Shell softens 2030 carbon emissions target

PETROCHEMICAL giant Shell has announced it will weaken its 2030 carbon emissions reduction target and scrap its “perilous” 2035 objective, citing expectations for strong fuel demand and uncertainty in the energy transition says a report published by Reuters.

The retreat, which mimics that made last year by rival BP, comes in response to the slowing of emissions regulations by governments across the globe, many of which have redacted climate policies and delayed emissions targets amid soaring energy costs and supply concerns.

According to the article, major oil supplies have also faced increased investor pressure to focus on the most profitable arms of their businesses after reporting bumper profits in recent years while returns in renewables have slumped.

The changes to Shell’s targets are central to CEO Wael Sawan’s strategy revamps that will see his company focus on higher-margin projects, steady oil output, and growth in production of natural gas to bolster shareholder returns.

In its recent annual update on its energy transition strategy, Shell said it will target a 15-20 per cent reduction in net carbon intensity of its energy products by the end of the decade compared with 2016 levels. It had previously aimed for a 20 per cent cut.

Measuring emissions from the burning of fossil fuels by intensity, rather than in absolute terms, means a company can technically increase its fossil fuel output and overall emissions while using offsets or adding renewable energy of biofuels to its product mix, reports Reuters.

As the world’s largest liquified natural gas (LNG) trader, Shell said it believes the product has a “critical role” to play in the energy transition by replacing more polluting carbon (i.e., coal) in electricity generation plants.

At the same time, Shell said it expects power sales, which include those from renewables, to be lower than previously forecast.

Shell retired its previous target of a 45 per cent reduction in carbon intensity by 2035, with Mr Sawan telling Reuters that it was “perilous” for the company to set such a target given the level of uncertainty surrounding the “energy transition trajectory”.

“We are trying to focus our company, our organisation, and our shareholders on a waypoint that is much clearer … which is 2030,” he said.

Shell’s annual update also introduced a new “ambition” to cut overall emissions from oil products (diesel, petrol, jet fuel, et al) sold to customers by 15-20 per cent by 2030 compared with 2021.

These end-user emissions, referred to as Scope 3, account for around 95 per cent of the company’s greenhouse gas emissions.

Shell also maintained its target to halve emissions from its own operations (known as Scope 1 and 2 emissions) by the end of the decade, saying it had already achieved more than 60 per cent of that target.

Founder of activist shareholder group Follow This, Mark van Baal, told Reuters that the backtrack on its previous targets shows that Shell is “betting on the failure of the Paris Climate Agreement”.

Shell also faces legal challengers over its climate strategy and is appealing a Dutch court ruling that ordered it to cut its emissions more quickly.

As part of that strategy, Shell began company-wide staff reductions – including those in its low-carbon solutions division – to help fund savings of $US3 billion ($A4.6b).

It also sold its European power trading business, exited offshore wind and low-carbon projects, put US solar assets on sale, and placed its giant refining and petrochemical complex in Singapore under review.

Shell has also announced plans to shut down a refinery in Godorf, Germany, and to withdraw its onshore oil operations in Nigeria.

The company reported a net profit of $US28 billion ($A43.1b) in 2023 on the back of strong LNG and oil sales, which were still down 30 per cent from the previous year’s earnings.

With Reuters