Ben van Beurden, Shell CEO, has realised his firm may have got it wrong on wind energy as the oil major turns to selected renewables. This U-turn comes amid uncertainty as to whether oil prices will rebound significantly beyond $50 per barrel. “I would say our return into wind is a bit of a U-turn, and if I have regrets it's that we went out of wind when we did," he said but stressed Shell would continue to “invest quite heavily in biofuels, which is a renewable as well.”
An earlier solar exit was prompted after the investment “didn't work out for us,” as van Beurden put it, explaining “we were basically not able to make money, as many others, in producing solar panels so we got out of that business by and large."
The man at the helm of Shell announced a new strategy this week to “transform the company financially,” as he seeks to cut costs further and shed more jobs after the £40 billion takeover of its smaller rival BG earlier this year.
Cautious on Capex – focus on synergies
Though Shell suggested that ‘integrated gas’ would have reached a “critical mass after the BG acquisition” – investment in new project has slowed. Instead, the oil and gas major announced a $1 billion rise in ‘expected deal-related synergies’, up from the $3/5 billion initially set out when snapping up its British rival.
Upstream investment has been curtailed, drilling in the Alaskan Artic has been abandoned altogether, while Shell is now focussing on deep water project in Brazil and the Gulf of Mexico and petrochemicals in the US and China.
It is still taking FIDs on selected liquefaction natural gas plants – although not on the much-observed LNG Canada project in Kitimat, British Columbia. The LNG Canada project has all regulatory permits in place and FID was initially envisaged for mid-2016 but then deferred.
Now, observers doubt that it fits into Shell’s revised capital spending plan of $25 billion to $30 billion per year between now and 2020. In an investors presentation in London, van Beuden also announced the selloff of “non-core positions.”
A new chemical plant in Pennsylvania, meanwhile, have been given the green light, with analysts estimating the full capital spend on the project will range between $3 billion to up to $5.5 billion.