Oil major Royal Dutch Shell wants to be carbon neutral by 2050 Royal Dutch and will expand its consumer facing businesses, reversing years of getting rid of product distribution and retail sites.
In a strategy statement on Thursday Shell vowed to eliminate net carbon emissions by 2050, accelerating previous targets and spending more, by continuing to exploit its oil and gas assets.
The company also called ‘peak oil’ in the statement and presentation, saying global oil production is set to slowly decline from its peak in 2019.
Oil demand in 2019 was 100.1 million barrels a day. Daily production was a touch over 95 million barrels. Demand could reach 95 million barrels a day in 2021 after falling to 95 million barrels a day in COVID-hit 2020. Daily production could end up between 90 to 93 million barrels a day, after the production cap from OPEC, Russia and others holds.
Shell says it will continue to extract returns from its declining oil and gas businesses to finance dividends to shareholders in the meantime, as well as financing the move to a carbon neutral world. So, years’ more emissions.
And unlike peers, Total and BP Shell will focus more on becoming an intermediary between clean power producers and customers rather than invest billions in renewable projects.
Shell announced in October it would increase its spending on low-carbon energy to 25% of overall capital expenditure by 2025 or more than $US5 billion a year, against $US1.5 billion to $US2 billion now. The 2025 target is up from around $US3 billion previously.
But for the near term (several more years) spending will stay tilted towards oil and gas while it
Royal Dutch Shell wants to leverage off its expertise in power trading and rapid growth in hydrogen and biofuels as it shifts away from oil.
Shell plans to boost its consumer base by expanding its electricity supply business for homes and its network of electric vehicle charging points, as well as signing long-term corporate power purchase agreements and is looking for a much deeper involvement with consumers.
As part of the change Shell plans to increase the number of electric vehicle charging points to 500,000 from 60,000 now.
Shell will boost to its retail business (already the world’s largest) 20% to 55,000 sites by 2025 from today’s 46,000. According to Reuters Shell has more outlets than either of the world’s two biggest food chains, Subway and McDonald’s.
The Shell approach is very different to the one BP has adopted. BP plans to slash its oil output by 40% by 2030 and is getting rid of its core oil and gas exploration team to focus on renewables, with spending on low-carbon energy set to rise 10-fold to $IS5 billion in the next decade
Shell wants to expand up its production of biofuels made from plants and waste as an alternative source of energy for transportation and is also betting on future growth in hydrogen.
Hydrogen has started attracting a lot of interest as a clean alternative to natural gas for heavy industry and transportation.
Reuters says Shell is already the world’s leading energy trader, trading around 13 million barrels of oil a day, or 13% of global demand before the pandemic, using one of the biggest fleets of tankers.
It is also the top trader of liquefied natural gas (LNG), buys and sells power, biofuels, chemicals and carbon credits, and now wants to dominate fast-growing low-carbon power market.
In its strategy update Shell said it will rely on revenue from its oil and gas businesses to pay for shareholder returns and the transition.
Oil production is expected to gradually be reduced by 1% to 2% each year from a 2019 peak of around 1.8 million barrels a day, including divestments of oilfields and the natural decline of fields.
