OPINION: Shell and other European oil majors have increasingly been trumpeting their plans to become leaders in the energy transition.

But upfront — and behind the scenes — there are deep tensions about the speed and the depth of that commitment to decarbonise.


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There is no blueprint for a fossil fuel company to gently morph into a giant of the electron world.

Denmark’s Dong Energy (since rebranded as Orsted) concluded last decade it had to sell off all its oil and gas assets and rebuild itself around wind power.

But it can be a more difficult transition to make for much larger players.

Shell and BP have their historic homes, respectively, in the Netherlands and the UK — both countries keen on renewables but which also have oil and gas coursing through their political and economic veins.

For oil companies themselves, the prize is to regain stock market relevance even with the oil price slowly recovering. The energy transition is unfolding at pace, and oil and gas companies must play an active part in it.

But the complexities of meeting future needs were on show last week as Shell outlined its latest strategy on how it intends to hit a net-zero emissions target.

Chief executive Ben van Beurden may be an effective communicator with a calm and convincing aura of confidence in Shell’s future success, but even he finds it difficult to provide concrete point-by-point details on how the company's business will be transformed.

Van Beurden is relying on a broad-brush strategy that he claims will match societal demands for decarbonisation with good financial returns for shareholders.

The pace of change at Shell will be relatively slow — with fossil fuels providing rewards to investors and simultaneously paying for the cost of transition.

Oil production will fall by 1% to 2% annually, while seven out of 13 refineries will be sold over 10 years.

Shell will increase production of liquefied natural gas, biofuels and hydrogen and “access” 25 million tonnes per annum of carbon capture and storage capacity by 2035.

Shell is not putting a figure on cutting upstream capacity. It is also not putting a gigawatt figure on renewable energy, saying it believes in quality, not quantity.

But there is a wider goal of cutting carbon emissions intensity to zero by 2050 and being a trader in electrons.

Shell — like other oil companies — has long derived much of its income from oil and gas trading but gives scant details of this in its financial statements.

It makes total sense for oil and gas majors to be heavily involved in trading all kinds of power units plus carbon, where markets are available.

A number of senior executives employed on the “green” side of the business have quit Shell in recent months after reportedly becoming frustrated at the slow pace of change at the company.

Van Beurden is walking a tightrope but he is continuing to be cautious and refusing to be rushed.

His counterpart at BP, Bernard Looney, is ahead of the green game but is taking a bigger gamble on executing faster change.

The wider concern for all oil companies surrounds a tipping point where the cash-rich Big Data groups take over the future electric economy.

Luxury car maker Jaguar has just announced plans to go all electric by 2025, and the Financial Times reported it was Apple — not Shell, or any other supermajor — that had talked to Nissan about future vehicles.

The future has already arrived. Oil and gas players need to jump in the driving seat.

(This is an Upstream opinion article.)