How far has Shell’s decarbonization journey gone and what is yet to come?

UK-headquartered energy giant Shell has reiterated its commitment to halving Scope 1 and 2 emissions from its operations by 2030, compared with 2016 on a net basis, to propel the energy transition agenda forward and reach its net zero aspirations.

Within its first energy transition update since the launch of its ‘Powering Progress’ strategy in 2021, Shell reaffirmed its target to achieve net-zero emissions by 2050 across all operations and energy products to support the goal of the Paris Agreement to limit global warming to 1.5°C above pre-industrial levels.

Commenting on this, Wael Sawan, Shell’s CEO, highlighted: “Today, the world must meet growing demand for energy while tackling the urgent challenge of climate change. I am encouraged by the rapid progress in the energy transition in recent years in many countries and technologies, which reinforces my deep conviction in the direction of our strategy.”

The oil major believes that its energy transition strategy, which covers all its businesses, will lend a helping hand to “a balanced and orderly transition away from fossil fuels to low-carbon energy solutions to maintain secure and affordable energy supplies.”

For Shell, LNG is a critical fuel in the energy transition, thus, the firm is growing its LNG business with lower carbon intensity. To this end, the company has earmarked about $13 billion a year during this decade on oil and gas with a focus on LNG, adding up to potentially over $100 billion in total by 2030.

Shell underlines that it is dedicated to slashing emissions from oil and gas production while keeping oil production stable, growing sales of low-carbon energy solutions, and gradually curbing sales of oil products such as petrol, diesel, and jet fuel. The company claims to be well-positioned to connect the supply of low-carbon energy to demand, as it has done for many years with oil and gas.

Furthermore, the UK-based player has made inroads in its climate targets, with more than 60% of its target to halve emissions from its operations by 2030 compared with 2016 achieved by the end of 2023. As a result, the company is adamant that its progress goes above and beyond the targets set by signatories of the Oil and Gas Decarbonization Charter agreed at COP28.

The firm also made progress in cutting methane emissions, as one of the first companies to set a target to achieve near-zero methane emissions by 2030. Last year, Shell achieved 0.05% methane emissions intensity – significantly below its target of 0.2%. In addition, the company contributed to the World Bank’s Global Flaring and Methane Reduction Fund, further supporting industry-wide action to drive down methane emissions and flaring.

On top of these achievements, the UK energy giant reached its target to curb the net carbon intensity of the energy products it sells, with a 6.3% reduction compared with 2016. This is the third consecutive year the company has managed to hit its target. Shell’s shareholders will have an advisory vote on the firm’s energy transition strategy at its 2024 AGM.

Sawan emphasized: “Shell has a very important role to play in providing the energy the world needs today, and in helping to build the low-carbon energy system of the future. Our focus on performance, discipline and simplification is driving clear choices about where we can have the greatest impact through the energy transition and create the most value for our investors and customers.

“We believe this focus makes it more, not less, likely that we will achieve our climate targets. By providing the different kinds of energy the world needs, we believe we are the investment case and the partner of choice through the energy transition.”

While Shell works on its transformation to a net-zero emissions energy business, it aims to take the lead in the energy transition game, as it believes in its strengths in the decarbonization arena. On a mission to assist in driving the decarbonization of the transport sector, the firm has set a new ambition to reduce customer emissions (Scope 3) from the use of its oil products by 15-20% by 2030 compared with 2021.

“Our focus on where we can add the most value has led to a strategic shift in our integrated power business. We plan to build our power business, including renewable power, in places including Australia, Europe, India and the USA, and have withdrawn from the supply of energy directly to homes in Europe,” outlined Shell.

In line with this shift to prioritizing value over volume in power, the company expects lower total growth of power sales to 2030, which has led to an update of its net carbon intensity target to a 15-20% reduction by 2030, compared with 2016, against its previous target of 20%. In 2023, the firm’s customer emissions from the use of its oil products were 517 million tons of carbon dioxide equivalent (CO2e). Shell has set its cap on investing $10-15 billion between 2023 and the end of 2025 in low-carbon energy solutions.

During 2023, the firm invested $5.6 billion on low-carbon solutions, more than 23% of its total capital spending, dishing out money on electric vehicle charging, biofuels, renewable power, hydrogen, and carbon capture and storage.

“We aim to help scale new technologies to make them an affordable choice for our customers and are focusing our advocacy on key areas which we believe are critical to the energy transition: policies that support national net-zero ambitions including carbon pricing, supplying the secure energy the world needs, driving changes in demand and growing low-carbon solutions,” concluded Shell.