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Big Oil’s huge bet to save itself from extinction

The Telegraph

Big Oil’s huge bet to save itself from extinction

A shift to renewables and the rise of green energy giants means the future for former fossil fuel titans is far from certain, writes Rachel Millard

Tuesday 20 October 2020 The Daily Telegraph 


It was the early days of 2015 when Shell’s chief executive Ben van Beurden ascended the stage of the InterContinental Hotel on London’s Park Lane with a stirring message for his industry peers amid strengthening global action on carbon emissions.

Encouraging fellow industry bosses to be “less aloof, more assertive”, he insisted that the sudden death of fossil fuels wasn’t a “plausible plan” and spoke of balancing moral obligation: energy access and fighting climate change. Renewable energy was growing, but was a long way off from being used widely in heating and transport, he said. “This is our chance to get ready,” he added.

Five years later, the window for oil and gas giants to prepare for a global shift in energy is closing fast.

Shell believes its power business – which it hopes to turn into the world’s largest – can deliver returns of 8pc-12pc.

They are battling scepticism…

Having underperformed over the decade, oil giants have had a torrid year on the stock market, Shell’s share price has fallen from £22.56 at the start of the year to 939.4p yesterday…

“Can you really pull off this trick of spending billions to transform and throw off the same returns?’ asks one industry source.

BP and Shell’s tumbling shares are in stark contrast with Orsted, the Danish former oil and gas provider, now almost entirely focussed on offshore wind…

Shell also sees offshore wind, which supplied only a tiny 0.3pc of global energy in 2019, as a “key growth area” and is developing a 759MW subsidy-free offshore wind farm in holland, which also produces hydrogen via electrolysis.

Hydrogen can also be made from natural gas in which both Shell and BP are doubling down – Shell having paid £47bn for BG Group in 2015, and BP planning to double its liquified natural gas portfolio to 30 million tons per year by 2030, even as it cuts its own production.

The market is unconvinced that Big Oil companies are the best place to deploy capital into renewables.

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