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Chief executive Wael Sawan plans to make Shell “leaner” and more selective about how it invests in the energy transition as he defended a shift in focus that has led several senior executives to leave the company’s green divisions in the past six months.
Since he took the top job in January, Sawan has outlined plans to boost returns by maintaining oil output, growing the gas business and trimming less profitable parts of the company’s low-carbon portfolio established under his predecessor Ben van Beurden.
“We need to get leaner, we need to get more focused, we need to get more disciplined,” Sawan told the Financial Times. “That inevitably will include choices around where we are going to operate but also importantly how we operate.”
Last month the UK-listed energy major, which is the largest company on the FTSE 100, confirmed it would cut 200 jobs in its low-carbon solutions division and place another 130 positions under review, representing at least 15 per cent of the workforce in that unit.
The cuts followed a decision to scale back Shell’s work on hydrogen technology for passenger cars to focus on hydrogen for heavy goods vehicles and industry. Shell is building Europe’s largest green hydrogen production plant in the Netherlands.
This year Shell has also agreed to sell its retail energy business in the UK and Germany and is seeking to exit some of its investments in renewable power generation and storage in Europe.
Senior executives, who have left Shell because of the shift, told the FT it had become clear internally that the company’s ambition in some of these areas had changed.
“It’s not what he’s said, it’s what he hasn’t said,” said one recently departed executive, referring to a perceived lack of support from Sawan for parts of Shell’s Renewables and Energy Solutions business. “The silence was deafening.”
Sawan told the FT he remained committed to transforming Shell into a “multi-energy” company, while cutting emissions to net zero by 2050, but that Shell would no longer “pretend to lead” in parts of the energy transition where it did not have the right competencies and capabilities.
“In transport and industry we already have a significant market share there, and we think it is only natural for us to lead as we support the decarbonisation of those sectors,” he said.
In addition to hydrogen production that means Shell will focus its low-carbon spending on activities such as electric vehicle charging, biofuels and carbon capture and storage.
In areas where Shell lacks a unique capability, such as renewable power generation, it would aim to work with partners or not invest at all, Sawan said. “This is really much more of a selective approach to where we are going to lead.”
The moves have been welcomed by many investors, with Shell shares trading near record highs in London. The stock was further underpinned after it reported robust third-quarter earnings on Thursday.
As part of the shift in emphasis under Sawan, the company has also said it will invest more in its world-leading gas business to grow sales volumes of liquefied natural gas by 20 to 30 per cent by 2030.
Selling more gas could mean Shell would have to revise down its emissions reductions targets during a review next year, analysts said.
Sawan said it was too early to comment on the energy transition strategy update planned for March but stressed that LNG had made a significant contribution to global emissions’ reductions in the past five years by allowing coal to gas switching for power generation, particularly in China.
“A sensible, focused approach on low-carbon intensity gas molecules, and LNG in particular, is a key part of [our] strategy,” he added. “That goes hand in hand with our continued focus on looking at profitable decarbonisation with low-carbon molecular solutions.”
