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Shell expects 80% of oil and gas reserves to be produced before 2030

The publication also comes a week after Milieudefensie Shell wants to launch a climate case against the company, because it wants to hold Shell accountable for contributing to dangerous climate change.

Shell expects 80% of oil and gas reserves to be produced before 2030

Printed below is an English translation of an article published 12 April 2018 by the Dutch Financial Times, Financieele Dagblad

Bert van Dijk • Entrepreneurship

Shell considers the risk of a large part of its oil and gas reserves to remain in the ground (‘stranded assets’) because production will no longer be in line with climate targets.

In the Shell Energy Transition Report published on Thursday, in which the company outlines how resilient the company is in the current transition from fossil fuels to sustainable energy, Shell writes that about 80% of all oil and gas reserves of the company will be produced before 2030. The remaining 20% ​​after that year, according to the report.

‘We come to the conclusion that there is a low risk that Shell will have “stranded assets” or reserves that we will not be able to produce profitably in the medium term, “according to the report.

Climate business

With the report, Shell claims to respond to questions from shareholders, governments and NGOs about what the energy transition means for Shell. It also follows discussions with the Financial Stability Board’s TaskForce on Climate-related Financial Disclosures, which calls on companies to be more open about climate-related risks and opportunities.

The publication also comes a week after Milieudefensie Shell wants to launch a climate case against the company, because it wants to hold Shell accountable for contributing to dangerous climate change.

Investments in new oil and gas

The oil and gas multinational states in the report that it welcomes and supports the Paris climate agreement, but at the same time states that it intends to produce oil and gas for decades. ‘We expect to continue investing in maintaining the oil and gas supply to meet the growing demand for energy in the world’, Shell CEO Ben van Beurden writes in the report.

CO₂ price up, cash flow down

If the company wants to achieve the Paris targets, Shell expects that CO₂ emissions in 2070 should be net zero. CO₂ is then emitted, but it is then collected and stored or, for example, compensated. ‘ This requires the world to drastically reduce the amount of CO₂ per unit of energy produced in 2050. ‘ Shell itself aims for a halving in 2050.

Shell hopes to limit the financial consequences of an increasing price for CO₂. Because for every $ 10 increase in the price of a tonne of CO₂, Shell’s cash flow before tax decreases by about $ 1 billion, as the company has calculated.

New Energies

Van Beurden announced at the end of last year that the investments for the new business unit New Energies, in which the more sustainable forms of energy of Shell are bundled, are doubling to $ 2 billion per year until 2020.

In the report published on Tuesday, Shell nuances it to “between $ 1 billion and $ 2 billion”. Most of that money goes to the electricity sector, where Shell wants to invest in order to gain access to customers and in power generation by solar, wind and gas.

Investments in the electricity market must yield at least 8%

The company points to the rapid cost reductions in solar and wind energy, which make it attractive to invest, but at the same time regulatory uncertainty in a number of electricity markets leads to uncertain long-term revenues.

In order to avoid this uncertainty, Shell only wants to invest in projects that are already profitable. For example, Shell requires returns of at least 8% -12% in the electricity market and investments in biofuels that are comparable to those in the current downstream branch (refining and selling of fuels) of the company.

Shareholders

The stringent return requirements are meant to keep shareholders happy. The first of Shell’s three strategic ambitions is still to achieve the best total shareholder return (price gain and dividend per share) for its shareholders in the oil and gas sector, according to the report.

SOURCE

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