Oil patch insider: Shell CEO says major to continue O&G investment, risky not to
Rebecca Logan picked up an interesting Reuters article for the Alliance’s Oct. 15 AK Headlamp, in which Royal Dutch Shell’s CEO was quoted as saying there are ample opportunities to make money from oil and gas in the decades ahead.
Ben van Beurden, who became a prominent industry action advocate on global warming following the 2015 Paris climate agreement, expressed concern that some shareholders might abandon the big energy company due in part to what he described as the unjustified “demonization” of oil and gas.
Shell “set out in 2017 a plan to halve the intensity of its greenhouse emissions by the middle of the century,” Reuters reporters Ron Bousso and Dmitry Zhannikov wrote in the Oct. 14 article.
Nonetheless, they reported, the amount of carbon dioxide emitted from Shell’s operations and products rose by 2.5% between 2017 and 2018.
In an exclusive interview with the Dutch CEO in London, a “defiant” van Beurden rejected increasing complaints from climate activists and elements in the investor community to transform the 112-year-old company’s traditional business model, Reuters wrote.
“Despite what a lot of activists say, it is entirely legitimate to invest in oil and gas because the world demands it,” van Beurden said, noting Shell has “no choice” but to invest in long-life projects.
Shell plans to approve more than 35 new oil and gas projects by 2025, according to an investor presentation from June, the article said.
“We can sustain an upstream portfolio all the way into the 2030s if there is an economic rationale for doing that and a societal rationale for doing that,” van Beurden was quoted as saying.
“Fortunately enough, we have more of those than we have money to spend on them.”
Van Beurden rejected arguments that Shell’s oil and gas reserves would become economically unviable, or stranded, in the future.
Rather, his position is that a lack of investment in oil and gas projects could lead to a supply shortage and spikes in oil prices.
“One of the bigger risks is not so much that we will become dinosaurs because we are still investing in oil and gas when there is no need for it anymore. A bigger risk is prematurely turning your back on oil and gas,” he said.
Shell plans to increase its annual capital expenditures to $32 billion by 2025 from the current $25 billion, Reuters reported, with up to 10% earmarked for renewables and the power business.
LNG long-term future brightRegarding liquefied natural gas, in which Shell is the world’s biggest trader, van Beurden told Reuters the market would exhibit oversupply in the near term: “But (LNG) demand will continue to grow at a pace that is roughly four times that of oil.”
According to the article, Shell has become a “focal point of environmental protests, particularly in Europe, with regular demonstrations outside its London headquarters and the British National Theatre dropping Shell’s sponsorship in recent months.”
Van Beurden put the responsibility for achieving a transformation to low-carbon economies on governments, saying not enough progress has been made to reach the Paris climate goal of limiting global warming to “well below 2 degrees Celsius above pre-industrial levels” by the end of this century, Reuters reported.
“Can that happen? I think it can ... Increasingly society is not putting up with the fact we are not making enough progress,” van Beurden said.
- Kay Cashman