By Barney Smith
It is often said that the only people who really have the money to make the sort of difference necessary to achieve what change the climate requires are the Oil and Gas companies, like Shell, TotalEnergies and BP. If so, it follows that the outcome of their meetings become even more crucial. So it is of the first importance that “Powering Progress”, a detailed report on 2021 has been produced in-house by Shell for the Annual General Meeting (AGM) later this month. Inter alia it highlights the company’s response to Global Warming and the Russian attack on Ukraine (after an initial error, estimates are perhaps of a cost of $3 billion)
To begin with, it must be recognised that Shell have changed their formal structure in two important respects: firstly, in December 2021 its previous rather complicated dual management arrangements was changed to a more simplified single UK-based structure; secondly, from the start of 2022, one of the new sub-sets of reporting will be “Renewables and Energy Solutions” (R&ES),….investing in those [solutions] where we believe sufficient commercial value is available.”
This change in reporting may reflect very considerable internal upheaval. But the quick external view is surely that increased visibility for renewables is to be seen as a minimum, not as a source of great satisfaction, particularly as the new R & ES division includes Shell’s “production and marketing of hydrogen, nature and environmental solutions, as well as our integrated power activities.” Incidentally, page 49 of the report tells us that in 2021 total cash capital expenditure in R&ES amounted to $2.4 billion (out of a total of rather over $20 billion – see page 15). It is not for Greenbarrel to decide whether this is an acceptable percentage.
But, it is also striking that the strategy validated by the shareholders at the AGM in 2021 at several points emphasises the need to stay “… in step with society and our customers” in the transition to the goal of carbon neutrality by 2050. Only prudent, you may say. Agreed, but still prudent. It might suggest that, for the purposes of the energy transition, Shell sees itself as a large tanker which manoeuvres and changes course only carefully and in search of profit. “….Powering Progress, sets out a comprehensive strategy on how Shell intends to decarbonise energy customers, while running legacy businesses for value rather than for volume.”
Yet while all major oil and gas companies are united in saying that they are engaged in the transition to becoming Energy companies with net-zero emissions by 2050, they are also markedly different in their make-up. Shell, for example, is a leader in Liquefied Natural Gas (LNG), but less of a leader in renewables. (The position on renewables is complicated by the fact that there are not all that many large, low-risk, renewables projects waiting around for finance.)
What seems to be clear is that the company is interested in the non-renewables side of the transition as well. The Shell report states that “An important aim of our Powering Progress strategy….is that we reduce our global production of traditional fuels by 55 per cent by 2030”. Page 11 of the report goes on to highlight two specific projects: firstly, in Rotterdam one of Europe’s biggest biofuel facilities is being built which should start producing in 2024, making up to 820,000 tonnes of biofuel a year, to be sold as sustainable aviation fuel and biodiesel. This feeds into the company’s ambition of producing around 2 million tonnes of sustainable aviation fuel a year by 2025.
Secondly, Shell plans to establish in Singapore a new plant to upgrade the quality of pyrolysis oil made from hard-to-recycle plastic that would otherwise go to landfill. “…We expect the pyrolysis oil upgrade to start production in 2023 and be the largest in Asia.” This will help towards the company’s “Aim of [profitably] processing 1 million tonnes of plastic waste in our global chemicals plants by 2025”.
But the report is also not immune to the concerns of the ordinary man in the street: page 67 deals with the need for adequate refuelling facilities for electric cars.