Shell on decarbonisation quest plans to dish out $10-15 billion in low-carbon energy by 2025

UK-headquartered energy giant Shell has decided to step up its decarbonisation efforts by boosting its low-carbon energy solutions business with investments of $10-15 billion over the next two years. This is part of the oil major’s transformation strategy to help usher in a balanced energy transition.

Shell is actively working on curbing emissions not only from its operations but also from the fuels and other energy products it sells to its customers in a bid to become a net-zero emissions energy business by 2050. This global climate goal was first announced in April 2020. Come October 2021, the oil major set a new target to halve its Scope 1 and 2 emissions compared to 2016 levels by 2030.

The UK-headquartered energy giant told Offshore Energy in February 2023 that it was more than halfway towards achieving its target reduction of 50 per cent by 2030 for Scope 1 and 2 emissions by the end of 2022. At the time, the firm estimated that it had reduced Scope 1 and 2 carbon emissions under operational control by 16 per cent compared with 2021, and 31 per cent compared with 2016.

The UK giant believes it is making good progress towards its net-zero target, as it aims to achieve near-zero methane emissions by 2030 and eliminate routine flaring from its Upstream operations by 2025. This means that the oil major plans to achieve this faster than the World Bank’s Zero Routine Flaring 2030 initiative.

Regarding its plans to invest $10-15 billion from 2023 to 2025, this is expected to support the development of low-carbon energy solutions including biofuels, hydrogen, electric vehicle charging, and carbon capture and storage (CCS).

Shell intends to update investors during a meeting on Wednesday, 14 June 2023, on its strategy to create “more value with less emissions” while delivering increased shareholder returns through a balanced energy transition, which reflects the UK player’s balanced approach as it operationalises its Powering Progress strategy.

Wael Sawan, Shell’s Chief Executive Officer, remarked: “We are investing to provide the secure energy customers need today and for a long time to come, while transforming Shell to win in a low-carbon future. Performance, discipline, and simplification will be our guiding principles as we allocate capital to enhance shareholder distributions, while enabling the energy transition.”

Furthermore, Shell intends to keep investing in providing – what it deems as – secure supplies of energy while scaling up efforts to reduce carbon emissions. To this end, the firm intends to grow its Integrated Gas business and maintain “a leading role” in the global liquefied natural gas (LNG) market while extending – what it believes to be –  its advantaged position in Upstream to achieve cash flow longevity by stabilising liquids production to 2030.

The oil major also plans to leverage its brand, customer relationships, and trading strengths to optimise the value from investments it has made in Downstream and Renewables & Energy Solutions, while helping customers across the transport and industry sectors to decarbonise.

To enhance performance and position itself for further growth, the company unveiled a simplified organisational structure and executive committee and directorate changes in January 2023, which are expected to take effect on 1 July 2023.

This will enable Shell’s Integrated Gas and Upstream businesses to join together to form a new Integrated Gas and Upstream Directorate led by current Upstream Director, Zoe Yujnovich, while the Downstream business will combine with Renewables & Energy Solutions to form a new Downstream and Renewables Directorate led by current Downstream Director, Huibert Vigeveno.

According to Shell, an enhanced focus on performance and stronger capital and cost discipline will underpin higher shareholder distributions of 30-40 per cent of CFFO through the cycle, compared with 20-30 per cent previously, through a combination of dividends and share buybacks.

In addition, the company will raise the dividend per share by an expected 15 per cent, effective from the second quarter 2023 interim dividend, payable in September, and commence share buybacks of at least $5 billion for the second half of 2023, subject to its board’s approval.

“We need to continue to create profitable business models that can be scaled at pace to truly impact the decarbonisation of the global energy system. We will invest in the models that work – those with the highest returns that play to our strengths,” highlighted Sawan.