Shell presents gas & LNG as safe bets but keeps low carbon and renewable tools in play

While outlining plans to bet on what it sees as the sure thing, the UK-headquartered energy giant Shell showcased its investment plans for the future, spotlighting its commitment to oil and gas to unlock longevity, further growth, and attractive returns. The company believes that liquefied natural gas (LNG) is a golden ticket to the energy transition since it is poised to play a key role during the pivot to low-carbon and green energy sources, which will also get their slice of investment pie, albeit a lower one than oil and gas, as Shell sees a continued need for investment in hydrocarbon production to provide secure energy for the future.

During its Capital Markets Day 2025 presentation, Shell outlined its next steps in the execution of its strategy to deliver ‘more value with less emissions’ by strengthening its commitment to value creation and maintaining its focus on performance, discipline, and simplification. Back in 2023, Shell presented its plan to invest not only $10–15 billion in low-carbon energy solutions between 2023 and the end of 2025 but also about $13 billion a year for oil and gas developments with a focus on LNG, adding up to potentially over $100 billion in total by 2030.

Wael Sawan, Shell’s Chief Executive Officer, commented: ‘’We have made significant progress against all of the targets we set out at our Capital Markets Day in 2023. Thanks to the outstanding efforts of our people, we are transforming Shell to become simpler, more resilient and more competitive.

‘‘We want to become the world’s leading integrated gas and LNG business and the most customer-focused energy marketer and trader, while sustaining a material level of liquids production. Today we are raising the bar across our key financial targets, investing where we have competitive strengths and delivering more for our shareholders.’’

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Shell’s new plan for the future revolves around enhancing shareholder distributions from 30-40% to 40-50% of cash flow from operations (CFFO) through the cycle, continuing to prioritize share buybacks, while maintaining a 4% per annum progressive dividend policy. The firm has decided to increase the structural cost reduction target from $2-3 billion by the end of 2025 to a cumulative $5-7 billion by the end of 2028, compared to 2022.

The company wants to invest for growth while maintaining capital discipline, with spending lowered to $20-22 billion per year for 2025-2028. Shell intends to grow free cash flow (FCF) per share by more than 10% per year through to 2030 and maintain the climate targets and ambition set out in its ‘Energy Transition Strategy 2024.’

Sawan explained: “While we can’t always predict the future of energy, our scenarios help set the bookends of possible outcomes, and inform our portfolio choices. Whether it’s our Archipelagos scenario which reflects a world view which is very much focused on owning of resources, or tighter border and trade security, not too dissimilar to what we are seeing today, or our recently published Surge scenario, which incorporates increased demand from AI into the energy system… one message is consistent – demand for energy will continue to grow. Across all of these scenarios we see gas and in particularly LNG being a winner and that’s aligned with our portfolio today, and our longer-term vision which I will come to in the next slide.

“We expect that supplying LNG will be the biggest contribution we will make to the energy transition over the next decade and we are positioning our portfolio to match this. At the same time, continued investment in oil will be needed to offset the natural decline rates of oil fields. Aligned with our vision to sustain a material liquids production base, we are ready to take advantage of the growth opportunities ahead. And as the demand for secure and affordable energy rises it will need to be consumed with lower emissions.

“Lower-carbon molecules and renewable power will play an important role supporting the decarbonization of the different sectors. EV’s share will grow in light transport. Biofuel demand will grow in heavy transport and aviation, together with the increased use of natural gas as marine fuel. All these are foundations for maturing a set of high-quality low-carbon business options which we will talk about later. Ultimately, different outcomes and different rates of change across energy vectors are possible but we believe that Shell’s strength comes from a portfolio and balance sheet that aligns with the uncertainty of a transitioning multi energy system.”

Furthermore, Shell has set its cap on continuing its growth in LNG and deepwater resources and claims to be on track to bring online projects with a total peak production of more than half a million barrels of oil equivalent per day by the end of this year. The UK-headquartered energy giant is determined to deliver Sparta in the Gulf of America, formerly known as the U.S. Gulf of Mexico, and expand its operations in Brazil with an additional Mero FPSO, Atapu 2, and the recently announced FPSO Gato de Mato.

While confident in its ability to sustain its levels of production to 2035 within $12 to $14 billion of capital allocated to Integrated Gas and Upstream, the firm emphasizes that its ongoing investments in equity liquefaction capacity will support further cash flow growth well into the future. With its LNG Canada project on track for first cargoes to be shipped around the middle of this year, the company elaborates that this project was designed with resiliency in mind, thanks to natural gas turbines and renewable electricity from the British Columbia hydro grid and lower CO2 composition natural gas feedstock from the Montney Basin.

Projects in Nigeria and Qatar, which are also slated to come online in the next three years, when combined with Shell’s investment in Ruwais LNG, add 12 million tons per year of share capacity to the portfolio, increasing the oil major’s equity volumes by almost a third from today’s levels. In the latter part of the decade and beyond, options such as projects related to Oman Train 4 and a phase 2 expansion at LNG Canada, as well as backfill opportunities, are poised to allow the company to extract further value from existing LNG trains and sustain the cash flow longevity of its Integrated Gas portfolio.

Sawan underlined: “We will continue to grow our gas business, where LNG in particular plays a key role in the energy transition, producing fewer greenhouse gas emissions than coal when used to generate electricity, and fewer emissions than petrol or diesel when used for transport fuel. We expect to maintain or grow our oil and natural gas liquids production, aiming to sustain material liquids production of 1.4 million barrels of oil equivalent per day to 2030, supporting the demand for secure energy. Across IG and Upstream combined, we expect a total production growth rate of 1 percent per year through the decade, which is achievable at our targeted cash capex of 12 to 14 billion dollars a year.”

Shell sees the demand for LNG increasing by around 60% by 2040, driven by economic growth in Asia, electricity demand from artificial intelligence, and the emission reduction plans boosting gas demand within heavy industry and transport. Sawan is convinced that LNG will be “one of the most durable energy vectors through the energy transition, with very attractive growth prospects.” Shell aims to decarbonize its gas value chains and strives to develop and commercialize lower-carbon intensity gases.

As natural field declines are expected to outpace demand reduction, Sinead Gorman, Shell’s Chief Financial Officer, underscored: “We focus on basin mastery, understanding the subsurface and geology in key regions like the Gulf of America, Brazil, Oman, and Malaysia. Our long legacy in these positions provides the ability to produce at lower costs and higher efficiency, to ensure we remain competitive through the cycle. Additionally, we are committed to reducing the carbon footprint of our production, aiming for lower carbon intensity over time by optimising power use, for example at our Timi asset in Malaysia and Sparta in the Gulf of America.“

“[…] Our goal remains: to maximize returns, enhance efficiency, and unlock the full potential of these world-class businesses. We will achieve this through targeting strict capital discipline, prioritising the most profitable areas of our portfolio, continuous high grading and expansion of premium offerings. We will also continue to optimize our cost structure and selectively invest in opportunities where we see clear and compelling returns. With this in mind we will spend 30 percent less in cash capex over the next five years versus the last. And we will be highly selective on where we spend this.”

Shell’s focus will be on businesses where the firm plans to unlock value and realize upside, including Chemicals, Power, and Low Carbon Options such as low carbon fuels, hydrogen, and carbon capture and storage (CCS), constituting 20% of capital employed, compared to 80% going to Upstream and Integrated Gas. Sawan points out that Power and Low Carbon Options represent $15 billion and $5 billion of capital employed, respectively. As ROACE across these businesses was negative last year, Shell is determined to turn this around by constraining the proportion of group capital employed that these businesses will represent by 2030 to less than 10%, as a way to create “a much stronger, more resilient, and more profitable set of businesses and options.”

Sawan added: “In Power, we are driving a strategic shift in our business, reallocating capital to areas of the value chain where we see higher returns and that leverage our strengths. That brings me to our low carbon options which together represent today around 5 billion dollars of capital employed across low carbon fuels, CCS and hydrogen. We will continue to develop these businesses to provide a platform of options we are building for the future, but will do so with capital discipline, harnessing our trading capabilities and driving deeper integration across our portfolio.

“Across these low carbon options and together with our Power business, we will manage capital employed to ensure that we are deploying capital where we truly see the potential to create value in line with demand. Going forward we will limit capital employed across these businesses to below ten percent of our total capital employed, with dynamic capital allocation based on returns.”

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Shell’s CEO also noted that the fundamentals of the biofuels market appear to be challenging through a large part of this decade, which partly contributed to the firm’s decision to temporarily stop on-site construction at its HEFA facility in Rotterdam. However, the company’s longer-term outlook remains positive, thus, it wants to build a profitable low-carbon fuels business by leveraging its trading and optimization capabilities to grow sales and secure sustainable feedstocks.

Gorman stated: “Trading provides a competitive edge, optimizes crude sourcing, product placement, and risk management which enables greater flexibility and higher earnings. And lastly, profitable decarbonisation – We are investing in decarbonising our refining assets to ensure they remain competitive through the energy transition. In 2024 alone, we committed to projects that aim to reduce approximately 2 million tonnes of Scope 1 and 2 emissions. This includes major projects such as Polaris, the carbon capture and storage project at Scotford Energy and Chemicals Park in Canada, which will capture an additional 650,000 tonnes of CO₂ annually once completed.”

Therefore, Shell is set on delivering more value with fewer emissions by pursuing further LNG plays, growing sales by 4-5% per year through to 2030; increasing its top line production across the combined Upstream and Integrated Gas business by 1% per year to 2030, sustaining its 1.4 million barrels per day of liquids production to 2030 with increasingly lower carbon intensity; and driving cash flow resilience and higher returns in its Downstream and Renewables & Energy Solutions businesses.

To this end, the UK-headquartered energy giant will pursue focused growth in its Mobility and Lubricants businesses; leverage competitive strengths to drive profitable and scalable businesses across its lower carbon platforms, where it expects to have up to 10% of capital employed by 2030; and unlock more value from its portfolio of Chemicals assets by exploring strategic and partnership opportunities in the U.S., and both high-grading and selective closures in Europe, enabling the business to prosper whilst improving returns and reducing capital employed by 2030.

Sawan highlighted: “On the emissions side, earlier this year, we reached our target of eliminating routine flaring. We also achieved a reduction in the net carbon intensity of the products that we sell, moving us closer to our target of a 15 to 20 percent reduction by 20301 . In 2024, we introduced an ambition to reduce customer emissions from the use of our oil products by 15 to 20 percent by 2030, and I can confirm we are progressing well on that too. […] CCS and hydrogen are different to low carbon fuels in that these are even more nascent businesses. But we are making good progress thanks to our integrated positions and technical capabilities. In addition to helping our customers decarbonise, these low carbon opportunities will help us meet our own emission reduction targets.

“They are important levers to support the decarbonisation of our Chemicals & Products and Integrated Gas footprint, where most of our scope 1 and 2 emissions are generated. In the future, we see potential for CCS and hydrogen to support the future of our gas business, with abated LNG and new fuels such as liquefied synthetic gas all playing an important part. But without strong regulatory incentives or carbon pricing mechanisms in place, these solutions are unlikely to become economical. We will of course watch demand and be ready to scale up if the right market signals present themselves. Irrespective of how the energy transition unfolds, we see further upside beyond 2030 across these low carbon areas, but we’re not baking this into the plan given the current uncertainty in terms of the pace of demand growth and regulatory frameworks.”

The firm, which has set a target to become a net-zero emissions energy business by 2050, achieved by the end of 2023 over 60% of its target to halve emissions from its operations (Scopes 1 and 2) by 2030, compared with 2016. Moreover, Shell and Equinor set the wheels in motion to combine their UK offshore oil and gas assets and expertise in December 2024 to form a new company, which they claim will be the UK North Sea’s biggest independent producer. Upon completion, the new independent producer will be jointly owned by Equinor (50%) and Shell (50%).

Shell sees 2028 as a key milestone year, thus, it is raising its structural cost savings target to a cumulative $5 to $7 billion by the end of 2028 compared with 2022 while also further right-sizing its cash capex to $20 to $22 billion per year from $22 to $25 billion. The company also intends to reward investors with higher distributions, moving its payout percentage from 30 to 40% to 40 to 50% of CFFO through the cycle.

Gorman said: “This is about raising the bar for investment; it’s about being strict and allocating more to the highest returning projects we have, and it’s about a disciplined approach to creating low-carbon options for the future. We expect to spend around 12 to 14 billion dollars a year in Integrated Gas and Upstream, both of which will continue to contribute significantly to cash flows, and allow us to sustain our material liquids production and grow our LNG sales.

“In Downstream and Renewables & Energy Solutions, we aim to spend around 8 billion dollars a year. In Renewables and Energy Solutions, we will take a measured approach, building positions to deliver cash flow in areas where we can leverage our strengths such as our Trading capabilities.”

Two projects, operated by Shell and Equinor, which are in the process of merging their UK portfolios, were hit with legal challenges in court. A recent court ruling, which overturned the previous UK government’s decision to approve Shell’s Jackdaw in the North Sea and Equinor’s Rosebank located west of the Shetland Islands, outlined that the government failed to consider the emissions that would be caused by burning the oil and gas produced by these fields.

Given the challenges the global energy market is facing, Offshore Energies UK conducted research to feel the pulse of the industry in the UK, with results indicating that 90% of the companies see business opportunities in other countries as more lucrative due to the fiscal and regulatory upheaval that places a veil of uncertainty over the future of Britain’s offshore energy supply chain, which encompasses oil, gas, renewables, hydrogen, decommissioning, and CCS.

With this in mind, OEUK is urging the UK government to address the industry’s rising concerns to stop the supply chain from packing its things, closing shops, and moving overseas for further growth. Based on recent signals from the UK government, these concerns have been heard since Aberdeen & Grampian Chamber of Commerce recently reported that Rachel Reeves, UK Chancellor, announced Jackdaw and Rosebank will be green-lighted, as the North Sea oil and gas industry is expected to remain an important factor in the British economy “for decades to come.”

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This announcement comes before the Spring Statement and is seen by Aberdeen & Grampian Chamber of Commerce and the wider industry as a key intervention set to unlock billions of pounds for the energy sector supply chain, motivating it to remain on its home turf rather than seek better opportunities elsewhere.

This does not change the fact that the UK Supreme Court judgment, delivered in 2024, changed the rules of the oil and gas game by putting Scope 3 emissions into play, as it threw downstream emissions into the mix, ensuring that future developments must take into account Scope 3 emissions within environmental assessments. This judgment influenced the ruling, which labeled the approvals granted for Jackdaw and Rosebank as unlawful since they did not consider GHG emissions arising from the eventual combustion of the extracted oil and gas.

Both projects now need to undergo a new approval process, including Scope 3 environmental impact assessment. As Shell and Equinor are in the process of combining their UK portfolios, these projects are soon expected to be part of the same portfolio. Ed Miliband, UK’s Energy Secretary, may have described Rosebank as “climate vandalism” but Treasury sees the economic potential of the project to generate billions of pounds for the UK economy.

Reeves underlined: “We said in our manifesto that they would go ahead, that we would honour existing licenses, and we’re committed to doing that, and go ahead they will. North Sea oil and gas is going to be really important to the UK economy for many, many decades to come. And we want to make sure that fields that have already got licenses can continue to exploit those reserves and bring them to market.”

Aberdeen & Grampian Chamber of Commerce claims that the Rosebank oil and gas field is anticipated to generate a gross value add (GVA) of £25 billion, while Shell said the Jackdaw field would produce enough gas to heat more than 1.4 million UK homes.

Sawan emphasised: “We’re creating a portfolio that is built to win, that delivers more value with less emissions; that allocates capital and carbon with discipline and a value focus; that accelerates delivery through performance, discipline and simplification; and that rewards shareholders with consistent, competitive and resilient returns. We’ll do this profitably for our shareholders, delivering both high returns-on-capital and high returns-of-capital.”