Shell reorients its energy transition plan

Posted by | Rauf Mammadov

It looks like Shell is considering¹ selling battery management and utility company sonnen, which it acquired in 2019. Although the news has not yet been confirmed, it would not be a surprise if Shell is putting the company up for sale given the recent shift in the company’s portfolio strategy.

Earlier this year, Shell faced a significant shakeup when Thomas Brostrom, the Senior Vice President responsible for the company’s transition to renewable energy, and the executives overseeing offshore wind projects, departed². These departures came as a result of a strong disagreement with the company’s new strategy under Shell’s new CEO, Wael Sawan. Sawan, hailing from a background in conventional oil and gas, decided to prioritize profitability and eliminate underperforming assets that were not well-suited for integration into the company’s expanding trading and optimization business.

This shift in strategy led to the immediate divestment³ of several EVC projects, including an offshore wind venture and various assets within the electricity value chain, including utility businesses in the UK and Germany. Shell also announced that it was withdrawing from its goal to double its electricity production by 2030.

Shell’s energy transition

Shell has put natural gas and trading at the center of its energy transition strategy, with a primary goal of reducing the carbon footprint of its refineries around the world. As part of this strategy, the company has made the decision to retain only the core sites that are integrated with its chemical plants, trading hubs, and marketing operations. Consequently, Shell anticipates a substantial 55% reduction in conventional fuel production by 2030. To put this in perspective, 25 years ago Shell operated 55 refineries whereas today, that number stands at only 5.

Downstream M&A activity

• • Selling its stake in the PCK refinery in Schwedt, Germany⁴
  • Sold Puget Sound Refinery to HollyFrontier Corporation⁵
  • Agreed to sell Chemical LP Refinery in Alabama to Vertex Energy⁶

Reorientation and net-zero

Although Shell has recently scaled back its net-zero targets, the ongoing disposal of renewable electricity value chain assets does not necessarily mean that Shell is halting its pivot towards new energies. Firstly, it’s important to note that Shell’s recent divestments have primarily focused on the European Union and the United Kingdom, and have not affected its utility and renewable power generation operations in Australia and the United States, which appear to be secure at the moment. Secondly, Shell’s commitment to its strategies in the Electric Vehicle (EV) charging sector indicates that both mobility and the company’s ongoing enthusiasm for low-carbon fuels will continue to be key drivers in its determined transition to less carbon-intensive industries.

Read more

• Read more articles from our Energy practice
• Read Not Your Grandfather’s Gas Station: Shell Explores new technologies and business models at its gas station network in Europe

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References:

1. https://www.reuters.com/business/energy/shell-sell-german-energy-storage-firm-sonnen-handelsblatt-2023-09-07
2. https://www.reuters.com/world/uk/shells-renewables-boss-leave-after-ceo-strategy-shift-2023-06-30
3. https://www.reuters.com/markets/deals/shell-sell-energy-business-uk-germany-octopus-energy-2023-09-01/
4. https://www.reuters.com/markets/deals/polands-unimot-talks-buy-shells-stake-german-schwedt-refinery-sources-2023-09-25
5. https://www.prnewswire.com/news-releases/shell-completes-sale-of-washington-puget-sound-refinery-to-hollyfrontier-301413248.html
6. https://www.prnewswire.com/news-releases/shell-completes-sale-of-washington-puget-sound-refinery-to-hollyfrontier-301413248.html

Tags: Energy, Oil and Gas, Renewables