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CERAWeek: Helping customers get to net zero an opportunity: Shell CEO
03 March 2021Bernadette Lee
Adopting a policy of helping customers get to net zero can help
companies derive significant value as the world shifts to a
different energy system, Shell chief executive Ben van Beurden told
attendees of CERAWeek by IHS Markit.
Speaking on the "New Strategies for the New Era" panel, van
Beurden said net zero is both a societal imperative and, arguably,
a moral imperative.
For companies, it also presents "amazing" business
opportunities, he said. Unless companies adopt a policy of helping
their customers get to net zero, "they are basically stuck with the
monologue: 'We will provide the commodity, oil and gas, or
commodity energy in general,'" he told the virtual audience on 1
March.
"Society is very clear, obviously," about meeting the goals of
the Paris Agreement, and it "realizes it has to achieve net-zero by
2050 or 2060. Being a European company operating in a wide range of
countries, we have decided that we need to be therefore at net-zero
emissions as well. The other thing, of course, is there is a
business opportunity here," he said.
Shell's net-zero strategy
Shell recently released a detailed strategy on achieving
net-zero carbon emissions, called "Our climate target."
"It's a 100%-reduction in our global carbon footprint, which is
1.7 gigatons, and it needs to come down to zero. Of course, we have
interim milestones [such as] a 45% reduction by 2035 and
[near-term] milestones like this year, next year, and the year
after. These near-term milestones are [linked] to a very
significant part of a long-term incentive program," he said.
While it is clear to the company it needs to significantly
change its product footprint, the business strategy underpinning
the plan is challenging, van Beurden said.
Shell is in the process of laying out all the actions and
decisions that the company plans to take in the following three
decades. "You cannot get to zero by just taking the carbon out of
making hydrocarbons. We are going to very significantly increase
demand for low-carbon fuels in the energy mix, and we are going to
very significantly increase the amount of electricity we sell," van
Beurden said.
"We are going to very significantly play the game in providing
electricity for mobility for two-and-a-half million [electric
vehicle] charging points by the end of the decade. We are going to
be a major player in biofuels and a large player in nature-based
solutions, and we are going to be a material player in carbon
capture and storage." One message Shell is delivering to its
customers is that decarbonization can be profitable for them as
well, van Beurden said.
"When I talk about opportunities, there is more money to be made
in working with our customers on their problem sets than just
generating a new type of commodity which is a green commodity.
That's where I think the strength of the company, is by paying
close [attention] to customers," he said.
Gas and renewables
Daniel Yergin, vice chairman at IHS Markit, who moderated the
session, asked van Beurden whether growing the gas business remains
part of Shell's plan and whether it is looking into renewables such
as wind and solar. "No, when it comes to renewables, it is broader
of course. It is basically electricity […] we really don't mind too
much where it comes from. It is electricity, it is hydrogen, it is
biofuels. Again, these are going to be the areas where we see most
of the growth in the product mix that we will sell," van Beurden
said.
"The fact that we believe our oil production has peaked [in
2019] is not because we believe it has peaked in the world," he
said.
For Shell, the decision has been to invest more of its capital
in non-oil energy. "Basically, ... you have to make choices," he
said. The net effect will be a more concentrated portfolio of
oil-producing assets in its best prospects, he said.
"But we do believe that we can still continue to invest in gas
because gas will continue at least a decade longer than oil and
will decline much slower than oil will decline simply because of
its application, but that is not a strategy per se, it's an outcome
of the strategy," he said.
Partners and solution providers
Scott Kirby, chief executive of United Airlines, who sat on the
same panel, described the net-zero topic as a "defining issue for
this generation to solve" and one that is "deeply personal" to
him.
"It's been said it's just the right thing to do. For the most
part, it is as simple as that for us. I also think that for people
in leadership like us, [we need] to talk honestly about the real
scale and scope of the problem.… Our children and grandchildren are
going to judge us based on how we do in solving the problem," he
said.
But Kirby was also quick to point out the tendency for people to
discuss such topics with the intention of getting their name in the
media rather than finding real solutions.
"What is unique about this moment is that companies … that are
our partners … are either a producer of hydrocarbons or consumers
of hydrocarbons and they are focused on solving climate change.
They have to be a partner and solution provider," he said.
Sequestration
United Airlines sees sustainable fuels as an important part of
the solution for carbon emissions, but it has encountered
challenges when using hydrogen power for its short-haul, small
aircraft service.
Hydrogen lacks the energy density to be appropriate for bigger
airplanes, he said. "There is not anything even on the drawing
board. It's going to alter jet rules. That means a combination of
sustainable fuels, and I think it is important that we source [a]
feedstock of sustainable fuel that is not taking arable land, which
can otherwise be used for food production service," he
explained.
"So, we focus on sources of feedstock that are not otherwise
harmful to the environment," he said.
United Airlines uses a combination of solid waste and cooking
oil for its biofuel feedstock in addition to industrial gases,
according to Kirby. The company is also exploring the use of algae
because it is a scalable feedstock. "Algae is tough, the science
exists, but getting it to be economic, and work, is really
difficult. I don't think there is an answer yet," he admitted.
With finding sufficient resources to make enough biofuels a
challenge, United Airlines believes that hydrocarbon fuels will
still be part of the aviation mix. And that expectation brings it
to offsets of carbon as part of its package of answers. "[This] is
why we are saying, we are going to be 100% green, for every net
carbon molecule that comes out of the back, we're going to put one
in the ground," he said. "That's how we get to [carbon]
sequestration ... Perhaps it is the most important point that we
need to get through to them. Policymakers and others need to solve
this problem."
Cooperation
Cooperation and a comprehensive approach are needed, Shell's van
Beurden concluded.
"The airlines, fuel suppliers, airports, engine manufacturers,
and regulators [need] to come together to figure this out," he
said. "For now, the only available solution at scale in the near
term is basically to have drop-in biofuels made from sustainable
sources."
"We have the technologies available to deploy here, [but] they
are not commercially viable, without any support at this point in
time … but I do believe we can bring that solution to scale if
there is a sector that deals with the issues of competition, carbon
leakage, and everything else that would otherwise disrupt how
companies like [United Airlines] and Shell could try to make this
work."
But urgency is part of the equation as well. "Only over time do
I believe you can get to truly zero carbon fuels like fuels
produced from direct air capture, green hydrogen, or hydrogen as
such or electrical, but I think it is going to be a few decades
out. We have to act now. We do not have the luxury to rack up a few
decades worth of emissions before the end solution presents
itself," he warned.
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