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Shell is accelerating its commitment to reach net zero emissions, with the oil company now aiming to zero out its impact on the environment by 2050.
The 2050 date isn’t exactly new for Shell, it had already promised that its energy business would achieve net zero by this date, although it’s now throwing in its other businesses. That includes third party oil and gas the company sells as products.
Despite its attempts to greenwash its image, Shell has only recently seen a reduction in its carbon emissions. The company noted that its total carbon emissions peaked in 2018, although oil production peaked in 2019. The firm is now on a mission to drive down its emissions to zero.
“Our accelerated strategy will drive down carbon emissions and will deliver value for our shareholders, our customers and wider society,” said Ben van Beurden, Shell’s CEO.
“We must give our customers the products and services they want and need – products that have the lowest environmental impact. At the same time, we will use our established strengths to build on our competitive portfolio as we make the transition to be a net-zero emissions business in step with society.
“Whether our customers are motorists, households or businesses, we will use our global scale and trusted brand to grow in markets where demand for cleaner products and services is strongest, delivering more predictable cash flows and generating higher returns.”
How Shell will achieve net zero
Shell has been aggressive in advocating for the transition to electric vehicles, with the firm being amongst the first to lobby the Government to bring forward its ban on petrol and diesel vehicles. Of course, it didn’t do that purely out of the kindness of its own heart, the firm thinks that it can make a significant return on investment in the electric vehicle market, with it rapidly rolling out EV chargers across the world.
It’s not good enough to simply transition to full electric vehicles to net zero its businesses, however. So Shell is undergoing an aggressive carbon reduction campaign, one in which it hopes will help it achieve net zero emissions by 2050.
To achieve net zero, Shell will continue with short-term targets that will drive down carbon emissions as it makes progress towards the 2050 target, linked to the remuneration of more than 16,500 staff. This includes a new set of targets to reduce its net carbon intensity: 6-8% by 2023, 20% by 2030, 45% by 2035 and 100% by 2050, using a baseline of 2016.
The firm will also seek to have access to an additional 25 million tonnes a year of carbon, capture and storage (CCS) capacity by 2035. Currently, three key CCS projects of which Shell is a part, Quest in Canada (in operation), Northern Lights in Norway (sanctioned) and Porthos in The Netherlands (planned), will total around 4.5 million tonnes of capacity.
Additionally, it aims to use nature-based solutions (NBS), in line with the philosophy of avoid, reduce and only then mitigate, to offset emissions of around 120 million tonnes a year by 2030, with those we use being of the highest independently verified quality.
Starting at the 2021 AGM, Shell will submit an Energy Transition Plan for an advisory vote to shareholders, the first in the sector to do so. It will update that plan every three years and seek an advisory vote on the progress made each year.
Diversification will be key to Shell’s decarbonisation efforts
Shell’s aim is to build material low-carbon businesses of significant scale by the early 2030s. Upstream will continue to deliver vital energy supplies, which will help to generate the cash and returns needed to fund shareholder distributions while accelerating investment in the growth businesses to capture new market opportunities.
In the near term, Shell’s strategy will rebalance its portfolio, investing annually $5-6 billion in its Growth pillar (around $3 billion in Marketing; $2-3 billion in Renewables and Energy Solutions), $8-9 billion in its Transition pillar (around $4 billion Integrated Gas; $4-5 billion Chemicals and Products) and around $8 billion in Upstream. Plans include:
Growth:
Marketing
Target to increase Adjusted Earnings to around $6 billion by 2025 (from $4.5 billion in 2020), achieved by improving the already market-leading position of the lubricants business, an increase to 40 million customers at 55,000 retail sites (from 30 million at 46,000 sites today) and growth of global electric vehicle (EV) network from more than 60,000 charge points today to around 500,000 by 2025.
Low-carbon fuels – extend the biofuels production and distribution business, which in 2019 sold more than 10 billion litres of biofuels. Shell’s joint venture Raízen, which produces low-carbon fuels from sugar cane in Brazil, recently announced the acquisition of Biosev. This is set to increase Raízen’s bioethanol production capacity by 50%, to 3.75 billion litres a year, around 3% of global production.
Renewables and Energy Solutions
Integrated Power – Shell aims to sell some 560 terawatt hours a year by 2030 which is twice as much electricity as it sells today. The company expects to serve more than 15 million retail and business customers worldwide, while aiming to be a leading provider of clean Power-as-a-Service.
Nature-based solutions – Shell expects to invest around $100 million a year in high-quality, independently verified projects on the ground to build a significant and profitable business to help customers meet their net-zero emissions targets.
Hydrogen – built on Shell’s position in hydrogen by developing integrated hydrogen hubs to serve industry and heavy-duty transport, aim to achieve double-digit share of global clean hydrogen sales.
Transition:
Integrated Gas
Extend leadership in liquefied natural gas (LNG) volumes and markets, with selective investment in competitive LNG assets to deliver more than 7 million tonnes per annum of new capacity on-stream by the middle of the decade. Continue to support customers with their own net-zero ambitions, with leading offers such as carbon-neutral LNG.
Chemicals and Products
Transform its refinery footprint from 13 sites today to six high-value Chemicals and Energy Parks and reduce production of traditional fuels by 55% by 2030. Intention to grow volumes of the chemicals portfolio and increase cash generation from Chemicals by $1-2 billion a year by 2030 compared with the medium term. Will produce chemicals from recycled waste, known as circular chemicals, and by 2025 aim to annually process 1 million tonnes a year of plastic waste.
Upstream:
Focus on value over volume, being simpler and more resilient, continuing to provide material cash flow into the 2030s. An expected gradual reduction in oil production of around 1-2% each year, including divestments and natural decline.
