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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
1.5deg 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
(END) Dow Jones Newswires
February 11, 2021 02:15 ET (07:15 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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