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Shell: ‘The energy transition gives power back to the customer’

Printed below is an English translation of an article published today by the Dutch Financial Times, Financieele Dagblad. 

Maarten Wetselaar: There has been a period of thirty years in which the industry and we also only talked about the largest oil platforms that were built and the deepest wells that were drilled.’ Photo: Michel de Groot

‘The energy transition gives power back to the customer’

Bert van Dijk: Energy: 12 Sept 2018

ShellRDSA € 27.85 + 1.05% is still an oil and gas multinational, but is sorting for a future in which it will become one of the largest electricity companies. ‘We are faced with a revolution’, says Maarten Wetselaar, member of the Executive Board of Shell in an interview with the FD. He is responsible, among other things, for the New Energies division that was established two years ago.

The 49-year old Wetselaar, who has been employed by Shell for more than 20 years, outlines the contours of the new Shell. The company expects hundreds of new jobs in the field of new CO₂-poor forms of energy to emerge in the coming years. And no, the company does not stop with the extraction of oil and gas, but Shell is planning to play a major role in the market for electricity in the coming years.

Molecules become electrons

‘The energy market is very static. Forty years ago 80% of all energy was fossil and that is still the case today. But in the next twenty to thirty years a revolution will take place there. We go from an energy system dominated by molecules to an energy system that is dominated by electrons. ‘

Wetselaar expects that the share of electricity in the energy system will increase to 50% to 60%. ‘Electricity will therefore increase three times in an expectedly doubling energy market. We want to be a leading energy company in all areas and if the largest segment in energy is electricity, then we want to lead that.’

Supply and demand become more mobile

Shell has also devised the corresponding business model: integration. ‘We want to be present throughout the chain. The demand and supply of electricity will become much more mobile in the coming years. The margin in the chain is therefore not always in the same place. Sometimes the margin lies with the customer, sometimes with the generation of electricity. So if you want to be in a sector for the long term, it is useful to be present everywhere. ‘

This does not necessarily mean that Shell wants to produce as much electricity as it wants to sell. ‘No, in fact we see the same model as in oil. We sell three times as much oil every year as we produce ourselves. We also see something like that on the power side. It is important to be in a wind and sun project, but very often 20% is enough. ‘

More and more self-confidence

It partly explains why the annual investments in New Energies from $ 1 billion to $ 2 billion are still relatively modest in relation to Shell’s total investment budget of about $ 25 billion.

‘$ 1 billion to $ 2 billion is still more than any Dutch company invests in new energy and we are one of the biggest in Europe in this area’, says Wetselaar. “And I am convinced that if we really want to make a fourth big activity in addition to oil, gas and chemistry, the” commitment “must eventually go up. But we must first become good at it. We are getting more and more self-confidence, but not so much that we will quadruple the budget next year. ‘

First Utility

In the coming years, Shells’ flow strategy must be rolled out by, as Wetselaar calls it, ‘putting the pieces together’. In the United States, Shell says it is furthest. ‘There we have a large portfolio of power production and a large customer base.’

‘In England, we bought the electricity utility First Utility, which does not have its own power plants. We now have to add the electricity generation to that. In the Netherlands we have done more for the time being in producing electricity with our wind farm Borssele, wind farm Noordzeewind and with our solar park in Moerdijk. So we will have to stick the customer side to that. ‘

Buyer of Eneco?

Shell is invariably mentioned in the corridors as a buyer of Eneco, which has a large customer base. “I can not respond specifically to this. But companies with clean electricity generation and large customer databases are interesting for us. We look for opportunities in all markets. And undoubtedly we will do things there, because otherwise we will not grow fast enough. ‘

In its strategy, Shell goes much more towards a direct relationship with the consumer. ‘As a company, we used to be a marketing company. Only in the seventies did that change. Then there was so much surplus to oil and gas production pushed because the Opec artificially held high the price that the fascination of the industry. There has been a period of thirty years in which the industry and we also only talked about the largest oil platforms that were built and the deepest wells that were drilled. The energy transition gives power back to the customer. In that respect, the circle is round again and the story of Shell becomes a customer story again. ‘

Closer to the customer, marketing, you as a company need a strong image. And Shell’s image is, to say the least, not equally positive for everyone. That also recognizes Wetselaar. ‘But we still have thirty million customers who buy petrol and diesel from us every day. Not everyone has the same emotion about us. But we can not be passive. We have to come up with new solutions to tempt people to make their lives more carbon-neutral. ‘

Reforestation

Such a solution is very low-tech. ‘Two weeks ago we signed an agreement with the Malaysian part of Borneo to jointly investigate how we can generate CO₂ credits together with reforestation on a large scale. Not a few, but really on an industrial scale. If the price in Europe is € 25, like now, instead of € 6, then such a project suddenly looks much better. We are one of the largest emission trading traders in the world. And that is a much nicer market now than a few years ago ‘, Wetselaar notes with satisfaction.

Shell wants future customers to offer refueling to compensate CO₂ emissions after each refueling.

MAIN TEXT ENDS

In brief

  • Shell will not say goodbye to oil and gas in the coming years, but it will sort in an important position on the electricity market.
  • Where electricity now accounts for 20% of the total global energy system, this will be 50% to 60% in the future.
  • The company invests $ 1 billion to $ 2 billion a year in, among other things, the development of hydrogen, biofuels, wind and solar energy and other new green energy technologies.
  • Geothermal energy, nuclear energy or the production of wind turbines, solar panels and batteries are left behind by the company. 

No windmills or batteries, no nuclear power and no geothermics

Wind, sun, reforestation, integration with gas, hydrogen, smart sensors and software to link fluctuating supply and demand as well and profitably as possible. Shell invests all of it. Nevertheless, there are a number of market segments in the area of ​​CO₂-poor technologies that Shell deliberately ignores.

The production of windmills, solar panels or batteries for example. In 2016, French Total bought more than $ 1 billion Saft, a large battery manufacturer. Shell does not take that route. “No, making things, we are not good at that. We leave that to the Chinese. We did it once and that was a disaster, “said Wetselaar.

In the seventies, Shell was active in nuclear energy. Wetselaar: ‘We got off there confidently.’

The company has looked at geothermal energy. ‘There are some logical points of contact with which we are good at. We do not think it’s big enough for us. When we do things, we do them either on a scale or not. Geothermics is a very local and relatively small-scale solution. We have deliberately chosen not to use it.’

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