Shareholders' Meeting: A Notable Faction of Investors Voices Concerns over LNG Expansion Plans by Shell
Shell, the multinational oil and gas company, has announced plans to grow its top-line production in its integrated gas business by 1% annually. The company's strategy centres around the LNG Canada project, which began shipping its first cargo in June 2025 and is expected to support LNG sales growth of 4-5% Compound Annual Growth Rate (CAGR) through 2030.
The LNG Canada project, with Shell holding a 40% share, offers competitive costs and lower carbon intensity. Its strategic location in Canada provides an advantaged shipping route to Asia, halving transit times compared to US Gulf Coast LNG, thereby improving profitability and market positioning. Shell is investing $20–22 billion annually, prioritising high-margin upstream and liquefaction projects, with LNG playing a critical role in sustaining earnings.
Shell's commitment to its shareholders is evident in its strong free cash flow, supportive of a $3.5 billion share buyback, and a 7% increase in dividends. This has led to a shareholder distribution of 46% of cash flow from operations over the last year, signalling a balance between growth and returns.
However, not all shareholders are convinced. More than 20% of Shell's shareholders have backed a resolution questioning the company's planned expansion of LNG production. Sir Andrew Mackenzie, Shell's chair, urged shareholders not to back the LNG resolution, stating that in the absence of LNG, renewables would be deployed more slowly, and the world would burn more coal.
Doubts have been raised about LNG's ability to act as a transition fuel, and concerns about its carbon footprint persist. Sandra Stewart, chief executive of the Greater Manchester Pension Fund, has called for transparency in Shell's LNG strategy to allow investors to evaluate its long-term value in the energy transition. Nick Mazan, company strategy, UK Lead for the ACCR, echoed this sentiment, stating that shareholders have sent a strong signal for better disclosure.
The International Energy Agency predicts that global LNG demand will peak by 2030. This raises questions about the assumptions made by Shell regarding LNG demand and potential losses if prices were to drop. Under UK listing rules, Shell is required to explain how it will address shareholder concerns about its LNG expansion plan.
Investors have also expressed concern about the disconnect between Shell's planned LNG expansion and its Paris-alignment ambition. Vaishnavi Ravishankar, head of Stewardship at Brunel Pension Partnership, and Silvia van Weveren, engagement specialist at Robeco, are among those who have backed a resolution questioning Shell's LNG strategy.
Meanwhile, Wael Sawan, Shell's CEO, expressed his conviction in supporting the growth of LNG and decarbonizing it over time through carbon capture and sequestration and the development of liquid synthetic gas. He believes that supplying LNG will be the biggest contribution the company will make to the energy transition.
A key topic among investors is the potential for consolidation in the oil and gas sector, with speculation about Shell taking over BP. However, when asked directly about these rumours, chair Mackenzie neither confirmed nor denied, instead referring to earlier statements prioritising returning dividends to shareholders.
Amidst these debates, Milieudefensie has announced its intention to take Shell to court again over its alleged failure to decarbonize. Doug McMurdo, chair of the Local Authority Pension Fund Forum, questioned if each member of the board concurs with the statement that LNG is a low-carbon fuel. Investors stressed the need for further transparency, with Xander Urbach of MN inquiring about the company's 2035 decarbonisation targets.
In summary, Shell's LNG expansion through LNG Canada is integral to its long-term strategy focused on profitable growth, shareholder returns, and measured climate commitments. However, the company faces challenges in addressing shareholder concerns about its LNG strategy, particularly in relation to its carbon footprint and the potential for LNG to act as a transition fuel. The energy transition is a complex and evolving landscape, and Shell, like many other companies, is navigating this change while balancing the needs of its shareholders, the environment, and the global energy market.
- Shell's LNG Canada project, with a strategic location and lower carbon intensity, positions the company for profitable growth in the liquefied natural gas (LNG) industry, which is expected to grow by 4-5% Compound Annual Growth Rate (CAGR) through 2030.
- Despite the company's continuous investments in high-margin upstream and liquefaction projects, some shareholders remain concerned about the environmental impact and the carbon footprint of LNG, calling for transparency in Shell's LNG strategy to assess its long-term value in the energy transition.
- The International Energy Agency predicts that global LNG demand will peak by 2030, raising questions about the assumptions made by Shell regarding LNG demand and potential losses if prices were to drop, as well as the alignment of its planned LNG expansion with its Paris-alignment ambitions.
