Royal Dutch Shell plc (Shell) today published a report outlining how its strategy should enable it to thrive as the world transitions to lower-carbon energy. The Shell Energy Transition Report describes its understanding of the transition and what it means for the company. It also explains how Shell has designed its strategy not only to be a world-class investment case, and to sustain its societal licence to operate, but also to manage climate change-related risks and maximise opportunities through the transition.
The report provides examples of how Shell is already active in many of the growth areas that will drive its continued success and resilience. Shell CEO Ben van Beurden says: “Understanding what climate change means for our company is one of the biggest strategic questions on my mind today. In answering that question, we are determined to work with society and our customers. We will help and inform and encourage progress towards the aims of the Paris Agreement. And we intend to continue to provide strong returns for shareholders well into the future.”
The report contains Shell’s principal response to the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures and demonstrates the company’s near- and mid-term financial and portfolio resilience, even against its recently-published and most rapid energy transition scenario, known as Sky. It also explains how Shell’s capacity to adapt to the transition should allow it to thrive in the longer term by supplying the types of energy customers will need over the coming decades. For Shell, this means that the company will still sell the oil and gas that society needs, while preparing its portfolio to move into lower-carbon energy, when this makes commercial sense.
Shell’s strategy, global portfolio and strong financial framework provide the ability to thrive through potential changes in the energy system to 2030. Every year the company assesses its portfolio under different scenarios, including prolonged low oil prices. In addition, Shell ranks the break-even prices of its assets in the Upstream and Integrated Gas businesses to assess their resilience against low oil and gas prices. These assessments indicate a low risk of stranded assets in the current portfolio. As of 31 December 2017, Shell estimates that around 80% of its current proved oil and gas reserves will be produced by 2030, and only 20% after that time.
In the medium term Shell will grow its business in areas it expects to be important in the energy transition, while reducing costs and improving its CO2-intensity performance. The company is expanding in the power market as it expects the energy system to increasingly electrify, and it is adjusting its businesses to meet changing demand in different countries. This includes investments in areas such as wind generation in the Netherlands, supplying power to retail customers in the UK and offering hydrogen refuelling and electric-car charging.
Longer term there is great uncertainty in how the energy transition will unfold, but Shell believes its strategic flexibility will allow it to adapt in step with society. Shell has previously announced its ambition to reduce the Net Carbon Footprint of the energy products the company sells by around half by the middle of the century in alignment with society as it moves towards implementing the Paris goals. Critically, this plan covers the full energy life cycle of the company’s products, making it unique in the energy industry. It includes not only emissions from the production of energy products, but also those from the consumption of Shell’s products by its customers, where around 85% of the emissions associated with the company’s energy products occur. Progress will be reviewed every five years to ensure it is in-step with society’s progress towards the Paris goal of limiting global warming.
To read the full report, go to www.shell.com/energytransitionreport
Notes to Editors:
- This report is a follow up to the “Shell: Energy Transitions and Portfolio Resilience” report (2016).
- Shell plans to reduce the Net Carbon Footprint of its energy products in step with society’s progress. As such, the company’s Net Carbon Footprint ambition covers not just emissions from its own operations but also those produced by its customers when they use the energy products purchased from Shell. Shell has applied its own unique Net Carbon Footprint methodology, using its Sky scenario analysis and the IEAs Energy Technology Perspectives 2017 as inputs. Based on this analysis, Shell believes society will have to achieve net zero additional CO2 equivalent emissions from the energy system, of approximately half by 2050. Shell intends to meet the Net Carbon Footprint of the global energy system in that time frame. The company plans to reduce its Net Carbon Footprint by around 20% by 2035 as an interim measure. Shell will review its progress every five years. See the full report for more.
- The Net Carbon Footprint methodology was developed inhouse at Shell and it was designed to reflect the activities that Shell is directly involved in and the carbon content of the energy products the company sells.
Shell Investor Relations:
Europe: +31 70 377 4540
North America +1 832 337 2034
Shell International Media Relations:
International +44 207 934 5550
Americas +1 832 337 4355
This press release contains data and analysis from Shell’s new Sky Scenario. Unlike Shell’s previously published Mountains and Oceans exploratory scenarios, the Sky Scenario is targeted through the assumption that society reaches the Paris Agreement’s goal of holding global average temperatures to well below 2°C. Unlike Shell’s Mountains and Oceans scenarios which unfolded in an open-ended way based upon plausible assumptions and quantifications, the Sky Scenario was specifically designed to reach the Paris Agreement’s goal in a technically possible manner. These scenarios are a part of an ongoing process used in Shell for over 40 years to challenge executives’ perspectives on the future business environment. They are designed to stretch management to consider even events that may only be remotely possible. Scenarios, therefore, are not intended to be predictions of likely future events or outcomes and investors should not rely on them when making an investment decision with regard to Royal Dutch Shell plc securities.
Additionally, it is important to note that Shell’s existing portfolio has been decades in development. While we believe our portfolio is resilient under a wide range of outlooks, including the IEA’s 450 scenario (World Energy Outlook 2016), it includes assets across a spectrum of energy intensities including some with above-average intensity. While we seek to enhance our operations’ average energy intensity through both the development of new projects and divestments, we have no immediate plans to move to a net-zero emissions portfolio over our investment horizon of 10-20 years. Although, we have no immediate plans to move to a net-zero emissions portfolio, in November of 2017, we announced our ambition to reduce our net carbon footprint in accordance with society’s implementation of the Paris Agreement’s goal of holding global average temperature to well below 2°C above pre‑industrial levels. Accordingly, assuming society aligns itself with the Paris Agreement’s goals, we aim to reduce our net carbon footprint, which includes not only our direct and indirect carbon emissions, associated with producing the energy products which we sell, but also our customers’ emissions from their use of the energy products that we sell, by 20% in 2035 and by 50% in 2050.
Also, in this press release we may refer to “Shell’s net carbon footprint”, 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 but, to support society in achieving the Paris Agreement goals, we aim to help and influence such suppliers and consumers to likewise lower their emissions. The use of the terminology “Shell’s net carbon footprint” is for convenience only and not intended to suggest these emissions are those of Shell or its subsidiaries.
The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate legal entities. In this press release “Shell”, “Shell group” and “Royal Dutch Shell” are sometimes used for convenience where references are made to Royal Dutch Shell plc and its subsidiaries in general. Likewise, the words “we”, “us” and “our” are also used to refer to Royal Dutch Shell plc and 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 press release refer to entities over which Royal Dutch 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. 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.
This press release 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 Royal Dutch 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 Royal Dutch 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’’, ‘‘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 Royal Dutch Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this press release, 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, 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; and (m) 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 press release 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 Royal Dutch Shell’s 20-F for the year ended December 31, 2017 (available at www.shell.com/investor and www.sec.gov ). These risk factors also expressly qualify all forward looking statements contained in this press release and should be considered by the reader. Each forward-looking statement speaks only as of the date of this press release, 12 April 2018. Neither Royal Dutch 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 press release.
We may have used certain terms, such as resources, in this press release that United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our filings with the SEC. U.S. Investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575, available on the SEC website www.sec.gov.