27 Sep 2019 The dilemma facing Shell CEO searching for a purpose beyond oil
What is the right business plan for an oil and gas company as people’s awareness about the threats of climate change leave no space for fossil fuels in the future?
In May 2017, Shell top brass discussed the future of the world’s biggest dividend payer to keep and grow company’s value and profitability in the future. As to September 2019, Shell has prioritised gas business over oil, focused on oil-free chemicals and worked to become the worlds’ largest clean power producer.
Furthermore, Shell has developed zero carbon emission projects like wind and solar-power projects, encouraged the hydrogen electric energy and invested in electric vehicle charging and home energy storage start-ups.
However, the trade-offs are not sufficient. Shell’s clean energy investments are incomparable with traditional oil and gas businesses, and its actions are greenwashing. Even though the oil and gas business could expose Shell to oil price collapse, being held legally responsible for physical property and coastline damages, abandoning Shell’s core businesses is a bigger risk that Shell boss Van Beurden is not willing to take.
Instead, he feels legitimate to act this way. For example, WoodMac forecasts that in 2040, coal, oil and gas will still contribute about 85% of global energy supply. Moreover, as long as Shell can return $25bn to the owners of the company every year, it is easy to grasp why Mr. Van Beurden says he could not live with the regrets of abandoning such lucrative business.
However, Shell and other major oil and gas companies have limits to what they can or cannot control. Public opinion’s trust is not so easy to win. To win people’s trust is to accommodate their values. But, values, like everything that has a history and therefore changes, have transformed. Therefore, what was at stake in the past it is not the same thing that it is at stake today. After all, not all of us hold Shell shares.
For further information, see the following link:
https://www.ft.com/content/45a9b82e-df73-11e9-9743-db5a370481bc