Tue.
Oct 20
2020
Royal Dutch Shell To Cut Costs With Renewables Transition

Image: Photographic Services, Shell International Limited

Royal Dutch Shell will be moving in line with its oil-major peers in a transition to lower carbon energy, Reuters reported yesterday, citing company sources.

The so-called Project Reshape is expected to be completed this year and will overhaul spending toward renewable energy and power, as it cuts up to 40% off the cost of producing oil and gas, or “upstream” costs.

 “We are undergoing a strategic review of the organisation, which intends to ensure we are set up to thrive throughout the energy transition and be a simpler organisation, which is also cost competitive. We are looking at a range of options and scenarios at this time, which are being carefully evaluated,” according to a Shell spokeswoman statement cited by Reuters.

European oil producers are in the midst of a major shift towards alternative energy. London-based BP already took a significant step towards implementing its new green strategy by announcing a $1.1 billion investment into offshore wind generation. Total recently joined a venture to create a battery gigafatory for electric cars, and the Paris-based company’s investor day at the end of this month has already become a subject of curiosity in terms of the company’s future plans.

Government restrictions on carbon emissions are likely to become even more strict as the international community increasingly confronts the effects of climate change. The European Union is set to increase emissions cuts to at least 55% versus 1990 over the next decade, from the current 40% target, and use green bonds to finance the transition, European Commission President Ursula von der Leyen said on Sept. 16. The EU seeks to reach net zero emissions by 2050.

Moves into renewables by European-based oil majors appear to be real, and not a case of making a virtue out of necessity. A collapse in the oil price would dictate spending cuts regardless. At the same time, keeping renewable energy plans, which generally have a lower profit margin than oil projects, shows they have moved to the top of the internal pecking order.

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Stephen Bierman

By Stephen Bierman

Stephen Bierman is an energy, markets journalist and the editor of New Economy Observer.