Was it a golden gamble? Almost ten years ago, Shell acquired the British gas company BG Group for 70 billion dollars. That takeover was not only remarkable because of the colossal amount involved. Shell also partly shifted its course. With the takeover, Shell instantly became a global player in liquefied gas, liquefied natural gas (lng). Until then, it mainly traded in pipeline gas (and oil).
One of the calculations at the time: liquid gas could well become a lucrative trade. Europe wanted to get rid of Russian gas. And for other countries it could be a nice 'interim step' in making their energy supply more sustainable. Quickly replacing fossil energy with clean energy sources (such as wind and sun) is impossible for poorer countries, because it is too expensive or simply not available. But because natural gas is cleaner than oil, steps can still be taken to combat climate change.
Shell is now reaping the benefits of that strategy. Upon the publication of the annual figures Thursday showed that it has once again had an excellent year, largely thanks to its strong focus on LNG. In 2023, Shell made a profit of more than 28 billion dollars. This is admittedly (significantly) less than in 2022, when it made almost $40 billion in profit. But then there was a Russian-induced energy crisis, and energy prices reached extreme levels. Apart from the record profit of 2022, the current profit is the highest since 2011. In the press release, Shell speaks of “exceptional results” at the LNG division.
The overall result was so good that there was room for 'presents' for shareholders. Dividend payments will increase by 4 percent, after having already been increased last year. And next quarter, Shell will again buy back shares, for a total of 3.5 billion dollars. As a result, there are fewer shares in circulation and Shell's total profit is therefore spread over a smaller number of shares. As an investor you will receive more dividend per share.
Eager to deduct
Liquid gas has indeed become the 'transition fuel' that Shell hoped it would become. Countries all over the world are committed to realizing their sustainability plans, especially Asian countries such as China. But it is also in great demand in Europe. Germany has built new import terminals after it decided to close its nuclear power plants and was subsequently cut off from Russian gas. The Netherlands sees it as an alternative to Groningen gas.
Critics don't like that – for example, Milieudefensie, in response to the annual figures, criticizes the lack of 'real' greening by Shell. “Wael Sawan is still pumping the brakes when it comes to sustainable investments and is now launching major new fossil projects in Brazil and the Gulf of Mexico. Time is running out, but Shell refuses to change course and is racing at full speed towards the destruction of the earth like a tanker without a rudder,” said Sjoukje van Oosterhout of the environmental movement, who faced the oil and gas company again in court in April. states, during the appeal in the climate case that Milieudefensie filed against Shell three years ago.
But you can also look at it differently. Other fossil energy companies did not even make the 'gas-as-transition-fuel' step. They held – and hold – firmly on oil. The American oil giants Exxon and Chevron recently made tens of billions of dollars in acquisitions of other oil producers.
And yes, Shell's truly 'green' activities are still negligibly small. But it is not the case that it is only oil and gas that matters at Shell. For example, Shell started building a large hydrogen factory in the port of Rotterdam last year. That same year it also bought a major Danish biomass producer for $2 billion. And last week announced Shell has announced that it will convert an installation at a German chemical park so that 'high-quality' lubricating oil and coolants can now be produced there instead of traditional fuels.
“The latter is a really exciting step,” says market analyst Jean-Paul van Oudheusden of eToro, a broker for private investors. According to him, Shell is responding to the rise of artificial intelligence, among other things. “OpenAI CEO Sam Altman recently warned during the World Economic Forum in Davos that humanity completely underestimates how much energy artificial intelligence will need. With specialist refrigerants you can reduce energy consumption, and therefore also CO2emissions. If artificial intelligence really takes off, this is a 'green' opportunity for Shell.”
Van Oudheusden sees it as careful pre-sorting by Shell. It may not be big, not too visible either – and in the eyes of the critics, far too little too late. But they are all 'moves' on the chessboard, he thinks. Van Oudheusden: “I actually think that Shell is waiting for the next 'big step', like with BG Group at the time. And I don't expect Shell to follow Exxon and Chevron. I rather think that there may be a next 'sustainable' step coming.”
Whether that is the case remains to be seen. In any case, March 14 is another important moment. Then Shell comes up with a 'strategy update'.
In the meantime, CEO Sawan says that he is now mainly focused on making Shell 'more valuable'. Partly because investors seem to find the shares of Exxon and Chevron more attractive. He cuts costs where he can, and stops everything that does not yield enough returns.
In a video Sawan gave an example of what is being done to make Shell as profitable as possible. Shell has installed “millions of sensors” on installations worldwide that collect “more than 5 trillion rows of data” so engineers can quickly identify and fix problems.
But in the background, small and larger steps are also being taken that should help Shell “position itself for growth in the future”, according to Sawan himself. It is clear that maneuvering is in full swing. Sawan is determined to win the sustainability battle with his fossil competitors. “Our goal is to be the most attractive investment during the energy transition,” he repeated his now permanent mantra again on Thursday.
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