Shell has abandoned plans to cut oil production every year for the rest of the decade, taking a firmer approach to fossil fuels and increasing payouts to shareholders under its new chief executive.
The FTSE 100 oil company announced on Wednesday that output would remain stable until 2030, after previously saying it would cut output by 1-2% each year.
Shell will invest $40bn in oil and gas production between 2023 and 2035, including $10bn to $15bn in “low carbon” products.
Chavan was appointed Shell’s chief executive in September, surprising some activists and investors, replacing Ben van Beurten, who has aimed to achieve net zero carbon emissions by 2050 and phase out fossil fuel production.
Since taking charge, Chavan has emphasized financial returns for investors. He told investors on the New York Stock Exchange that “we want to reward our shareholders today and in the future.” While saying he wants to cut emissions, he has repeatedly emphasized his belief that oil and gas will be needed in the long term.
within it strategy By 2021, Shell said it was targeting “a gradual reduction in oil production of 1-2% each year, including divestment and natural decline”.
However, Shell argued on Wednesday that the previous strategy lacked a commitment to steadily reduce oil production.
It said it hit the target less than seven months after announcing it due to a $9.5 billion sale of its interest in a project in Texas’ Permian Basin in 2021. Shell’s output was 1.9 million barrels of oil per day in 2019, and fell to 1.5 million barrels per day – a 21% decline.
A Shell spokesperson: “Our target to reduce oil production by 2030 has not changed. We met it eight years ago.
Shell’s announcement came the same day the International Energy Agency, a respected global energy watchdog, said global demand for oil would peak by the end of the decade. In 2021, the company said the development of new oil and gas fields must stop immediately to meet the goal of global net zero carbon emissions by 2050 and avoid climate disruption.
Climate campaigners have criticized Shell’s renewed commitment to fossil fuels. UK Green Party Co-Chair Karla Denyer said: “Shell’s targeting of more fossil fuel production and increasing shareholder payouts is clean climate destruction and a sign that fossil fuel companies will not lead us to a greener future. We all yearn without the political leadership of national governments.
Chavan announced a strategic update in New York that will see Shell focus on cutting costs and targeting its most profitable areas.
Shell said it would grow its gas production business while keeping oil production stable and liquids production steady until 2030.
It announced a 15% planned dividend increase and will return $5bn to investors through share buybacks.
Chavan reaffirmed the company’s previous commitment to produce net zero emissions by 2050, although the company warned that this is unlikely to be achieved “unless society is net zero by 2050”.
As part of those plans, Shell said it would invest $10bn to $15bn from 2023 to 2025 in “low carbon” products including biofuels, hydrogen, electric vehicle charging and carbon capture and storage.