Shell’s boss defends renewables strategy shift with a ‘leaner operation’

Wael Sawan, the chief executive of Shell, plans to make the company “leaner”, and more selective in its investments in energy transition. He defended the shift in focus which has caused several senior executives in the green divisions to leave in the last six months.

Since taking the top job at the company in January, Sawan outlined plans for boosting returns by maintaining oil production, growing the business of gas and trimming the less profitable parts.

Sawan said, “We have to be leaner. We need to become more focused. We need to be more disciplined.” “That will inevitably include decisions about where we’re going to operate, but also how we operate,” Sawan said.

The UK’s largest energy company, the FTSE 100-listed UK-listed Energy Major, announced last month that it would be cutting 200 jobs from its Low-Carbon Solutions division, and reviewing another 130 positions, which represents at least 15% of the workforce.

These cuts were made in response to a decision by Shell to reduce its work on hydrogen technologies for passenger vehicles to concentrate on heavy goods vehicles and industrial applications. Shell is building Europe’s largest green hydrogen plant in the Netherlands.

Shell also sold its retail energy business to the UK and Germany this year and has sought to exit its investments in Renewable Power Generation and Storage in Europe.

Shell’s senior executives who left the company because of this shift said that the ambition of the company in certain areas has changed.

One recently-departed executive said: “It’s the silence, not what he said.” He was referring to Sawan’s perceived lack of support for Shell’s Renewables and Energy Solutions division. “The silence was deafening.”

Sawan said he was committed to turning Shell into a multi-energy company and cutting emissions to zero by 2050. However, Shell would not “pretend” to lead in areas of the energy transformation where it lacked the necessary competencies.

He said: “In the transport and industrial sectors, we have a substantial market share and it’s only natural that we lead in decarbonising these sectors.”

Shell’s low-carbon expenditure will include activities like electric vehicle charging, carbon capture and storage and biofuels.

Sawan stated that Shell would work with partners in areas where it lacks unique capabilities, such as the generation of renewable energy, or refrain from investing altogether. This is a much more selective approach in terms of where we will lead.

Shell shares are trading at near-record highs in London. Stocks were further boosted after the company reported strong third-quarter earnings.

The company will also invest in its leading gas business in order to increase sales of liquefied gas by 20-30% by 2030.

Analysts said that Shell could be forced to lower its emission reduction targets when it reviews the review process next year.

Sawan said that it was still too early to comment about the energy transition update scheduled for March, but he did stress that LNG has made a significant impact on global emissions reductions over the last five years through the switch from coal to gas for power generation. This is particularly true in China.

He added that “a sensible, focused, approach to low-carbon gas molecules and LNG, in particular, are a key component of [our] strategic plan.” “That goes along with our continued focus to look at profitable decarbonisation using low-carbon molecular solutions.”