Shell has abandoned plans to cut oil production every year for the rest of the decade, in a change of approach to firmly target fossil fuels and increase payouts to shareholders under its new chief executive, .
The FTSE 100 oil company announced on Wednesday that output would remain stable until 2030, after previously saying it would cut production by around 1[ads1]-2% each year.
Shell will invest $40 billion in oil and gas production between 2023 and 2035, compared with between $10 billion and $15 billion in “low carbon” products.
Sawan was named Shell’s chief executive in September, replacing Ben van Beurden who had surprised some activists and investors by setting a target of achieving net zero carbon emissions by 2050, albeit with only gradual reductions in fossil fuel production planned .
Since the takeover, Sawan has emphasized financial returns for investors. He told investors at the New York Stock Exchange that he wanted to “reward our shareholders today and well into the future”. While he said he wanted to reduce emissions, he also repeatedly emphasized his belief that oil and gas would be needed in the long term.
In its 2021 strategy, Shell said it would aim for “an expected gradual reduction in oil production of around 1-2% each year, including disposals and natural decline”.
However, Shell claimed on Wednesday that the previous strategy did not involve a commitment to cut oil production steadily.
It said it had effectively hit the target within seven months of the announcement due to the $9.5 billion sale later in 2021 of its interest in a project in the Permian Basin, Texas. Shell’s production was 1.9 million barrels of oil per day in 2019, falling to 1.5 ml per day – a 21% decrease.
A Shell spokesperson: “Our target to reduce oil production by 2030 has not changed. We just met it eight years too early.”
Shell’s announcement came the same day the International Energy Agency, a respected global energy watchdog, said the peak for global oil demand would come before the end of the decade. In 2021, the agency said the development of new oil and gas fields had to stop immediately to reach the goal of global zero carbon emissions by 2050 and avoid climate collapse.
Climate campaigners criticized Shell’s renewed focus on fossil fuels. Carla Denyer, co-leader of the UK Green Party, said: “Shell targeting more fossil fuel production and increasing payouts to shareholders is pure climate vandalism and a sign that fossil fuel companies will not steer us towards the greener future we want all without political leadership from national governments.”
Sawan announced a strategy update in New York where Shell will focus on cutting costs and targeting its most profitable areas.
Shell said it would increase its gas production operations while keeping oil production steady, and stabilize liquids production until 2030.
It also announced a 15% planned dividend increase and a pledge to return $5 billion to investors through a share buyback.
Sawan confirmed the company’s previous commitment to produce net zero emissions by 2050, although the company warned that this was unlikely to be achieved “if society is not net zero in 2050”.
As part of those plans, Shell said it would invest between $10 billion and $15 billion in 2023 to 2025 on “low carbon” products, including biofuels, hydrogen, electric vehicle charging and carbon capture and storage.