, Shell divested a variety of downstream assets in 2015. These included interests in Tongyi Lubricants in China, Butagaz in France, downstream assets in Norway, and 185 service stations across the United Kingdom.

Royal Dutch Shell’s (RDS.A) decision to separate its Motiva assets was another move in the ongoing restructuring of its downstream assets.

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Shell’s downstream expansion plans

Shell is also expanding and modernizing its existing asset base. It plans to move ahead with its de-bottlenecking project at the Scotford refinery. Expected to be completed in 2016, the project will raise hydrocracker capacity by 20%.

Shell also plans to construct a solvent de-asphalting unit at the Pernis refinery, which will increase the production of lighter, higher value refined products. Subject to approvals, construction is expected to begin in 2016, with completion expected by 2018.

Shell also plans to expand its presence in the high-return petrochemical market. In 2015, Shell started production at its new high-purity ethylene oxide purification unit and its ethoxylates unit, doubling the production of both chemicals at Jurong Island in Singapore.

Also, Shell signed an agreement to double its ethylene capacity in China. Work is in progress at Shell’s proposed petrochemical plant in the Appalachian region in the United States. Plus, Shell is planning to construct its fourth alpha olefins unit at Geismar, Louisiana, which is expected to be completed by 2018. As per Shell, this will make the site the largest alpha olefins producer in the world.

Going forward

Shell’s downstream portfolio is evolving into a more competitive portfolio poised to grow with the company’s expansion plans. Shell’s aim to strengthen its petrochemical segment will further bolster its downstream segment’s earnings capacity.

If you’re looking for exposure to integrated energy stocks, you can consider the iShares Global Energy ETF (IXC). The ETF has ~57% exposure to integrated stocks, including Royal Dutch Shell, ExxonMobil (XOM), Chevron (CVX), BP (BP), and Total (TOT).

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