Energy News — Shell CEO Is Still Coming Under Pressure About Company’s Energy Transition Strategy

Shell’s CEO Wael Sawan cannot dodge his shareholder’s concerns, even as he promises to deliver better value to them through the company’s new energy transition strategy.

This global market strategy was delivered at the company’s Capital Markets Day on 14 June 2023.

According to documents that were first seen by Reuters, some shareholders issued a formal letter to Shell’s CEO about their concerns with the energy transition strategy at Shell. According to what Reuters shared about the open letter in their report, the shareholders specifically mentioned the CEO’s comments at the Capital Markets Day held in June.

Here’s what they wrote in the letter:

“The recent announcements at and after the capital markets day deeply concern us… We can only hope the optics of the CMD announcements are deceiving us and that Shell continues its path as a leader in the energy transition.”

I also watched the presentation given by Shell CEO Wael Sawan at the CMD. I found his concluding remarks about the company’s global market strategy to be pretty straight-forward: “In short, we will deliver more value, with less emissions.”

You can watch the full presentation in the video link below:

Clearly the sentiment around oil and gas production on global markets is a cause of concern for many folks across the board. Investors want to see capital returns, but they also want to see energy companies investing in clean energy technologies that reduce the company’s carbon footprint, or greenhouse gas (GHG) emissions.

Here’s some more content from Areas & Producers about the energy transition strategies of other international oil companies.

Changes To BP’s Strategy & CEO Transition For Future Energy Trends

Bernard Looney is now British Petroleum’s former CEO, as of 13 September 2023, which was revealed by BBC’s report that he “has resigned as chief executive amid a review of his personal relationships with colleagues.”

This news was a big surprise to anyone following global energy markets and future trends. Even though much of BP’s strategy continues to make headlines this week such as “BP hires Valaris drillship and jack-up for work in Brazil and Indonesia” written by Offshore Energy Today.

Other reporting on future energy trends indicates that BP sees no alternative to the energy transition. The company does not provide a single scenario with an increase in carbon emissions until 2050. The company’s oil and gas forecast can be reviewed in the BP Energy Outlook 2023.

For British Petroleum (BP) the world is headed for a sustainable energy future that should be affordable and secure — known as the energy trilemma.

Former BP CEO Bernard Looney has been very vocal about the company’s enhanced view of the Energy Transition on the company’s future outlook on oil and gas investments. According to figures reported by Upstream, the company’s capex of $16.3 billion comes with a 30% share in so-called transition growth engines. This percentage comes dangerously close to the company’s massive increase in the tax rate from the UK’s EU’s windfall taxes.

At a rate of 34%, the company had to pay $15.1 billion on the company’s global operations in the oil and gas sector. This includes $700 million in windfall taxes paid for its North Sea operations alone. It’s no wonder that UK’s biggest energy company is seeking to invest $60 billion in its energy transition over the next six year. It’s clear that the company’s oil and gas operations simply would not be able to thrive under the new windfall tax regulations in the UK and EU.

Sinopec, Chevron & Yara International Are Leading Major Strategies For The Energy Transition

It was reported by Reuters on 19 September 2023 that China’s Sinopec has ordered “more than 30 cargoes of liquefied natural gas (LNG) via a tender for October 2023 to the end of 2024.”

This tender for LNG shipments is reportedly tied to ongoing legal issues facing the contract problems with USA-based LNG trader Venture Global. As quoted in the Reuters report,

“The tender is for both securing supply for winter and topping up supply pool. Sinopec is short near-term because Venture Global has failed to supply.

LNG trading has become a sharp edge of competition for pricing and supplies ever since it became a viable import option to wide range of customers throughout Asia and Europe. Due to the ongoing issues with OPEC’s oil production cuts and lack of policy direction from US shale production, LNG is likely to become the most reliable source of energy supplies for countries that have the capacity to import it.

At least this would be the case, for the short-term, as energy security dilemmas are dictating both the foreign and industrial policies of most countries in the European and Asian markets right now.

As for the long-term energy demand scenarios, global watchers should not go to sleep on any of the developments related to global hydrogen production. Sinopec has also announced its strategy to produce green hydrogen domestically.

For example, SinoPec is now beginning the production at its first green hydrogen plant located in Xinjiang. According to the report this green hydrogen plant could produce up to 20,000 metric tons of hydrogen per year. Reuters

Although China intends to increase its domestic use of renewable energies, such as hydrogen, for reducing carbon emissions from industrial production. Chinese producers also have the capability to export clean energy as demand for sustainable energy is steadily increasing on global markets.

Writing for the publication Areas & Producers, Yury Erofeev recently published some report findings about China’s clean energy exports, such as how China exported about 155 GW of solar modules in 2022.

But in my personal point of view, oil and LNG are two of the main reasons why China is on the radar of oil and gas producers.

Now, please let me take your attention to Chevron and Yara International so that I can explain further.

It was reported by Reuters on 12 September 2023 that Chevron will acquire “a majority stake in the world’s largest proposed storage facility for hydrogen from renewable energy.”

This deal is related to a previous acquisition of ACES Delta located in Utah, for which more details are provided in the Reuters link above.

The global hydrogen market has already projected to be larger than the LNG market by 2030. Since hydrogen fuels in developing countries have significant opportunities in this market, such as North Africa, where there’s a big push among producers to source green hydrogen and ammonia.

In this context, it’s important to know why oil and gas producers, such as Chevron, are trending with other producers, such as Yara International, to use renewable energy as a link between energy and food security dilemmas.

Chevron has announced it will a US-based shale producer — PDC Energy — for a total transaction value of $6.3 billion. This deal is being heralded as one of the first of many in a new wave of shale production asset acquisition to come in the oil and gas industry.

Moreover, according to Argus Media, the deal gives Chevron a boost in its proved reserves by 10% with the acquisition of 275,000 net acres in Colorado and Wyoming, as well as 25,000 net acres in the Permian basin.

Meanwhile, Yara will expand its fertilizer production in the United Kingdom, where it already has fertilzier operation plants located in Yorkshire.

From the industry perspective, Yara President & CEO Svein Tore Holsether noted that although Yara International delivered strong results in Q3 2022 that “we remain deeply concerned about the food and fertilizer supply situation in Europe and globally, and repeat our call for urgent action to reduce dependency on Russia.”

Thus, energy security and dependence shall play another big role in global fertilizer prices and supplies going into the long-term rebuilding of Ukraine’s agriculture production for global food security.

The content in Areas & Producers provides a methodology for readers and writers who are curious about global trends and the future of the world.