Shell Pushes LNG Agenda and Backtracks on Sustainability

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Shell Pushes LNG Agenda and Backtracks on Sustainability

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Oil and gas major Shell has decided to place profits over sustainability, backpedalling from previous commitments to rein in its carbon emissions. Governments must find ways to regulate these fossil fuel-producing giants.

03 August 2023 – by Tim Daiss   Comments (0)

UK-based energy major Shell PLC has decided to chase profits over keeping its previous sustainability pledges.

The move came on June 14 when recently installed Shell CEO Wael Sawan promised to be “ruthless” in his pursuit of higher shareholder returns as he guides the legacy oil and gas company through the energy transition. 

Part of the pivot includes boosting Shell’s dividends for investors by 15%, which will take effect this quarter. The company will also start buying back at least USD 5 billion of its shares in the second half of the year to prop up stock valuation.

Essentially, this financial obligation has to be paid for. To that end, Shell plans to maintain oil production at the current level of 1.4 million barrels per day until 2030. This comes after the cutting of oil production under former Shell CEO Ben van Beurden by about 20% over the past two years from a peak in 2019.

Who Is Shell PLC?

Shell is an integrated fossil fuel producer. This means that it is involved in the entire value chain of the global oil and gas business. It is also the world’s largest publicly owned LNG trader.

Its LNG tanker fleet comprises some 11% of the world’s total. Moreover, it operates and has stakes in LNG terminals and plants worldwide.

What Is Shell’s LNG Capacity?

Shell called for more investment in the global LNG supply even before its most recent strategy backpedals, according to Shell LNG Outlook 2023.

Shell dominated the global long-term LNG import contract volumes signed by key purchasing companies in 2022, with a contracted capacity of 6.7 million metric tonnes per annum (mtpa).

In 2022, Shell produced nearly 504 million barrels of crude oil and natural gas liquids through subsidiaries and around 29 million barrels through joint ventures and associates. 

Liquefied Natural Gas Production Uptick

Under its new strategy, Shell will spend USD 40 billion over the next three years, which will also help it add 500,000 barrels of oil equivalent (boe) a day of new oil and gas production by 2025. 

Conversely, Shell said it would now be more selective about the types of clean energy projects it backs. 

Amid its production increase, Shell also reiterated its pledge to achieve net-zero emissions by 2050. Unfortunately, Shell is still not setting specific renewables capacity targets, unlike many of its oil and gas peers (including French oil and gas major Total Energies and UK-listed BP).

Only two weeks after Shell’s decision to pursue more revenue from oil and gas production, Thomas Brostrom, Shell’s head of renewables, resigned. He joined Shell less than two years ago from offshore wind giant Orsted. He was tasked with developing Shell’s offshore wind development as the energy giant planned to expand wind and solar operations. This was part of Shell’s previous strategy to cut GHG emissions under its former CEO.

A Shell spokesperson said that Brostrom “decided to leave the company in order to pursue another opportunity”.

Misplaced Low Carbon Strategy

Shell also added in its June 14 disclosure that it plans to invest USD 10-15 billion from 2023 to 2025 in low-carbon energy sources, such as biofuels, hydrogen, electric vehicle charging and carbon capture and storage (CCS) technology.

The company said there’s a caveat in this since spending will have to adhere to Shell’s mission to drive higher returns for shareholders. This strategy, however, is typical oil industry greenwashing, as it relies heavily on hydrogen development and CCS technology.

Choosing the Wrong Hydrogen

Moreover, Shell envisions not using green hydrogen but using “blue hydrogen”. Green hydrogen emits no verifiable emissions, as it is produced using renewables.

However, blue hydrogen uses natural gas – a fossil fuel – in its production. To capture those emissions, Shell will rely on the use of problematic CCS., despite it being described as “bogus.” It is also an expensive technology, as storage locations can leak CO2. Meanwhile, the technology has yet to be proven on a large scale.

Holding Shell Accountable

A growing list of organisations is holding Shell accountable for its most recent decision.

“Shell’s U-turn could produce an average of 29 million tonnes of extra carbon per year, almost as much as Denmark emits annually,” Alice Harrison, fossil fuels campaign leader at Global Witness, told Energy Tracker Asia.

“By 2030, Shell’s extra estimated emissions would be as much as Spain – one of Europe’s largest polluters – produces in one year. This is a climate bombshell of a decision,” she said.

Last year, Global Witness submitted to the US financial regulator a claim that Shell was lumping together some of its gas-related investments with its spending on renewables to inflate its overall investment in renewable energy sources.

Despite Shell claiming to spend 12% of its annual expenditure on its so-called renewables and energy solutions, Global Witness found that it only spends 1.5% of its overall expenditure on solar and wind power generation. “Alarmingly, it appears that a significant portion of Shell’s spending on renewables and energy solutions goes to investments in climate-wrecking gas,” Harrison said.

Cashing In On Peak Oil

Shell’s new strategy could also be a tactical move ahead of projected peak oil demand. The International Energy Agency (IEA) said on June 14 that it expects global oil demand to peak in the coming years.

Currently, companies are all in on gas and oil, the IEA finds, with global investment, exploration, extraction and production investment on track to hit their highest levels since 2015.

As such, Shell’s vast oil and gas apparatus has to swing into high gear to maximise profits before 2028.

Additional Greenwashing Of Shell

Shell is already under climate change crosshairs with lawsuits pending. Nonetheless, the company said in March that emissions from its operations — Scope 1 and 2 emissions — decreased by 15% year-on-year to 58 million tonnes of CO2 equivalent (CO2e) in 2022. 

However, this is also greenwashing, as the decreases largely came from a divestment strategy to sell off assets to reduce emissions, particularly highly polluting oil refineries (downstream assets) in the US. They did not come from a major overhaul of the company’s oil and LNG production capacity (upstream assets).

“Don’t believe the greenwash that fossil fuel giants like Shell are green, climate-friendly companies. Fossil fuels are the single biggest cause of climate breakdown and fossil fuel companies are the single biggest threat to fixing it,” Harrison said. “For so long as we are made to rely on oil and gas, then change will need to come not from oil and gas companies themselves but the governments that regulate them.”

by Tim Daiss

Tim has been working in energy markets in the Asia-Pacific region for more than ten years. He was trained as an LNG and oil markets analyst and writer then switched to working in sustainable energy, including solar and wind power project financing and due diligence. He’s performed regulatory, geopolitical and market due diligence for energy projects in Vietnam, Thailand and Indonesia. He’s also worked as a consultant/advisor for US, UK and Singapore-based energy consultancies including Wood Mackenzie, Enerdata, S&P Global, KBR, Critical Resource, and others. He is the Chief Marketing Officer (CMO) for US-based lithium-sulfur EV battery start-up Bemp Research Corp.

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