Tuesday, October 15, 2019

Shell's Hell

Royal Dutch 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.

 Shell still sees abundant opportunity to make money from oil and gas in coming decades even as investors and governments increase pressure on energy companies over climate change, its chief executive said. Ben van Beurden expressed concern that some shareholders could abandon the world’s second-largest listed energy company due partly to what he called the “demonisation” of oil and gas and “unjustified” worries that its business model was unsustainable.

Van Beurden rejected a rising chorus from climate activists and parts of the investor community to transform radically the 112-year-old Anglo-Dutch company’s traditional business model. “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. “We have no choice” but to invest in long-life projects, he added. 

Shell plans to greenlight more than 35 new oil and gas projects by 2025, according to an investor presentation from June. Oil and gas remain the backbone of profits for Shell, the largest listed company on London's main FTSE index. Many oil and gas projects such as gas-processing plants, deepwater platforms or chemical plants take billions of dollars to develop and operate for decades. Shell plans to increase its annual spending to around $32 billion by 2025 from the current $25 billion, with up to one tenth allocated to renewables and the power business. On liquefied natural gas, of which Shell is the world’s biggest trader, van Beurden said 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,” he said. 

Van Beurden expressed concern that some investors could ditch Shell, acknowledging that shares in the company were trading at a discount partly due to “societal risk”.
“I am afraid of that, to be honest,” he said.“But I don’t think they will flee for the justified concern of stranded assets…It is the continued pressure on our sector, in some cases to the point of demonisation, that scares asset managers. It is not at a scale that the alarm bells are ringing, but it is an unhealthy trend.” 

Van Beurden put the onus for achieving a transformation to low-carbon economies on governments, warning that not enough progress had 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 the century.

Shell, which supplies around 3% of the world’s energy, set out in 2017 a plan to halve the intensity of its greenhouse emissions by the middle of the century. Still, the amount of carbon dioxide emitted from Shell’s operations and the products it sells rose by 2.5% between 2017 and 2018. 

Greenpeace activists boarded two Royal Dutch Shell oil platforms,  Brent Alpha platform and the Brent Bravo, in the North Sea  in protest against plans to leave parts of the giant structures in place after production shuts down. Shell is in the process of decommissioning and dismantling the 40-year-old Brent field east of the Shetland islands.  And is currently seeking approval from the British government to leave in place their bases - huge concrete and steel legs that each weigh dozens of tonnes. 

“The UK government cannot claim to be a global oceans champion while allowing Shell to dump thousands of tonnes of oil waste in the North Sea,” Doug Parr, Greenpeace UK’s chief scientist, said in a statement. “If ministers allow Shell to bend the rules, this will set a dangerous precedent for the decommissioning of hundreds of ageing North Sea platforms in the coming years.”


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