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Financial Review: ‘Dramatic but doable’: Shell CEO on climate challenge

Ben van Beurden suggested Shell could work with Australia to press for credits for low-carbon LNG exports.

Angela Macdonald-Smith: Senior Resources Writer:

Shell’s global chief executive Ben van Beurden has declared a global carbon price of about $US250 a tonne and “tens of thousands” of carbon capture and storage plants would be needed for the world to keep within the 2 degree warming goal.

Nature-based carbon offsets “to the tune of the Amazon” and a “massive” electrification of energy supply would also be needed he said in Sydney, ahead of a meeting with Prime Minister Scott Morrison where energy and climate policy – and the troubled east coast gas market – were set to be discussed.

“The things that are going to be needed to stay within that 2 degrees Celsius envelope are quite dramatic but doable,” said Mr van Beurden, adding that Australia wasn’t alone in falling behind on what was needed given current commitments put the world on track for warming of 3 or 4 degrees.

The Anglo-Dutch company, among Australia’s biggest foreign investors, has been a vocal advocate for the Paris accord and a carbon price and has called for more ambitious targets on emissions reductions.

Mr van Beurden’s remarks show the scale of the challenge Australia faces to meet its climate commitments given the nation’s dependence on fossil fuels and energy intensive industries.

“We have to find a way to get there,” said Mr van Beurden, who is in Australia to celebrate the start-up of Shell’s massive Prelude floating LNG plant off the north-west coast.

Energy transition

Mr van Beurden said the pointers and incentives were all there for Australia’s energy transition, given the upcoming closure of coal power plants and the cost competitiveness of renewables, but he acknowledged the difficulties faced by government on policy.

“I’m sure the way the government will have to implement this is going to be a delicate process because it’s a very noisy space,” he said, adding that Shell could help in advocacy, investment and policy support.

Mr van Beurden singled out the issue around accounting for carbon emissions from the production of LNG as one where he saw strong overlapping interests between Australia and Shell and one where they could work together.

National accounting for emissions is problematic for LNG exporters, which have been on the back foot arguing that the contribution of the fuel towards emissions reduction in Asia by replacing coal should be taken into account.

But Mr van Beurden pointed to Article 6 in the Paris Agreement that offers parties the opportunity to cooperate with each other when implementing emissions reductions obligations. That article, which hasn’t been brought into operation, would allow the climate benefits of gas use to be considered together with emissions in the source country.

“We have to find a way to square that circle to solve that particular issue,” he said. “Australia will have that problem…pretty much in spades because you are a very large natural gas supplier to emerging economies in Asia.”

He said it would be “massively in the interests of Australia to have a functioning Article 6 in the Paris Agreement”.

“Well it also happens to be massively in our interests, so maybe here we can again work together.”

Questions around emissions also cloud the future of one of Shell’s biggest upcoming investments in Australia, the development of the Woodside-led Browse gas fields to replace declining supplies for North West Shelf LNG.

Mr van Beurden said that while Browse gas “will come to market” and that processing it through the North West Shelf was “the most sensible approach” both for the venture partners and the nation, challenges on costs and on carbon still had to be dealt with.

“We have to have a CO2 solution for that as well,” he said.

“We cannot close our eyes to it: we can’t just say it’s gas and so it’s good.”

Tougher requirements

Western Australia’s Environment Protection Authority is consulting on tougher carbon requirements for LNG, while federal policy will also have an impact on the prospects for the $US20.5 billion Browse project.

“Some of that will also depend on how the Australian government will want to manage its carbon frameworks and we need to have a reasonably good outlook on how that is going to take place in the next year or so if we are to bring Browse to an investment decision in the timeframe that is needed,” Mr van Beurden said.

Shell Australia chair Zoe Yujnovich said the EPA’s proposed carbon guidelines had provided a “nice stimulus to get engagement around how to do offsets” for Browse and on the broader issue of recognition for the role Australian gas is playing in “decarbonising” Asia.

On the east coast, Shell is nearing a commitment to develop its Arrow gas resources in Queensland, the biggest undeveloped chunk of gas on the east coast, where prices for domestic buyers have soared.

Mr van Beurden named Browse, Arrow and power generation as the three biggest areas of investment for Shell in the coming years after a major phase of spending on Prelude, the Chevron-led Gorgon LNG venture and QCLNG in Queensland.

He said spending to building electricity generation was necessary for Shell’s ambitions to form an integrated electricity supply business in Australia, one of six markets Shell has identified as offering that opportunity.

So far Shell has taken only small steps, developing on a 120 megawatt solar farm in Queensland, building up power and gas trading and acquiring the Sonnen household battery business.

The revelation of the scale of Shell’s local ambitions in electricity last year prompted speculation that AGL Energy may become a target.

Mr van Beurden wouldn’t be drawn: “At this stage of the game it’s all very immature and we are much in the ‘assembling the building blocks’ mode before we can really start talking about an integrated business that we can grow organically.”

However he added: “M&A in a broader sense needs to be part of our power story: you cannot start everything from zero completely organically and grow your way to the point where you need to be.”


Angela Macdonald-Smith writes on the resources industry with a focus on energy, including gas, oil, electricity and renewables. Connect with Angela on Twitter. Email Angela at


Australia a focus for Shell’s power ambitions

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