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OilPrice.com: Big Oil Fights For Its Life

Big Oil Fights For Its Life

Just as Big Oil has returned to growing profits after the 2015-2016 price crash, the world’s largest oil companies are facing another formidable challenge amid growing calls from activists, shareholders, and institutional investors to start saving our planet.

The world’s largest oil firms already invest in green energy—including in wind, solar, biofuels, hydrogen, and electric vehicles (EVs) charging networks—but these alternatives are not their core business and will not be such for years, and probably decades, to come.

Will these investments in green technology and the pledges to work to reduce carbon emissions will be enough to appease shareholders? And what if Big Oil shifted more capital expenditure to alternative energies? Will it still be able to make sustainable profits and pay handsome dividends to shareholders?

“We have to find a way to preserve that dividend-paying capacity, while at the same time growing the value of the company, while at the same time also changing the make-up of the company,” Shell’s chief executive Ben van Beurden tells Financial Times’ Senior Energy Correspondent Anjli Raval.

On its Management Day 2019 in June this year, Shell said it is building a business with the potential to return US$125 billion or more in the form of dividends and share buybacks to shareholders between 2021 and the end of 2025.

Shell is also re-focusing its business into three categories: Core Upstream, Leading Transition, and Emerging Power. Core Upstream—including deepwater, shale, and conventional oil and gas, will continue “to focus on delivery and financial performance and is expected to continue generating robust cash flow for decades to come,” Shell said.

“If you are able to return $25bn to the owners of the company every year . . . you’re not going to disappear,” van Beurden told FT last week.

Shell and the other European oil majors have started to set goals to reduce the carbon emissions they generate.

Shell announced its first-ever short-term goals to cut the carbon footprint of its operations and product sales. Van Beurden said in July that the world reducing emissions to net zero “is the only way to go,” and called on businesses to work together to move faster in addressing climate change.

But shareholders want more.

“While we applaud Shell’s leadership, we continue to require further action. We expect a full set of measurable targets by next year linked to remuneration as well as continued efforts by Shell to provide clarity on the alignment of its ambitions and scenarios with the Paris Agreement and capital deployment,” Adam Matthews, Director of Ethics and Engagement for the Church of England Pensions Board, said, commenting on Shell’s annual general meeting in May.

Full article by Tsvetana Paraskova for Oilprice.com

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