Anglo-Dutch energy company Royal Dutch Shell pledged to cut its carbon emissions to net-zero by 2050 as part of a major overhaul to expand its renewables and low-carbon operations, including hydrogen and biofuels. However, Shell said that oil and gas would receive a bulk of its spending in the near future. Shell expects a return on investment of 6%-9% from renewable projects, well below the 15% in fossil fuel projects. However, the company’s complex marketing and trading units could lift renewable returns to about 10%.
The retail business will be the central pieces of Shell’s growth strategy. It operates 46,000 refill stations today and plans to increase the number to 55,000 by 2025. Shell also intends to add electric vehicle charging points from 60,000 to 500,000 over the same period. Shell also aims to sell 560 TWh of power annually in 2030. However, it did not outline expansion plans of its wind and solar power generation capacity.
Shell will split evenly its $5 billion a year investment for its trading, renewable, and retail businesses. Its upstream oil and gas business will receive $8 billion. It also plans to spend $4 billion on its LNG business and up to $5 billion on refining and chemicals operations. Its total annual capex is expected to be steady within a range of $19 to $22 billion.
Shell’s carbon neutrality target also includes emissions from end-users, making it one of the most ambitious in the sector. The company’s peak emissions reached 1.7 gigatons in 2018. It estimated that its oil output had peaked at around 1.8 million bpd in 2019, and is expected to fall 1% to 2% annually. Shell plans to reduce its net carbon intensity from the 2016 baseline by 6%-8% in 2023. The target will be intensified gradually from 20% reduction by 2030 to 45% by 2035 and 100% by 2050.
