Anglo-Dutch supermajor Shell has vowed to accelerate cuts in the carbon intensity of its business by embracing more ambitious and comprehensive targets that include emissions from all the products it sells.
Announcing a long-awaited roadmap of how it intends to adapt to the energy transition, Shell on Thursday unveiled more ambitious near and longer-terms goals to cut its carbon intensity by between 6% and 8% by 2023, 20% by 2030, 45% by 2035 and 100% by 2050.
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This is an increase on the previous targets set last year of achieving a 30% cut by 2035 and 65% cut by 2050.
Chief executive Ben van Beurden stressed the new targets would be “more comprehensive”, covering not only emissions from Shell's own operations but also the energy from the products it sells.
This covers so-called Scope 3 emissions, which also includes emissions from the oil and gas other companies produce but that Shell sells as products.
The oil and gas giant said its total carbon emissions hit 1.7 gigatonnes per annum in 2018 and will not go any higher in future.
Shell said it could achieve its goals and satisfying investor demands, including increasing dividend payments to shareholders by 4% annually.
Capital spending is to be kept at $19 billion to $22 billion per annum in the near term and Shell plans to cut net debt to $65 billion.
Operating expenses in the near-term will be no higher than $35 billion and Shell will sell about $4 billion of assets each year.
Three pillars
The spending will be split around a rebalanced portfolio featuring three "pillars" — “growth”, “transition” and the traditional upstream business.
The “growth” pillar will see annual investments of $2 billion to $3 billion in renewable energy and about $3 billion of annual spending on Shell's customer-facing marketing business, which includes lubricants, retail and vehicle charging.
The “transition” pillar includes investment of about $4 billion per annum in the integrated gas unit and will also attract $4 billion to $5 billion per year in spending on chemicals and products.
Spending in the upstream sector will be maintained at $8 billion per annum, which will fund the transition and the bulk of investor returns well into the 2030s.
Shell also confirmed its oil production reached its highest level in 2019 and that it expects this to fall from now on by 1% to 2% per annum, both from natural field declines and from asset sales.
Shell said it aims to build a low-carbon business of “significant scale” by the 2030s, selling some 560 terawatts hours per annum of electricity by 2030, twice as much as it does now.
It is also seeking access to an additional 25 million tonnes per annum of carbon, capture and storage capacity by 2035.
Shell is currently involved in three CCS projects: Quest in Canada, which is already operational; the under-development Northern Lights project in Norway; and the planned Porthos project in the Netherlands.
Shell also wants to boost “nature-based” schemes to offset carbon output, such as large-scale tree planting, which could capture 120 million tonnes per year by 2030.
Van Beurden said nature-based offset solutions could grow to 300 million tonnes per annum eventually.
'Value for shareholders'
Van Beurden said: "The world is changing, we will change too."
He added: “Our accelerated strategy will drive down carbon emissions and will deliver value for our shareholders, our customers and wider society.
“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.”
He speculated that by 2050 all of Shell's cash flows could come from serving customers with net zero energy solutions.
"Our energy product mix will be dominated by low and no carbon energy such as renewable power, biofuels and hydrogen," he said.
Analysts at Jefferies said: "Shell's strategy announcement today does not introduce significant changes in its energy transition strategy. The most material change is on the carbon emission side, with the introduction of one of the most stringent carbon reduction plans in the sector.
"How this will be achieved remains partially unclear, based on the limited low-carbon growth targets provided. The outlook around cash flow and shareholder remuneration remains unchanged."
'Grotesque' and 'delusional' - Greenpeace
Reacting to the announcement, environmental group Greenpeace labelled Shell's plan "grotesque", arguing that what it sees as the "customer first" strategy "seeks to blame customers first for climate change".
Mel Evans, head of Greenpeace UK's oil campaign, continued: "“Shell ... brazenly says it will dodge oil production cuts and will simply let output dwindle.
“Without commitments to reduce absolute emissions by making actual oil production cuts, this new strategy can’t succeed nor can it be taken seriously."
Evans argued that the oil giant's plans "include a delusional reliance on tree-planting".
“Communities around the world have been flooded, while others are on fire. Governments are upping their commitments on renewables, while competitors are pivoting — but Shell’s big plan is to self-destruct and take the planet down with it," Evans argued.
