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Page added on March 11, 2017
Shell to develop transition framework over next two decades
Royal Dutch Shell plans to shift its business model in the next several decades to a mix of renewables and traditional fossil fuels, said Shell CEO Ben van Beurden, during a keynote address given Thursday at the 2017 CERAWeek conference in Houston. The shift, he said, will enable the company to focus on creating less carbon dioxide, overall, but it will not target a specific industry for reduction.
Shell is concerned about governmental regulations centered on carbon pricing mechanisms. Mr. van Beurden added that the fastest and most inexpensive way to accomplish a cleaner footprint is to switch energy generation to natural gas. This was the strategy behind Shell’s BG Group acquisition, which now brings the firm’s energy portfolio to 50% gas. The integration of BG’s assets and personnel is now complete.
Going forward, van Beurden said the company will strive to balance its portfolio by targeting traditional oil and gas, integrated gas operations, shale plays and new energy methodologies, including offshore wind generators. The new business model is designed to move the company toward fulfilling its oblations under the UN’s Paris Agreement on climate change to reduce carbon dioxide emissions, starting in 2020.
“The transition toward cleaner energy will be a multi-decade initiative that will move the industry toward less carbon output by putting a price on carbon emissions.” Mr. van Beurden stressed that this initiative is important and will help re-establish the public’s trust, and the agreement will play a role in providing a mindset change.
A major plank in the transition initiative is to reduce the overall use of crude oil. Asked to envision when he thinks peak oil use will occur, van Beurden said, “within a decade, depending on several variables.” As energy demand is expected to double in the next 15 years, van Beurden sees growth opportunities in the LNG market to help fill the energy gap.
Lowering breakeven costs. On Thursday morning, Shell announced that it sold its Canadian oil sands business unit for $7.25 billion. Mr van Beurden said the oil sands operation is “a high-value” business, but he felt it could be run more efficiently by another company. Although the environmental impact of the mining operation was not mentioned, the divestiture will help Shell conform to its transition policy and build its image as a clean energy provider.
Van Beurden said Shell’s exit from Alaska offshore was due mainly to “regulatory pressures,” high development costs, and that the last well drilled by the firm was a dry hole. He went on to say, even if substantial reserves were discovered, it was not likely that the company would have elected to develop the reserves.
In Shell’s U.S. shale plays, the company has managed to lower costs 40% in the last several years. In the Permian basin, the company’s break-even cost is now $40/bbl.
In Argentina’s Neuquén province, Shell is developing its Vaca Muerta shale acreage and has purchased a substantial new block of drilling rights surrounding a successful horizontal operation. The well cost just $5.0 million and was the “cheapest” such borehole drilled in Argentina, to date. Mr van Beurden concluded by saying that within Shell’s conventional oil and gas business, “we want to make shale equally weighted with our deepwater reserve base.”
9 Comments on "Shell to develop transition framework over next two decades"
shortonoil on Sat, 11th Mar 2017 1:11 pm
So Shell has finally figured out that they can’t make money on oil anymore. Next big announcement, pigs don’t fly!
Sissyfuss on Sat, 11th Mar 2017 1:43 pm
Shell is looking to gain the best of both dying worlds, economy and ecology. Greedy capatalists cannot mentally process in any other way.
Cloggie on Sat, 11th Mar 2017 5:11 pm
This is the best signal you can get that alt-energy is taken seriously. Shell is one of the most successful money-making machines around and if they announce that they will invest in a renewable future, you can safely bet your farm that it is because they expect to make money from it.
http://energypost.eu/jeroen-van-der-veer-ex-ceo-shell-chairman-ing-moving-away-fossil-fuels-presents-great-opportunities-oil-companies/
makati1 on Sat, 11th Mar 2017 5:48 pm
Shell is hedging it’s bets but will lose both ways. Alts are no more than a band-aid on a gaping chest wound. Time is not on their side. Nor is the energy economy. Why? Too many reasons to list. If you don’t already see that, it would be a waste of page to list them.
Cloggie on Sat, 11th Mar 2017 5:57 pm
Shell is hedging it’s bets but will lose both ways. Alts are no more than a band-aid on a gaping chest wound. Time is not on their side. Nor is the energy economy. Why? Too many reasons to list. If you don’t already see that, it would be a waste of page to list them.
Aren’t you taking yourself a little too seriously?
shortonoil on Sun, 12th Mar 2017 1:27 pm
Shell is facing the same issues as everyone else in the industry: falling reserves with no replacement, declining yields in the refinery sector, increasing water cut in existing formations, declining price, weak demand, declining asset values, and increasing capital costs. In other words, somewhere between the hammer and the anvil. So they tell their stockholders: “we are going to put up some solar panels, some wind mills, and sell some NG”. All comfort food for the next major earthquake season!
Cloggie on Mon, 13th Mar 2017 2:58 am
Shell is the first of the Seven Sisters to have the courage to change course and embrace a new business vision. It will pay out handsomely for them.
And if not, may the devil get them, as my entire (modest) pension plan is based on them.lol
Cloggie on Mon, 13th Mar 2017 6:18 am
Look at these prices!
http://365zon.nl/producten.html
Last year I paid 250 euro for a Chinese panel of 270 Watt. Or 1500 for 6 and the other 1500 euro for transformer and installation.
Now you get a Canadian for 170 euro! That’s 1/3 off the price in merely 16 months!!!
Wind energy: same story.
https://cleantechnica.com/2016/12/14/shell-consortium-sets-new-lowest-offshore-wind-price-700-mw-borssele-iii-iv-wind-farms/
(Shell knows exactly what it is doing)
Yesterday was a beautiful day and I had 6.5 kwh and that om March 12! The accompanying app says that I earned almost 400 euro. So payback time will be in 120 months or ten years in total. And than 15-20 years free energy (excluding zero, one or two new transformers of 400 euro each).
Davy on Mon, 13th Mar 2017 6:48 am
If, one looks at our reality as a civilization you then realize we are at the cusp of decline. We are in that period of turbulence of growth and decline. This period is characterized by lack of clarity of direction. For every optimistic viewpoint I can dash it with pessimism. Likewise there are plenty of signs of optimism. Though they are generally unsubstantiated by experience of the actual. Optimism today is either projections offer hope or lackluster reality. It is a fictional social narrative delivered by electronic media and social norms. It is not real it is manufactured and a deeply human response to mortality.
I would argue we are now in a permanent crisis period. We cannot be made whole with a continuation of the status quo with growth affluence. Affluence growth by the system as a whole is over. We are now about transfer of wealth between groups and nations. We are now nations locked in a brittle arrangement of trade, political relations, and social realities. We are fated to continue this because there are no alternatives. This condition is characterized by brittleness so any effort causes an equal and reaction in a zero sum gain. Ecosystems demonstrate this as climax systems when niches are filled. Diminishing returns has doomed technology from real progress. Limits have doomed economics to demand destruction. Ecological decline and climatic change are now on their own disturbed trajectory by forces beyond human influence.
Our human system is unable to adapt to mitigate any of these disruptions without initiating worse decline. Real human change would mean reducing population to 1BIL and going postmodern to what was premodern. We are now locked in and trapped in a decline phase of civilization. It does not matter our economic system is repressed and artificially managed. No longer does price discovery and innovation matter. They are still operative but they do not characterize our new normal of decline. Modern market based economics is dead. We are now economically engineered with underlying decline. We are now politically engineered with a global system of governance run by elites who through moral hazard control a revolving door of economics, political influence, and opportunity. Socially we are seeing reactions to this moral hazard and rejections of the lies.
This multifaceted reality is rigid to change and just like climate and our environment is now on its own trajectory. We are now in the mechanization phase of civilizational change. We have reached peak everything with a population still growing and a planetary system in decline. There is no room for innovative change to alter this gradient of decline. People may talk about a financial collapse saying it will be worse than 2008 but things are different now. We are locked into a new status quo by greater forces of decline so crisis is the process itself. We are in a crisis and pretending it is not one.
Our economy cannot break and adapt as was once the case were a recession cleaned house for new growth periods. We cannot have another crisis and make the system better. There will only be a stair step down. There is no longer destructive change that was creative from new technologies and and transitional systems. Now we only have destructive change of a system locked in a mechanization of decline. Nothing we can do can fight this process because it is systematic, macro, and mechanized. This decline mechanization is referring to a rigid adaptive process of decline not growth. We can extend and pretend to think we are changing things as we are doing now. We can transform some sectors like energy but there is no transition possible on any level. There is only demand destruction and physical decay.
This is a reality that all policy and social narratives should be judged by. All predictions forward should acknowledge status quo progress is over. We are now governed by a decline process. This makes the reality of economic, social, and political crisis different than they were in the 20th century. You can’t use 20th century history to describe 21st century decline. This is a paradigm shift of what governs our civilization.