Shell admits its oil production is now in decline

“We need to offer our customers the products and services they want and need – products with the lowest environmental impact,” CEO Ben van Beurden said in a statement. “At the same time, we will use our established strengths to strengthen our competitive portfolio as we transition to a zero-net-zero company in line with the company.”

Shell’s shift from oil is another sign of the European industry’s accelerated transition to fossil fuels to avoid the worst consequences of global warming. It is also a historic movement for the company, which began in 1833 as an exporter of shellfish but entered oil and gas around the turn of the last century.

But after a brutal year marked by the worst oil crisis in decades, the company and its European rivals – unlike the big US oil companies – have acted aggressively to prepare for a more low-carbon future. BP, Shell and Total have set net zero emissions targets and are investing money in solar and wind projects under pressure from investors, government regulators and the public to fight global warming.

CLOSED: Shell to lay off nearly 700 workers in Louisiana after refinery closes

Paris-based Total recently announced that it plans to develop 16 solar projects in the United States, including four in the Houston area, as it creates a portfolio with renewables and electricity producing up to 40 % of sales by 2050. London-based BP last year sold its petrochemicals and is investing in US wind farms while hoping to cut oil production by 40% over the next decade.

Yet neither has been as clear as Shell about the implication of net zero policies for the fossil fuel sector. Experts have long debated the timing of peak oil, when oil production will peak and decline continuously. Shell said on Thursday that its oil production will fall by 2% per year until 2030, when its production of petroleum-based fuels will be nearly half of current levels.

“Oil companies once feared peak oil supplies and focused on their growth prospects,” said Mark Finley, energy economist at the Baker Institute for Public Policy at Rice University. “Today, these companies boast of their own advanced oil supply.”

Europe’s largest oil companies recognize that they will need to cut back on crude production over the next few decades to achieve their net zero ambitions. They also trade higher returns for a clean energy company that is not beholden to geopolitical conflicts or as sensitive to a volatile commodity market.

Across the Atlantic, US oil majors such as Exxon Mobil and Chevron have been slower to embark on the energy transition, betting that the growing global population will continue to fuel demand for oil and gas. as it has done over the past century. Instead of delving into alternative energy sources, America’s oil giants are focusing on tailoring oil and gas operations to capture carbon emissions and make them commercially viable.

Pushed forward: Peak oil could arrive in 2028 due to pandemic

Although Shell will eventually abandon its oil business, it plans to continue investing in natural gas, considered cleaner than coal and crude. The company said it hopes to use its oil and gas business to generate the capital needed to start a “large-scale” low-carbon business by the early 2030s.

In the short term, the company said it would spend around $ 8 billion per year on oil and gas exploration, while spending up to $ 9 billion per year on its natural gas and petrochemicals business. At the same time, it is investing in carbon capture technology to reduce the environmental effects of its oil and gas operations. The company has three ongoing carbon capture projects with a total capacity of approximately 4.5 million tonnes.

Shell also plans to grow its global electric vehicle charging network to around 500,000 points of sale by 2025, from more than 60,000 existing charging points, to support the expected rise in electric vehicles.

Ultimately, Shell said its transition efforts would reduce its greenhouse gas emissions by 20% by 2030, 45% by 2035 and 100% by 2050, from 2016 levels. The company said its carbon emissions likely peaked in 2018.

David Rabley, chief executive of consulting firm Accenture, said that while renewables and alternative energy sources have yet to achieve large-scale economic viability, oil companies focused on energy transition and reducing fuel costs. emissions will be better able to overlap the energy transition than those that do not.

“It is not true that good environmental performance has to come at the expense of good financial performance,” said Rabley. “Those with the best carbon emission rates also have better financial resilience.”