The Hague, February 11, 2021 − Shell today set out its
strategy to accelerate its transformation into a provider of
net-zero emissions energy products and services, powered by growth
in its customer-facing businesses. A disciplined cash allocation
framework and rigorous approach to driving down carbon emissions
will deliver value for shareholders, customers and wider society.
Shell also confirmed its expectation that total carbon emissions
for the company peaked in 2018, and oil production peaked in
2019.
“Our accelerated strategy will drive down carbon emissions and
will deliver value for our shareholders, our customers and wider
society,” said Royal Dutch Shell Chief Executive Officer, Ben van
Beurden.
“We must give our customers the products and services they want
and need – products that have the lowest environmental impact. At
the same time, we will use our established strengths to build on
our competitive portfolio as we make the transition to be a
net-zero emissions business in step with society.
“Whether our customers are motorists, households or businesses,
we will use our global scale and trusted brand to grow in markets
where demand for cleaner products and services is strongest,
delivering more predictable cash flows and generating higher
returns.”
From today, Shell is integrating its strategy, portfolio,
environmental and social ambitions under the goals of Powering
Progress: generating shareholder value, achieving net-zero
emissions, powering lives and respecting nature. Shell’s reshaped
organisation will deliver on these goals through the three business
pillars of Growth, Transition and Upstream.
FINANCIAL RESILIENCE AND PROFITABLE GROWTH THROUGH
DISCIPLINED CAPITAL ALLOCATION
Shell reiterated its cash priorities to deliver value for
shareholders today while growing value for tomorrow, including:
- Maintain the progressive dividend policy, increasing dividend
per share by around 4% per year, subject to Board approval.
- Retain near-term annual Cash capital expenditure of $19-22
billion.
- Reduce net debt to $65 billion.
- On reducing net debt to $65 billion, target total shareholder
distributions of 20-30% of cash flow from operations; increased
shareholder distributions achieved through a combination of Shell’s
progressive dividends and share buybacks.
- Disciplined and measured capital expenditure growth balanced
with additional shareholder distributions and further strengthening
of our balance sheet.
In the near term we expect to maintain underlying operating
expenses of no higher than $35 billion, and pursue divestments
averaging $4 billion a year. Over time the balance of capital
spending will shift towards the businesses in the Growth pillar,
attracting around half of the additional capital spend. Cash flow
will follow the same trend and in the long term will become less
exposed to oil and gas prices, with a stronger link to broader
economic growth.
THE ROAD TO NET-ZERO EMISSIONS: A COMPREHENSIVE CARBON
MANAGEMENT APPROACH
Shell set out details of how it will achieve its target to be a
net-zero emissions energy business by 2050, in step with society’s
progress towards achieving net zero. This target covers the
emissions from our operations and the emissions from the use of all
the energy products we sell. And crucially, it includes emissions
from the oil and gas that others produce and Shell then sells as
products to customers, making the target comprehensive.
Powering Progress supports the most ambitious goal of the Paris
Agreement on climate change to limit the global temperature rise to
1.5° Celsius. To achieve net zero, Shell:
- will continue with short-term targets that will drive down
carbon emissions as we make progress towards our 2050 target,
linked to the remuneration of more than 16,500 staff. This includes
a new set of targets to reduce our net carbon intensity: 6-8% by
2023, 20% by 2030, 45% by 2035 and 100% by 2050, using a baseline
of 2016;
- expects that its total carbon emissions peaked in 2018 at 1.7
gigatonnes per annum;
- confirms that its total oil production peaked in 2019;
- will seek to have access to an additional 25 million tonnes a
year of carbon, capture and storage (CCS) capacity by 2035.
Currently, three key CCS projects of which Shell is a part, Quest
in Canada (in operation), Northern Lights in Norway (sanctioned)
and Porthos in The Netherlands (planned), will total around 4.5
million tonnes of capacity;
- aims to use nature-based solutions (NBS), in line with the
philosophy of avoid, reduce and only then mitigate, to offset
emissions of around 120 million tonnes a year by 2030, with those
we use being of the highest independently verified quality;
- will work with the Science Based Targets Initiative, Transition
Pathway Initiative and others to develop standards for the industry
and align with those standards;
- starting at the 2021 AGM, submit an Energy Transition Plan for
an advisory vote to shareholders, the first in the sector to do so.
We will update that plan every three years and seek an advisory
vote on the progress made each year.
DELIVERING WITH A PORTFOLIO FOR THE ENERGY TRANSITION
Shell is a customer-focused organisation, serving more than 1
million commercial and industrial customers, and 30 million
customers at 46,000 retail service stations daily. Shell uses its
world-leading brand, global reach and expertise to be a one-stop
shop for both consumer and business customers. A presence across
the entire energy system means we can optimise, scale up, and trade
products in a way that develops markets, drives down costs, and
will help accelerate the energy transition.
Shell’s aim is to build material low-carbon businesses of
significant scale by the early 2030s. Upstream will continue to
deliver vital energy supplies, which will help to generate the cash
and returns needed to fund shareholder distributions while
accelerating investment in the growth businesses to capture new
market opportunities.
In the near term, Shell’s strategy will rebalance its portfolio,
investing annually $5-6 billion in its Growth pillar (around $3
billion in Marketing; $2-3 billion in Renewables and Energy
Solutions), $8-9 billion in its Transition pillar (around $4
billion Integrated Gas; $4-5 billion Chemicals and Products) and
around $8 billion in Upstream. Plans include:
Growth:
Marketing
Target to increase Adjusted Earnings to around $6 billion by
2025 (from $4.5 billion in 2020), achieved by improving the already
market-leading position of the lubricants business, an increase to
40 million customers at 55,000 retail sites (from 30 million at
46,000 sites today) and growth of global electric vehicle (EV)
network from more than 60,000 charge points today to around 500,000
by 2025.
Low-carbon fuels – extend our leading biofuels
production and distribution business, which in 2019 sold more than
10 billion litres of biofuels. Our joint venture Raízen, which
produces low-carbon fuels from sugar cane in Brazil, recently
announced the acquisition of Biosev. This is set to increase
Raízen’s bioethanol production capacity by 50%, to 3.75 billion
litres a year, around 3% of global production.
Renewables and Energy Solutions
Integrated Power – aim to sell some 560
terawatt hours a year by 2030 which is twice as much electricity as
we sell today. We expect to serve more than 15 million retail and
business customers worldwide. We aim to be a leading provider of
clean Power-as-a-Service. We will make our investments go further
by partnering with others with the emphasis for Shell being on
managing clean electrons.
Nature-based solutions – expect to invest
around $100 million a year in high-quality, independently verified
projects on the ground to build a significant and profitable
business to help customers meet their net-zero emissions
targets.
Hydrogen – build on Shell’s leading position in
hydrogen by developing integrated hydrogen hubs to serve industry
and heavy-duty transport, aim to achieve double-digit share of
global clean hydrogen sales.
Transition:
Integrated Gas
Extend leadership in liquefied natural gas (LNG) volumes and
markets, with selective investment in competitive LNG assets to
deliver more than 7 million tonnes per annum of new
capacity on-stream by middle of the decade. Continue to support
customers with their own net-zero ambitions, with leading offers
such as carbon-neutral LNG.
Chemicals and Products
Transform our refinery footprint from 13 sites today to six
high-value Chemicals and Energy Parks and reduce production of
traditional fuels by 55% by 2030. Intention to grow volumes of the
chemicals portfolio and increase cash generation from Chemicals by
$1-2 billion a year by 2030 compared with the medium term. Will
produce chemicals from recycled waste, known as circular chemicals,
and by 2025 aim to annually process 1 million tonnes a year of
plastic waste.
Upstream:
Focus on value over volume, being simpler and more resilient,
continuing to provide material cash flow into the 2030s. An
expected gradual reduction in oil production of around 1-2% each
year, including divestments and natural decline.
CONTACTS
Media International: +44 (0) 207 934 5550
Media Americas: +1 832 337 4355
CAUTIONARY NOTE
The companies in which Royal Dutch Shell plc
directly and indirectly owns investments are separate legal
entities. In this announcement “Shell”, “Shell Group” and “Royal
Dutch Shell” are sometimes used for convenience where references
are made to Royal Dutch Shell plc and its subsidiaries in general.
Likewise, the words “we”, “us” and “our” are also used to refer to
Royal Dutch Shell plc and its subsidiaries in general or to those
who work for them. These terms are also used where no useful
purpose is served by identifying the particular entity or entities.
‘‘Subsidiaries’’, “Shell subsidiaries” and “Shell companies” as
used in this announcement refer to entities over which Royal Dutch
Shell plc either directly or indirectly has control. Entities and
unincorporated arrangements over which Shell has joint control are
generally referred to as “joint ventures” and “joint operations”,
respectively. Entities over which Shell has significant influence
but neither control nor joint control are referred to as
“associates”. The term “Shell interest” is used for convenience to
indicate the direct and/or indirect ownership interest held by
Shell in an entity or unincorporated joint arrangement, after
exclusion of all third-party interest. This announcement contains
the following forward-looking Non-GAAP measures: Adjusted Earnings,
Cash capital expenditure, Underlying operating expenses, and
Divestment proceeds. We are unable to provide a reconciliation of
the above forward-looking Non-GAAP measures to the most comparable
GAAP financial measures because certain information needed to
reconcile the above Non-GAAP measure to the most comparable GAAP
financial measure is dependent on future events some which are
outside the control of the company, such as oil and gas prices,
interest rates and exchange rates. Moreover, estimating such GAAP
measures consistent with the company accounting policies and the
required precision necessary to provide a meaningful reconciliation
is extremely difficult and could not be accomplished without
unreasonable effort. Non-GAAP measures in respect of future periods
which cannot be reconciled to the most comparable GAAP financial
measure are calculated in a manner which is consistent with the
accounting policies applied in Royal Dutch Shell plc’s financial
statements.
Also, in this announcement we may refer to
Shell’s “Net Carbon Footprint”, which includes Shell’s carbon
emissions from the production of our energy products, our
suppliers’ carbon emissions in supplying energy for that production
and our customers’ carbon emissions associated with their use of
the energy products we sell. Shell only controls its own emissions.
The use of the term Shell’s “Net Carbon Footprint” is for
convenience only and not intended to suggest these emissions are
those of Shell or its subsidiaries. It is important to note that as
of February 11, 2021, Shell’s operating plans and budgets do not
reflect Shell’s Net-Zero Emissions target. Shell’s aim is that, in
the future, its operating plans and budgets will change to reflect
this movement towards its new Net-Zero Emissions target. However,
these plans and budgets need to be in step with the movement
towards a Net Zero Emissions economy within society and among
Shell’s customers.
This announcement contains forward-looking
statements (within the meaning of the U.S. Private Securities
Litigation Reform Act of 1995) concerning the financial condition,
results of operations and businesses of Royal Dutch Shell. All
statements other than statements of historical fact are, or may be
deemed to be, forward-looking statements. Forward-looking
statements are statements of future expectations that are based on
management’s current expectations and assumptions and involve known
and unknown risks and uncertainties that could cause actual
results, performance or events to differ materially from those
expressed or implied in these statements. Forward-looking
statements include, among other things, statements concerning the
potential exposure of Royal Dutch Shell to market risks and
statements expressing management’s expectations, beliefs,
estimates, forecasts, projections and assumptions. These
forward-looking statements are identified by their use of terms and
phrases such as “aim”, “ambition”, ‘‘anticipate’’, ‘‘believe’’,
‘‘could’’, ‘‘estimate’’, ‘‘expect’’, ‘‘goals’’, ‘‘intend’’,
‘‘may’’, ‘‘objectives’’, ‘‘outlook’’, ‘‘plan’’, ‘‘probably’’,
‘‘project’’, ‘‘risks’’, “schedule”, ‘‘seek’’, ‘‘should’’,
‘‘target’’, ‘‘will’’ and similar terms and phrases. There are a
number of factors that could affect the future operations of Royal
Dutch Shell and could cause those results to differ materially from
those expressed in the forward-looking statements included in this
announcement, including (without limitation): (a) price
fluctuations in crude oil and natural gas; (b) changes in demand
for Shell’s products; (c) currency fluctuations; (d) drilling and
production results; (e) reserves estimates; (f) loss of market
share and industry competition; (g) environmental and physical
risks; (h) risks associated with the identification of suitable
potential acquisition properties and targets, and successful
negotiation and completion of such transactions; (i) the risk of
doing business in developing countries and countries subject to
international sanctions; (j) legislative, fiscal and regulatory
developments including regulatory measures addressing climate
change; (k) economic and financial market conditions in various
countries and regions; (l) political risks, including the risks of
expropriation and renegotiation of the terms of contracts with
governmental entities, delays or advancements in the approval of
projects and delays in the reimbursement for shared costs; (m)
risks associated with the impact of pandemics, such as the COVID-19
(coronavirus) outbreak; and (n) changes in trading conditions. No
assurance is provided that future dividend payments will match or
exceed previous dividend payments. All forward-looking statements
contained in this announcement are expressly qualified in their
entirety by the cautionary statements contained or referred to in
this section. Readers should not place undue reliance on
forward-looking statements. Additional risk factors that may affect
future results are contained in Royal Dutch Shell’s Form 20-F for
the year ended December 31, 2019 (available at
www.shell.com/investor and www.sec.gov). These risk factors also
expressly qualify all forward-looking statements contained in this
announcement and should be considered by the reader. Each
forward-looking statement speaks only as of the date of this
announcement, February 11, 2021. Neither Royal Dutch Shell plc nor
any of its subsidiaries undertake any obligation to publicly update
or revise any forward-looking statement as a result of new
information, future events or other information. In light of these
risks, results could differ materially from those stated, implied
or inferred from the forward-looking statements contained in this
announcement.
We may have used certain terms, such as resources, in this
announcement that the United States Securities and Exchange
Commission (SEC) strictly prohibits us from including in our
filings with the SEC. Investors are urged to consider closely the
disclosure in our Form 20-F, File No 1-32575, available on the SEC
website www.sec.gov.
LEI number of Royal Dutch Shell plc: 21380068P1DRHMJ8KU70
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