Royal Dutch Shell’s announcement of the sale of $7.25 billion in assets Thursday was a major step in turning itself into a more futuristic company — with a much larger mix of energy assets and a much smaller carbon footprint.
The company is committed to reshaping itself and believes that renewables and new energy will play a bigger role, said Shell CEO Ben Van Beurden. The company will retain only 10 percent of its Canadian sands assets.
“We are right in the middle of transforming the company into the company of the future,” he said at the CERAWeek conference in Houston, sponsored by IHS Markit.
Van Beurden spoke on the same morning that Scott Pruitt, the new administrator of the U.S Environmental Protection Agency, told CNBC’s “Squawk Box” that he does not believe carbon dioxide is a primary contributor to global warming.
New EPA Chief Pruitt told CNBC, “I think that measuring with precision human activity on the climate is something very challenging to do, and there’s tremendous disagreement about the degree of impact, so no, I would not agree that it’s a primary contributor to the global warming that we see. … But we don’t know that yet. … We need to continue the debate and continue the review and the analysis.”
Van Beurden said Shell has supported implementation of the Paris accord, which Pruitt called a “bad deal” on Thursday, even though Rex Tillerson, secretary of state, defended it. Although some governments are moving faster than others, the Shell CEO believes governments should quicken regulation of carbon emissions as well as put a price on carbon.
Although carbon was quite a popular topic of conversation among other oil companies that attended the CERAWeek conference, none were as vocal on the topic as Shell’s CEO. Van Beurden believes the commitment is important, especially since he views public support is going away from the energy industry, which will be a long-term problem.
“Trust has been eroded to the point where it is an issue for our long-term future,” he said.
Van Beurden said an important part of Shell relied on a future defined by broader mix is liquified natural gas, which he believes was a key factor in reducing the carbon impact from U.S power generation, as it replaced coal. He has a positive outlook about the market for liquified natural gas, which is currently the fastest-growing energy resource, growing at a rate that is four times faster than oil. Demand for it is expected to double in 15 years, he says.
Shell will increase spending in shale drilling as well, making it an even larger part of its spending plan. The company is able to break even at $40 per barrel of crude oil in the Permian Basin, currently the hottest U.S. shale play.
Van Beurden said the company is not abandoning mega-projects but just “taking a breather.” He said Shell has a big project in the Gulf of Mexico, and it has a new major petrochemical plant coming in Pennsylvania.
Shell will be selling its oil sands interests to Canadian Natural Resources. Shell will continue to operate the Scotford upgrader, which converts heavy oil for transport, as well as the Quest carbon capture and storage project.
Article written by HEI contributor Lydia Ezeakor.