Investor Insight Editorial: Shell faces scrutiny on LNG strategy at AGM

Nick Mazan, UK Company Strategy Lead

In keeping with the recent trend of UK-listed oil companies moving their AGMs out of the corporate centre of London, Shell’s AGM next week will be held at a Heathrow Airport hotel. While the location – designated as a ‘no protest’ zone – limits the potential for public disruption, Shell will still be facing unwanted scrutiny from shareholders making use of their legal rights.

A Special Resolution filed by institutional investors Brunel Pension Partnership, Greater Manchester Pension Fund and Merseyside Pension Fund, along with ACCR and ShareAction, is on the agenda and will be voted upon by the company’s shareholders. Resolution 22 asks Shell to justify the assumptions behind its extremely bullish LNG strategy and explain how it is consistent with its climate commitments, including its target to reach net zero emissions by 2050.

Shareholder resolutions are an important accountability mechanism. There is no other process by which shareholders can seek to compel enhanced disclosures from a company to improve transparency and facilitate risk appraisal. In this case, investors are asking Shell to justify its large and long-term bet on LNG, so they can better assess the material risks associated with this strategy.

Shell has recommended a vote against Resolution 22, saying it is not necessary. In response to the resolution filing, Shell referred to a series of existing disclosures that it says meets the resolution’s intent, while at the same time offering new disclosures. However, the view of the co-filers is that Shell’s current and proposed disclosures do not provide clear information on how its LNG strategy and new capital expenditure is consistent with its climate commitments, nor do they fully address the financial risks related to Shell’s LNG strategy.

The 2025 proxy season is one of the quietest in recent years when it comes to climate-related proposals in the global oil and gas sector – geopolitical, legal and regulatory uncertainty is without doubt exerting a chilling effect. This resolution, and the research that underpins it, has placed a necessary spotlight on significant risks to Shell’s approach; risks the company is not fully disclosing. The filing itself is a clear signal that active owners see a close connection between company strategies that align with reducing carbon emissions and protecting shareholder value – regardless of short-term political cycles.

Shell plans to grow its LNG business by an expected 4-5% per year to 2030, with LNG projected to account for nearly one-third of the company’s upstream hydrocarbon production by the end of the decade. Shareholders currently do not have the information they need to properly assess how this is consistent with Shell’s climate commitments, or to evaluate the financial risks posed by this strategy.

There are three key reasons investors believe the company’s current disclosures fall short:

1. Shell has more than 1.4 billion tonnes of uncontracted LNG – roughly twice as much as any other independent oil and gas company. This means Shell – and its shareholders – are uniquely exposed to significant risk if demand softens or prices fall. While no one possesses the crystal ball that depicts exactly what will happen in the future, with an LNG supply glut on the horizon and accelerating competition from renewables, it is reasonable to expect Shell to fully substantiate its gamble on gas.

   What we do know is that for Shell’s demand assumptions to stack up, LNG will need to be priced competitively with renewables. ACCR’s modelling shows that if LNG were to compete on price with renewables for power generation in emerging Asia, prices would need to fall to a $4-5/Mbtu range. This is well below the average lifecycle costs of LNG ($8-9/MBtu), implying that Shell would lose money on every cargo that they sell at that price.

2. Shell’s forecast for LNG demand is highly optimistic. The company projects demand to be more than three times higher than the International Energy Agency’s (IEA) Net Zero Emissions scenario and 21% higher than its Stated Policies scenario, which assumes there will be no new emissions reduction policies at all. Does Shell really think that governments around the globe will not only fail to act on climate change over the next 25 years, but regress from the current position on climate and energy policies?

3. Shell has not convincingly explained the basis for its demand projections. For instance, it cites economic growth in Asia as a key driver but overlooks the deteriorating reputation of LNG in the region after price spikes resulted in energy insecurity. No compelling case has been made by Shell to explain how LNG will outcompete cheaper alternatives like renewables or coal in these price-sensitive markets. It has also not addressed how a 2.5-degree warming scenario – which the company’s demand outlook implies – could threaten the very economic growth it relies upon, especially in the highly climate vulnerable markets it has highlighted as key drivers of demand.

By rejecting this Resolution, Shell is essentially asking shareholders for their trust. Yet given the company’s outlier position on LNG demand, its failure to substantiate the basis for this position, and the financial risks should its assumptions fail to eventuate, trust is not enough.

Indeed, ACCR’s research has found instances where Shell looks to be talking to its own book. For example, at its 2025 Capital Markets Day, the company produced a global cost curve chart that overstated the cost competitiveness of its under-construction LNG assets.^[1] In its LNG Outlook 2024, Shell misinterpreted the IEA’s scenarios in a way that makes its Outlook appear closer to a 1.5°C scenario than it actually is, and cites independent research in a way that overstates the role of gas in decarbonising the Chinese steel sector.^[2] Given this emerging pattern, investors should be careful not to take Shell’s disclosures at face value and trust a Company which has such an entrenched interest in high degrees of LNG demand materialising.

Given the scale of the value at risk in Shell’s LNG strategy, the spotlight is where it needs to be for next week’s AGM. Shareholders need greater transparency over the risks in Shell’s extremely bullish LNG strategy. We look forward to voting in favour of Resolution 22, which has used shareholder rights to shine a light on the company’s patchy disclosures and generate vital conversations between the company and its shareholders about where it must do better. Strong investor scrutiny of Shell’s LNG strategy will not be going away anytime soon.