LONDON – Royal Dutch Shell PLC said it would begin to reduce oil production, ending a decades-long strategy centered on pumping more hydrocarbons, while it and other energy giants seek to capitalize on a move to low-carbon energy.
The move marks a historic shift for the company, which after starting to import sea shells began selling kerosene in the 19th century and has since sought to expand its oil business. Until recent years, she pursued costly and environmentally challenging projects in the Canadian oil sands and Alaska, driven by fears that the world could run out of oil. Now, he sees demand faltering long before oil runs out.
Shell said on Thursday that its oil production has already peaked and that it expects a 1-2% drop per year, including asset sales, reducing its long-term exposure to commodity prices. The company plans to cut production of traditional fuels, such as diesel and gasoline, by 55% in the next decade. At the same time, the company said it would double the amount of electricity it sells and deploy thousands of new electric vehicle charging points.
The strategy follows similar plans by rivals BP PLC and Total SE to reduce their dependence on fossil fuels while expanding on renewable energy, such as wind and solar, in part in response to growing regulatory and investor pressure. In contrast, American companies Exxon Mobil Corp. and Chevron Corp. they do not plan to invest substantially in electricity, and both say the world will need large quantities of fossil fuels in the coming decades. Exxon, however, plans to invest in technology to reduce carbon emissions.
However, the pivot for low-carbon energy is seen by analysts as a challenge because it requires investments in areas where large oil companies do not necessarily have a competitive advantage and which have lower returns. Renewable energy projects typically generate returns of around 10%, compared to the traditional 15% directed at oil and gas projects.