Shell’s Latest Greenwashing Masterstroke: Converting Refinery to Make Fancy Oils While Keeping the Oil Party Going Elsewhere

Posted by John Donovan: 26 Jan 24

In a dazzling display of environmental sleight of hand, Shell Deutschland GmbH has triumphantly announced its Final Investment Decision (FID) to give a green makeover to its Wesseling site at the Energy and Chemicals Park Rheinland. The plan? To transform the hydrocracker into a glitzy production unit for Group III base oils, the crème de la crème of lubricants for those fancy engine and transmission oils. Because, as we all know, the real key to saving the planet is in smoother-running engines.

Meanwhile, crude oil processing at Wesseling will take a bow by 2025, but fear not, fossil fuel aficionados – the party continues at the Godorf site. It’s like stopping the taps in the kitchen while the bathroom floods.

Huibert Vigeveno, Shell’s Downstream and Renewables Director, couldn’t contain his excitement: “The repurposing of this European refinery is a significant step towards serving our growing lubricant customer base with premium base oils. This investment is part of Shell’s drive to create more value with less emissions.” Ah, the sweet sound of corporate eco-enthusiasm – music to the ears of environmentalists everywhere!

The electrification of this new base oil plant, coupled with the cessation of turning crude oil into fuels at Wesseling, is expected to cut Shell’s scope 1 and 2 carbon emissions by about 620,000 tonnes a year. It’s a bit like going on a diet by only eating cake every other day – progress, but not quite the transformation one might hope for. And let’s not forget, Shell’s grand ambition is to be a net-zero emissions energy business by 2050. At this rate, they might just get there when pigs fly.

Set to start operations in the latter half of this roaring decade, the new plant aims to pump out around 300,000 tonnes a year of these fancy oils, covering approximately 9% of the EU’s current needs and a whopping 40% of Germany’s. So, while the world burns, at least we’ll have well-lubricated gears – thanks, Shell!

Notes to editors:

• This investment, financed by Shell’s Chemicals and Products business, meets the minimum acceptable internal rate of return set out at our Capital Markets Day in 2023.
• A hydrocracker converts heavy, low-quality hydrocarbons into lighter, high-quality products, such as fuels (gasoline, jet fuel, diesel), chemicals feedstocks, and base oil feedstocks. This is achieved through a high-pressure, high temperature reaction between the hydrocarbons and hydrogen, in the presence of a catalyst.
• Group III base oils are mineral base oils with very high viscosity index, produced by hydrocracking technology. The market for high-quality engine and transmission oils, as well as e-fluids and cooling fluids, some of which are made from these base oils, is expected to grow.
• Shell has already driven forward the transformation of the Energy and Chemicals Park Rheinland with investments in a 10-megawatt electrolyser to produce renewable hydrogen and a biomethane liquefaction plant.
• Shell’s Energy and Chemicals Park Rheinland is located near Cologne and is comprised of two sites: Wesseling and Godorf. It currently has capacity to process over 17 million tonnes of crude oil a year, of which 7.5 million tonnes are processed at the Wesseling site.
• Despite ceasing crude oil processing at the Wesseling site, fuel supplies for the German market are expected to remain stable and secure. 

Cautionary note

The companies in which Shell plc directly and indirectly owns investments are separate legal entities. In this announcement, “Shell”, “Shell Group” and “Group” are sometimes used for convenience where references are made to Shell plc and its subsidiaries in general. Likewise, the words “we”, “us” and “our” are also used to refer to Shell plc and its subsidiaries in general or to those who work for them. These terms are also used where no useful purpose is served by identifying the particular entity or entities. ‘‘Subsidiaries’’, “Shell subsidiaries” and “Shell companies” as used in this announcement refer to entities over which Shell plc either directly or indirectly has control. Entities and unincorporated arrangements over which Shell has joint control are generally referred to as “joint ventures” and “joint operations”, respectively. “Joint ventures” and “joint operations” are collectively referred to as “joint arrangements”. Entities over which Shell has significant influence but neither control nor joint control are referred to as “associates”. The term “Shell interest” is used for convenience to indicate the direct and/or indirect ownership interest held by Shell in an entity or unincorporated joint arrangement, after exclusion of all third-party interest.

Forward-Looking Statements

This announcement contains forward-looking statements (within the meaning of the U.S. Private Securities Litigation Reform Act of 1995) concerning the financial condition, results of operations and businesses of Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Shell to market risks and statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as “aim”, “ambition”, ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘estimate’’, ‘‘expect’’, ‘‘goals’’, ‘‘intend’’, ‘‘may’’, “milestones”, ‘‘objectives’’, ‘‘outlook’’, ‘‘plan’’, ‘‘probably’’, ‘‘project’’, ‘‘risks’’, “schedule”, ‘‘seek’’, ‘‘should’’, ‘‘target’’, ‘‘will’’ and similar terms and phrases. There are a number of factors that could affect the future operations of Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this announcement, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell’s products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, judicial, fiscal and regulatory developments including regulatory measures addressing climate change; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; (m) risks associated with the impact of pandemics, such as the COVID-19 (coronavirus) outbreak; and (n) changes in trading conditions. No assurance is provided that future dividend payments will match or exceed previous dividend payments. All forward-looking statements contained in this announcement are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional risk factors that may affect future results are contained in Shell plc’s Form 20-F for the year ended December 31, 2022 (available at www.shell.com/investor and www.sec.gov

). These risk factors also expressly qualify all forward-looking statements contained in this announcement and should be considered by the reader. Each forward-looking statement speaks only as of the date of this announcement, January 26, 2024. Neither Shell plc nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this announcement.

Shell’s net carbon intensity

Also, in this announcement we may refer to Shell’s “Net Carbon Intensity”, which includes Shell’s carbon emissions from the production of our energy products, our suppliers’ carbon emissions in supplying energy for that production and our customers’ carbon emissions associated with their use of the energy products we sell. Shell only controls its own emissions. The use of the term Shell’s “Net Carbon Intensity” is for convenience only and not intended to suggest these emissions are those of Shell plc or its subsidiaries.

Shell’s net-Zero Emissions Target

Shell’s operating plan, outlook and budgets are forecasted for a ten-year period and are updated every year. They reflect the current economic environment and what we can reasonably expect to see over the next ten years. Accordingly, they reflect our Scope 1, Scope 2 and Net Carbon Intensity (NCI) targets over the next ten years. However, Shell’s operating plans cannot reflect our 2050 net-zero emissions target and 2035 NCI target, as these targets are currently outside our planning period. In the future, as society moves towards net-zero emissions, we expect Shell’s operating plans to reflect this movement. However, if society is not net zero in 2050, as of today, there would be significant risk that Shell may not meet this target.

Forward Looking Non-GAAP measures

This announcement may contain certain forward-looking non-GAAP measures such as cash capital expenditure and divestments. We are unable to provide a reconciliation of these forward-looking Non-GAAP measures to the most comparable GAAP financial measures because certain information needed to reconcile those Non-GAAP measures to the most comparable GAAP financial measures is dependent on future events some of which are outside the control of Shell, such as oil and gas prices, interest rates and exchange rates. Moreover, estimating such GAAP measures with the required precision necessary to provide a meaningful reconciliation is extremely difficult and could not be accomplished without unreasonable effort. Non-GAAP measures in respect of future periods which cannot be reconciled to the most comparable GAAP financial measure are calculated in a manner which is consistent with the accounting policies applied in Shell plc’s consolidated financial statements.

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