Shell, one of the world’s largest oil companies, has made a significant strategic shift by opting to maximise profits and prioritise shareholder returns over a previously planned gradual reduction of oil production.
In an announcement made today (June 14), Shell unveiled its updated strategy, detailing its intention to “stabilise liquids production until 2030.” According to the statement, this move aims to extend the company’s competitive position and ensure “cash flow longevity.”
The new approach contrasts the commitments set by former CEO Ben van Beurden in 2021, who had aimed to reduce the production of “traditional fuels” by 55% before 2030. Van Beurden’s plan involved an annual decrease of 1-2% throughout the 2020s.
Wael Sawan, who took over as CEO in September, commented on this change by stating, “We are investing to provide the secure energy customers need today and for a long time to come, while transforming Shell to win in a low-carbon future.
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“We need to continue to create profitable business models that can be scaled at pace to truly impact the decarbonisation of the global energy system. We will invest in the models that work – those with the highest returns that play to our strengths.”
Despite the new approach, Sawan reiterated the company’s commitment to achieving net zero carbon emissions by 2050. However, Shell acknowledged that reaching this goal might prove challenging, stating that “if society is not net zero in 2050, as of today, there would be significant risk that Shell may not meet this target.”
As part of its revised strategy, Shell plans to allocate between $10 billion (£7.8bn) and $15 billion (£11.8bn) from 2023 to 2025 to “low-carbon” initiatives, which include biofuels, hydrogen, electric vehicle charging, and carbon capture and storage projects.
Moreover, the oil giant unveiled its intention to increase dividends by 15% and return $5 billion (£4bn) to shareholders through a share buyback program, pending Board approval.
According to Shell, this strategic shift aims to strike a balance between meeting the immediate energy demands of customers while pursuing profitable business models that contribute to the long-term decarbonisation of the global energy system.
