• Thu. Mar 30th, 2023

    Shell restates commitment to projects to realize its 2050 energy transition agenda


    Mar 9, 2023

    Shell Group says it would continue to pursue the execution of projects that would allow the transfer from fossil fuels exploration and development to realize the energy transition agenda.

    The Chair of the Group, Andrew Mackenzie, said his message contained in the company’s annual report and accounts published on Thursday that despite its drive to develop low- and zero-carbon products, Shell must find ways to provide oil products with lower net carbon impact.

    He said Shell was determined to continue to efficiently and sustainably produce oil-based products that do not require burning in their use, such as lubricants and essential plastics.

    “We are focusing on chemical recycling where we break down hard-to-recycle plastics into raw materials through a technique called pyrolysis. The pyrolysis oil can then be used as feedstock in our chemical plants, replacing traditional hydrocarbon feedstock.

    To realize the target of the highest returns with the lowest emissions, Mackenzie said Shell would apply firm capital discipline in budgeting for carbon.

    The company’s carbon management framework (CMF), which allocates a carbon budget to the operating plans of its businesses, began in 2022, targeted at returning the highest value within a given carbon and capital budget.

    He said the CMF approach was working, resulting in the reduction of carbon emissions from the company’s operations by 30 percent by the end of 2022, well over halfway towards the target of 50 percent reduction by 2030.

    Despite the challenge of providing secure supplies of energy while transforming for a net-zero future, the Shell Chair stressed the importance of the Board to ensure the company’s governance was firmly in place and highly effective to guide management to move quickly when the opportunity comes.

    In his review, the Chief Executive Officer, Wael Sawan, said the current realities of the global environment has reinforced the need for a balanced energy transition.

    He said the Russia-Ukraine war, which has been raging over the last one year and threatening the security of Europe.

    Following the crisis, he said Shell was compelled to announce plans to withdraw from the Russian oil and gas activities in a phased manner, in line with government guidance.

    In 2022, he said the crisis resulted in the reduction of gas supply from Russia following an accelerated surge in global energy prices, which pushed up the cost of almost everything for households, industry, and businesses.

    Apart from acquiring two floating regasification facilities by the end of the year, the CEO said Shell also used its strength as a global energy producer and supplier to deliver 194 cargoes of liquefied natural gas to Europe and the UK – almost five times the usual average – and helped countries like Germany and Austria ensure they had enough energy storage ahead of their winter.

    Again, with the recent tragic aftermath of devastating earthquakes in Turkey and Syria, he said Shell has taken steps to support the effort to keep fuel supplies flowing to help relief efforts and keep hospitals operating.

    “The stark realities we are seeing globally reinforce the need for a balanced energy transition. They also show that our Powering Progress strategy is the right one: delivering secure and affordable energy with increasingly lower emissions. We must do this profitably as we help build the net-zero energy system of the future,” the CEO said.

    On generating shareholder value, Sawan said the Group realised an income of around $43 billion in 2022, with the highest-ever Adjusted Earnings of around $40 billion.

    Attributing the earnings to the global business environment for energy producers, the CEO said the company’s Adjusted Earnings were still around $17 billion higher than in 2014, when Brent prices were at similar levels.

    With a cash flow from operations of more than $68 billion, he said this allowed the company to increase its distribution to shareholders and returns of around $26 billion through share buybacks and dividends, which was more than 35 percent of cash flow from operations.

    “We are also preparing for the future by seizing the opportunities presented by the energy transition. Shell takes a dynamic approach to its portfolio by continuing to provide the energy the world needs and increasing our investments in low- and zero-carbon energy products and services.

    “We aim to generate value for shareholders by providing sustainable distributions through our progressive dividend policy and share buyback programmes,” he said.

    On the company’s performance, he said the company generated $68.4 billion revenue from its operating activities, with capital expenditure at $24.8 billion and total shareholder distributions at $25.8 billion, while net debt was reduced to $44.8 billion as at December 31, 2022.

    On achieving net-zero emissions, he said the company has a long-term target to become a net-zero emissions energy business by 2050, covering emissions from company operations, emissions from the energy the company buys to run its operations, and emissions from its customers’ use of the energy products the company sells.

    Besides, he said the company also targets to reduce the net carbon intensity of the energy products its sells, including targets of a 6-8% reduction by the end of 2023, a 9-12% reduction by the end of 2024, and a 9-13% reduction by the end of 2025.

    “Our medium- and longer-term targets are to reduce by 20% by 2030, by 45% by 2035 and 100% by 2050. We achieved our target of a 3-4% reduction by the end of 2022. We also have an absolute emissions reduction target of 50% emissions under Shell’s operational control by 2030 on a net basis.

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