Shell’s reserves hit decade low as analysts warn of looming production shortfall

Shell faces shrinking oil and gas reserves as analysts warn a “production gap” is coming

London | 9 February 2026 — Shell is facing growing pressure to secure new oil and gas resources after a steady decline in its reserve base pushed the company’s “reserve life” to under eight years, one of the shortest among the major international oil companies. Analysts and Shell executives say the company may need either a major acquisition or a significant exploration success to prevent a widening shortfall between what its current portfolio can produce and what it has told investors it aims to deliver through the 2030s.

At the centre of the story is a basic industry reality: upstream oil and gas production declines naturally as fields mature. To keep output steady — let alone grow it — producers must continually replace what they extract. For years, many oil majors have been cautious about committing capital to long-life oil and gas developments, citing the energy transition and the risk of future demand weakening. But demand has not collapsed, and major forecasters still expect growth in 2026, adding a renewed strategic premium to companies that can sustain supply.

The key numbers driving the debate

Reuters reports that Shell’s proven reserves position has fallen to its lowest level in at least a decade, and that its reserve life (a proxy for how long current proved reserves could sustain production at current rates) has dropped to less than eight years as of 2025.

Shell’s reserve base is also visible in its own reporting. In its Strategic Report for 2024, Shell said its proved reserves decreased to 8,156 million barrels of oil equivalent (boe) after accounting for production, with proved developed reserves rising slightly and proved undeveloped reserves falling.

Those figures matter because “reserve life” is not just a technical metric: it shapes investor confidence in whether a company can maintain production without buying assets or taking bigger exploration bets.

Reuters, citing Wood Mackenzie data, contrasted Shell’s sub-8-year reserve life with “over 12 years” at peers like Exxon and TotalEnergies — a gap that can influence valuations and strategic expectations.
TotalEnergies has also publicly emphasised reserve longevity as a strategic point, pointing in investor materials to around 12 years of proved reserves life.

The “production gap” problem

Shell CEO Wael Sawan has previously warned investors that natural declines across Shell’s portfolio could leave a sizable gap between the company’s production ambitions and what its current assets can supply by the mid-2030s. Reuters reports a projected shortfall in the range of 350,000 to 800,000 barrels of oil equivalent per day (boed) by 2035 if Shell does not add significant new supply.

In plain terms: even if Shell runs its current assets well, the portfolio may simply not contain enough future barrels and molecules to meet its own targets unless the company adds resources.

Shell’s strategy has been to grow overall hydrocarbon production modestly while keeping crude output broadly flat, and to lean heavily into liquefied natural gas (LNG) as a long-term growth market. Reuters notes Shell aims to increase LNG sales by at least 5% a year, even if that growth is not fully underpinned by Shell-operated upstream output.

That framing helps explain why reserve depletion matters: Shell can trade and market LNG without owning all of the production behind it — but upstream ownership still underwrites long-term security of supply, margin resilience, and strategic control.

Why Shell is more exposed than some rivals

One reason Shell’s reserve life has become a headline issue is that it exited or reduced exposure to regions that later proved to be major growth engines for competitors.

Reuters highlights Shell’s exit from U.S. shale in 2021 and from Guyana in 2014 — the latter now central to Exxon’s growth story. Reuters also quotes Sawan expressing regret about leaving Guyana when Shell did.

This matters not because shale or Guyana are “the only answer,” but because they represent the kind of large, scalable supply base that can extend reserve life and improve future production visibility.

Shell has pursued nearer-term measures to manage decline — investment in regions such as the U.S. Gulf of Mexico, Brazil, and multiple African plays, plus field upgrades and project tie-backs — and Reuters reports Shell believes these steps have largely covered a nearer-term gap expected by around 2030.

But analysts quoted by Reuters are sceptical that incremental projects alone will solve the longer-term challenge, especially if the post-2030 gap remains large.

Why this is happening now: the energy transition didn’t remove the supply problem

For several years, oil majors faced a strategic dilemma: invest heavily in long-life oil and gas projects (and risk overbuilding into declining demand), or hold back (and risk becoming supply-constrained if demand persists).

Reuters argues the industry’s caution was heavily influenced by expectations of a faster shift away from hydrocarbons. But with demand still growing in many forecasts — particularly outside the OECD — attention has shifted back to who has the resources to keep supplying.

The International Energy Agency’s January 2026 Oil Market Report forecast global oil demand growth averaging 930,000 barrels per day in 2026, up from 850,000 b/d in 2025, driven largely by non-OECD consumption growth.
The U.S. Energy Information Administration similarly forecasts global liquid fuels consumption rising by around 1.1 million b/d in 2026, reinforcing the view that demand remains on an upward path in the near term.

These outlooks do not guarantee high prices — markets can be well supplied — but they do support the idea that long-term barrels and molecules still have strategic value, especially for a company that is also committing to shareholder returns.

The shareholder returns tension: buybacks vs reinvestment

A related pressure point is capital allocation. Shell has maintained significant shareholder payouts and buybacks even as analysts watch reserve life decline.

In a separate Reuters report on Shell’s latest results, the company kept its buyback pace and raised its dividend, while analysts pointed again to reserve life concerns and what that might imply for M&A or exploration spending choices.

This is a classic supermajor balancing act: investors want returns and discipline; the upstream business requires continuous replenishment. Too much reinvestment can look like a bet against transition; too little reinvestment can look like running down the asset base.

What happens next: the strategic paths Shell could take

Most commentary now revolves around three realistic routes:

1) A major acquisition (M&A)

Buying reserves can be faster than discovering them, especially if Shell targets LNG-linked upstream assets or producing fields that immediately extend reserve life. The trade-off is cost — and the risk of overpaying in a competitive market where other majors are also looking for quality inventory.

2) Bigger exploration bets

A “material discovery” can reset the narrative, but exploration is uncertain by nature. It can also clash with decarbonisation messaging if the company is seen as doubling down on long-life oil.

3) Hybrid approach: secure supply through partnerships and LNG trading

Shell can grow LNG sales through long-term contracts, trading, and third-party supply — but the strategic question is how much of that growth Shell wants to underpin with owned production versus commercial arrangements.