Oil producer Shell has more heavily invested in clean and renewable energy options than its peers, yet it recently announced that it might be walking back plans to decrease oil production.
Key Details
- Shell’s previous plans included reducing oil output by 1% to 2% each year through 2030, however, CEO Wael Sawan says the company is now rethinking this strategy.
- Shell invests 14% of its capital expenditures to renewable energy.
- This announcement comes shortly after Shell’s rival BP announced that it would also reduce its hydrocarbon output reduction goals.
- Carbon-reduction regulations and restrictions on fossil fuels have also caused oil companies to look to future ways to bring in revenue.
- Oil and natural gas resources will likely continue to dominate the global energy supply well into 2050 as the most affordable and secure form of energy, according to consulting company McKinsey.
Why it’s news
The relationship between oil producers and renewable energy is complex as oil companies face pressure from climate activists to reduce environmental impact, yet producers look to continue making profits.
While oil companies and the fossil fuels they produce contribute to overall carbon emissions, the investment in renewable energy from these companies may play a vital role in the eventual global transition to renewable energy.
Shell, in particular, has contributed significant solar, wind, and other renewable investments through multiple global projects. Last year, Shell invested $3.5 billion in renewables and energy solution businesses. That number accounted for about 14% of the company’s overall capital expenditures.
Marathon Petroleum is another oil producer with heavy investment in renewables, including projects such as converting existing facilities to renewable diesel producers.
ExxonMobil committed in 2021 to invest $15 billion over the following six years in initiatives to lower greenhouse gas emissions.
Despite heavy investment in renewable and clean energy options, Shell and BP are delaying plans to reduce oil production.
“I am of a firm view that the world will need oil and gas for a long time to come,” Sawan says. “As such, cutting oil and gas production is not healthy.”
BP CEO Bernard Looney said his company’s decision was “responding to what society wants.”
Last year, several oil companies reported record-breaking profits, including Shell with $40 billion and BP with $28 billion, which could incentivize the companies to continue producing oil over renewable options.
Last year, fossil fuels provided 82% of global energy resources. While this number is a decrease from 85% five years ago, fossil fuels still outweigh other resources such as hydroelectric, which accounts for 6.8%, renewables which make up 6.7%, and nuclear power which contributed 4.3%.