Shell to invest USD10-15B in low-carbon energy solutions to 2025
In an update to investors on June 14, 2023, Shell plc outlined plans to invest USD10-15 billion in the development of low-carbon energy solutions, including biofuels, hydrogen, electric vehicle charging and carbon capture and storage (CCS), by 2025. The investment is part of an effort by the British multinational oil and gas company to create “more value, with less emissions.”
In a statement, Shell emphasised it was making good progress towards its net zero emissions by 2050 goal. “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,” said Wael Sawan, Shell’s chief executive officer.
Shell reiterated its commitment to achieving its climate targets, noting that it will eliminate routine flaring from upstream operations by 2025, five years ahead of the World Bank’s Zero Routine Flaring 2030 initiative. However, the investor update follows reports of Shell abandoning plans to cut oil production by 1-2% per year until the end of the decade, angering climate activists. The company argues it has already achieved its self-imposed targets through asset sales.
The investor presentation outlined a stronger focus on performance and capital and cost discipline moving forward. A reduction in capital spending to USD22-25 billion per year for 2024 and 2025 is planned, alongside a USD2-3 billion decrease in annual operating costs. Shell detailed an increase in shareholder distributions of 30-40% of cash flow from operations (CFFO) funded through a 15% increase in the dividend per share from the second quarter, 2023, and a share buyback program of at least USD5 billion. The latter is still awaiting board approval, says Shell.
A balanced strategy includes continued investment in secure energy supply, optimising the value from investments while aiding customers in the transport and industry sectors to decarbonise, says Shell. The energy company highlighted plans to continue to grow its Integrated Gas business, drive cashflow longevity in upstream by stabilising liquids production to 2030, and 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.
Shell will repurpose its Energy and Chemicals Parks footprint to offer more low-carbon solutions, with the company signalling a strategic review of its Energy and Chemicals Park assets on Bukom and Jurong Island in Singapore, and further high-grading its European footprint.
Investments in hydrogen and CCS will occur in a disciplined manner, says Shell, with selective investments in power where there is potential for higher returns, while also using access to green electrons to enable growth in low-carbon energy solutions.