Shell plc SHEL has announced that it is scrapping its solar and onshore wind projects in Brazil. Its decision to discontinue these projects was likely influenced by a challenging environment for investments in renewable power projects in Brazil.
The challenges in Brazil’s renewable power market are driven by several factors, including an oversupply of energy, which dampens the value of new projects coming online, along with a sluggish demand and regulatory hurdles involved in the process. Shell has also mentioned in its new global strategy that it will scale down its investments in low-carbon energy projects and renewables. The company’s primary focus is creating value from its power generation assets, which also involves withdrawing from activities and projects that do not generate enough returns to be sustainable.
Shell has also engaged in discussions with Brazil’s energy regulator to revoke its rights to operate certain solar-powered projects in the country. The projects mentioned here includes solar plants located in the central west and northeastern parts of Brazil. Solar plants are centralized power generation plants that directly supply electricity to the national grid, essentially meaning that these are large-scale projects. However, the company has added that it will continue to run a smaller firm, Prime Energy, which is part of the distributed generation segment. Distributed generation is different from centralized generation due to its scale, the former often operating on a smaller scale.
SHEL’s Zacks Rank and Key Picks
SHEL, the British oil and gas major, currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the Energy sector are Archrock Inc. AROC, Nine Energy Service NINE and NextDecade Corporation NEXT. While Archrock currently sports a Zacks Rank #1 (Strong Buy), Nine Energy Service and NextDecade carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
Archrock is an energy infrastructure company based in the United States with a focus on midstream natural gas compression. It provides natural gas contract compression services and generates stable fee-based revenues.
Nine Energy Service provides onshore completion and production services for unconventional oil and gas resource development. The company operates across key prolific basins in the United States, including the Permian, Eagle Ford, MidCon, Barnett, Bakken, Rockies, Marcellus and Utica, as well as throughout Canada. With a sustained demand for oil and gas in the future, the need for NINE’s services is anticipated to increase, which should position the company for growth in the long run.
NextDecade is an emerging player in the LNG space with its Rio Grande LNG project in Texas. The demand for LNG as a clean-burning fuel continues to grow, and the commodity is expected to play a crucial role in the energy transition process. The company’s focus on expanding its liquefaction capacity is expected to enhance its position in the rapidly growing global LNG market, enabling it to meet the rising demand for natural gas.
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