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Shell to make electricity 'fourth pillar of business'

London — Shell on Thursday published a report entitled "Energy Transition," showing how the company expects to adapt during the transition to low carbon energy systems.

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The company says it wants electricity "including from renewable sources ...to become the fourth pillar of our business, alongside oil, gas and chemicals." The company says it wants to be involved in all elements of the electricity supply chain from generation and trading to the supply of electricity to end-users.

Shell already manages 10 GW of power across North America and last year acquired First Utility, a provider of electricity to 825,000 households in the UK.

Electric transportation is an integral part of the strategy. In this sector, Shell last year bought Dutch recharging network company New Motion, and is introducing charging points at its gasoline station forecourts in the UK.



The company says it expects to invest $1 billion-$2 billion a year on average until 2020 in "New Energies," the largest part of which will be in power, to gain access to customers, and in generation from wind, solar and natural gas.

Shell's total capital investment in 2017 was $13.6 billion, following $47.5 billion in 2016, which included the acquisition of BG, according to its 2017 annual report.

The Energy Transition report reiterates Shell's position that global oil and gas demand will continue to rise out to 2030, and that even under a rapid transition pathway, investment in new oil and gas production will remain essential to meeting energy demand.

The company says there is a low risk of it having stranded assets, or holding reserves from which it cannot produce economically in the medium term.

Shell expects that its production of oil and gas will shift in favor of the latter, cleaner-burning fuel, stating that it expects a move from a current 50/50 ratio to 75% gas and 25% oil production by 2050.

Connected to this are a number of investments in LNG as a road and maritime transport fuel. LNG is identified as the fastest growing segment of the gas industry.

The overall aim outlined in the report is to halve the net carbon footprint of the company's energy products by 2050, with an interim target of a 20% reduction by 2035. Most of the emissions reductions will result from changes in Shell's products portfolio after 2030.

The company provides a number of examples of its long-term ambition, such as "selling the output from 200 large offshore wind farms the size of our planned Borssele wind farm in the North Sea."

This is something Shell "could" do and does not appear to be an actual commitment to invest in 200 offshore wind farms. Borselle is 700 MW and Shell sold half of its 40% stake to Switzerland's Partners Group Holding in January.

Other examples are in a similar vein: "selling enough electricity on our forecourts around the world to meet three times the total demand for power in the Netherlands." Power demand in the Netherlands was 114.7 TWh in 2016, according to BP's Statistical Review of World Energy.

Similarly, with biofuels, Shell could be "selling the fuel produced by 25 biofuel companies the size of our joint venture Raizen in Brazil."

Raizen, in which Shell has a 50% interest, produces about 2 billion liters of sugarcane ethanol a year. Its advanced biofuels plant produces 10 million liters a year from sugar cane residues. Shell has also invested in a waste-to-fuel demonstration project in India.

The company envisages 20 carbon capture and storage plants by 2050 the size its Quest CCS plant in Canada, which stored 2 million mt of CO2 in its first two years of operation.

To create carbon sinks, it also envisages planting trees over an area the size of Spain (505,990 square km).

--Ross McCracken, ross.mccracken@spglobal.com