October 6, 2023[Financial Times]- UK producer insists it is sticking to net zero goals even as it ramps up output in its most lucrative business.
At Shell’s first capital markets day under new chief executive Wael Sawan this summer, the UK energy group drew the ire of environmentalists for its plans to hold oil output steady rather than allowing it to decline.
But the meeting also underlined the company’s greater dependence on another carbon-emitting fuel, liquefied natural gas, with executives telling investors that boosting output from LNG assets was a “top priority” and outlining plans to invest $4bn a year in LNG projects until 2025.
Gas has become Shell’s biggest money-spinner. Its integrated gas division, which is dominated by LNG activities, was the largest contributor to group profits in four of the past five years and accounted for just over half the company’s $14.7bn in earnings in the first half of 2023.
The question is whether the fuel remains the right focus for a company that Sawan insists is sticking to a strategy launched by his predecessor Ben van Beurden to achieve net zero emissions by 2050 through a ramp-up in clean energy investment.
“They are moving further and further away from me being comfortable that they have a genuinely compelling view for what this business should look like in 25 years’ time,” said one top 20 shareholder.
Increasing LNG volumes was a “pragmatic” strategy for the current environment, the shareholder said, noting that demand for natural gas in a decarbonising world was likely to outlast demand for other fossil fuels, particularly as Europe weans itself off Russian gas and Asia seeks alternatives to coal.
But in the longer term, prioritising LNG over clean energy could be a risk, the shareholder added. “We would like Shell to be doing a lot more around developing and articulating and then committing to a genuinely compelling energy transition strategy.”
Other shareholders, particularly those based in the US, are more positive about Shell’s commitment to its most lucrative business, according to Oswald Clint, an analyst at Bernstein. “Investors can see that the demand is there, it is most likely multi-decade, and if you’re the biggest player in the market, you own the space, why not add to it,” he said.
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