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Soaring freight rates add $5.4 billion to Shell's debt, squeeze Total's margins

By Reuters News

LONDON, Oct 29 (Reuters) - Shell SHEL.L said on Thursday that soaring freight rates have added $5.4 billion to its shipping lease costs in the third quarter compared with the previous three months, feeding its net debt, while TotalEnergies TTEF.PA sees them cut into the prices it gets for its liquid fuels.

  • Spot rates for oil tankers hit an all-time high in early October as Middle East producers ramped up exports using a shuttle service and ship-to-ship transfers to move oil out the Strait of Hormuz, which tied up vessels

  • Shell does not publish data on absolute costs of shipping leases, which refer to long-term contracts for vessels to move hydrocarbons

  • The $5.4 billion increase reflects a non-cash accounting effect that is added to Shell's net debt, Shell said

  • "Just that route between anywhere in the Middle East and China at the moment is some 10 times what it was from even just 12 months ago as well or in 2025, so you absolutely see that and you see that starting to come into margins. We even see the pressure on our own side in terms of the refining margins as well," Shell CFO Sinead Gorman told a conference call on third-quarter results.

  • Gorman added Shell expected the lease costs to come down again once shipping through Hormuz normalises

  • In the first nine months of 2026, cumulative increases in shipping leases were $8 billion higher than in the first nine months of 2025, the company and a spokesperson said

  • TotalEnergies TTEF.PA CEO Patrick Pouyanne said freight costs for the French major had risen from about $2-$3 per barrel to around $25. He said shipping costs were the main reason for a $6/bbl reduction of its liquids price realisation in the third quarter versus the previous three months.

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