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Shell Hits Peak Oil Production, Will Reduce Output

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Oil giant Royal Dutch Shell announced that it already hit peak oil production. In a statement released Thursday, the company said its carbon dioxide emissions peaked in 2018 at 1.7 gigatons per year. Meanwhile, Shell’s oil production peaked in 2019. This means that they will end their decades-old business strategy focused on oil. Instead, Shell, along with its Euro rivals, will accelerate their shift to low carbon sources of energy.

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Reduction in Fossil Fuel

The decision is a historic shift for the 113-year-old company, which started out as a seashell importer. Recently, The company said Thursday that it hit peak oil production, and expects output to decline by 1 to 2% a year. This includes declines in asset sales and reductions in its exposure to commodity prices for the long term. Shell plans to cut back on the production of gasoline and diesel by 55% within the next ten years. Meanwhile, the oil company will double its electricity output and roll out thousands of new vehicle charging points.

European-based rivals BP PLC and Total SE also declared they will reduce their fossil fuel dependence and focus on renewable energy such as solar and wind. In contrast, US companies Exxon Mobil and Chevron Corp have no plans to change strategies or reduce production output for oil-based fuels. Exxon though announced plans to reduce its carbon emissions.  

Pivot to Low-Carbon

The pivot to low-carbon energy will require investments that potentially generate lower returns compared to fossil fuels. Renewable energy projects generate returns of 10% on average. Meanwhile, oil and gas projects earn 15%. This dampens investor interest, especially given that the pandemic reduced demand and cut dividends. Share prices of Shell went down 35%, while BP fell 45% and Total 24%. 

Shell allayed investor concerns on its pivot, saying that fossil fuel production remains a major revenue source into the next decade. It also re-upped its commitment to increase dividends by 4% annually. “By accessing the enormous opportunities that the future of energy holds we will create the conditions for future share price appreciation. We expect to radically transform Shell over the next 30 years,” remarked Chief Executive Ben van Beurden.

Trading and Selling Electricity

Shell declined to give targets for its renewable energy production. The company believes it can make more not from power generation, but from trading and selling electricity.  However, Shell did confirm it will allocate 25% of its budget, equivalent to $5 billion to $6 billion, for renewable energy and marketing. Shell sells more power than it produces, similar to its fossil fuel strategy. In fact, Shell sells around three times as much of the fuels as it produces. Shell owns UK power supplier First Utility, EV charging company Ubitricity, and battery firm Sonnen.

Shell won’t leave the oil and gas business entirely. It plans to invest $8 billion a year on oil-and-gas production, particularly on high-value projects. Also, the company will front an additional $4 billion a year on the integrated-gas business, including liquefied natural gas(LNG). Shell plans to add seven million metric tons of LNG production within the next 5 years.  

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Shift to Renewables

The strategy to shift to energy renewables is happening at a time when oil companies are trying to reduce their debt. Shell hopes to pare down its debt from $75.4 billion to $65 billion. It also plans to dispose of assets at $4 billion a year to help.

Watch the WION news video that reported oil giant Shell’s profit slumps in 2020 as the pandemic bites:

Do you support the idea that oil production already peaked, and it’s time to shift to renewable energy?

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Do you agree with Shell’s strategy to shift to renewable energy? Will this accelerate the world’s shift for less dependence on fossil fuels? Let us know what you think about this energy shift. Share your thoughts in the comment section below.

15 Comments

15 Comments

  • D Krumenaker says:

    Probably no since China ,India and other developing countries will continue to utilize fossil fuels. The United States is still very dependent on fossil fuels. Obama tried to sell this global warming hypothesis and it didn’t sell them and I’d still inconclusive despite the doomsday forecasters.

  • Kenneth Dolph says:

    The existing renewable sources are expensive and if the total energy cycle is evaluated from a total engineering perspective it will not replace fossil fuels. Take for example electric powered vehicles. If you take into account the percentage of the electricity generated by carbon dioxide releasing fuels and the BTU efficiency lost in electricity generation and in loss during transfer I calculated that the electric car is only 10% less in carbon dioxide release as compared to gasoline. If we are serious about dropping carbon dioxide amounts in the atmosphere in a short timeframe we need to invest into carbon sequestration both at the power houses and directly from the atmosphere, as well as implement renewables.

  • Lynn Beaver says:

    I am totally in favor of doing what we can within reason to help the environment. There’s a bunch of wackos and naysayers out there that are basically full of crap. The Biden ministration is totally out of line with what they’re trying to do it will cost hundreds of thousands of jobs and they will not magically appear in another sector of the economy the sooner we can ride out this administration and get back to more common sense approaches the better off this country will be. China India and various other countries have no intention of cutting their pollution rights. They have too many people and too many people are dependent on the way they are doing it now we cannot make up for the lack of cooperation from around the world. All the world wants is for the United States to pay for what ever gets done and then they do not have to abide by it.

  • DRM says:

    God put fossil fuel on this earth for us to use. God put TREES on earth to absorb pollution and give off OXYGEN. So if you cut down a tree plant another and life will go on just like it always has.

  • Vicky says:

    Our eyes are focused elsewhere than where they should be! The super wealthy and democrats are destroying our nation—-that’s right!! They are, BUT, our focus has been taken off the fact that Jesus is coming right soon, and we aren’t prepared! Read your Holy Bible! It tells that all this would happen.

  • Lewis Lawhorn says:

    I agree with Lynn Beaver

  • Sharon says:

    Joining the Paris Accord is another mistake Biden is making. We must curb our emissions by 2030 while India and China have until 2050. How unrealistic is Biden? Already, he has practically destroyed oil and gas production in this country where we were becoming #1 and not dependent on any other country. Everyone is up in arms about the Keystone pipeline but what about the other drilling on public and private lands? PA has a lot of natural gas production. All workers will lose their jobs, too. Just think how oil and gas will get to the people now–trucks and rail cars. I would think they are more dangerous over land than pipelines. They want solar which is still too expensive for the normal homeowner to buy; and wind machines which not only hurt migration patterns or kill birds, need maintenance and are very noisy and want to put them in the ocean which would hurt migration patterns of fish. Would ht warm the ocean even more? Who knows? As for emissions, they have been coming down gradually over the last 5 years. We don’t need the Paris Accord. This is just another radical progressive branch of the Biden administration. Plus, the voices are getting louder to shut down all the pipelines. Then what? You can’t stop a form of energy production when you have nothing to replace it.

  • Anonymous says:

    Sorry, but I couldn’t find BIDEN anywhere in the Bible, but I thought I saw Trump as the devil’s advocate.

  • Ed says:

    I agree with DRM and Vicky.

  • Tom says:

    Ok I’m seeking some SELF thinkers out there, and I’ll go slow.
    WHAT feeds everything green on the planet.
    Come on you know the answer, you can prosess this on your own. We dont uncle sam to answer.

  • Anonymous says:

    no

  • Ron says:

    The only reason that solar energy and electric cars are even attractive are th subsidies. They can not stand on their own and when considered withe the entire process, they are not green at all. rather grey to black. You can not name one program that the Democrat/Progressive/Communist party (yes they are one) that has created or supported that has not failed or produced undesirable results, not one. They have driven the country apart, they are turning America into a Communist state, they have turn the system of justice into a kangaroo court and legislative bodies, they have redefined culture, art, and society into something ugly and meaningless. The green program is just another example of a pie in the sky left program that will fail, as have their welfare programs, the education system, the voting process, the immigration approach, etc etc

  • JR says:

    Anonymous. you didn’t see the halo above Biden’s head?

  • S D LAWRENCE says:

    As a 68 year old actively involved in politics all my life – I’m proud and happy to see that there are so many of you who are intelligent, thoughtful individuals who can think for themselves – and aren’t the SHEEP who follow the Democrats.
    D KRUMENAKER
    KENNETH DOLPH
    LYNN BEAVER
    DRM
    SHARON
    RON
    You’ve said it ALL – I don’t need to repeat you.

  • Roger says:

    Until they can come up with a magical flue that can do what we have now or better don’t mess whit what works it will cause all sorts of headaches for everyone not including hardship thank you

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