Shell Walks Back Its Renewables Pledge

Shell’s head of renewable generation, Thomas Brostrom, is leaving the company. The move comes two weeks after chief executive officer (CEO) Wael Sawan reneged on Shell’s energy transition plans. Sawan, who took office in January, announced on June 14 a shift back to oil and gas production while paring back investments in renewables following investor pressure to focus on the most profitable businesses.

The shift away from renewables comes after Shell reported adjusted full-year earnings of US$39.9 billion last year — more than double the US$19.3 billion it posted in 2021.

Shell’s new chief is putting short-term gains over long-term growth by caving to shareholder profit demands even though the company’s shift to sustainable energy has not left them empty-handed. Shell returned US$26 billion to shareholders in 2022 through share buybacks and dividend payments. By comparison, it spent around US$21 billion on its low- or zero-carbon businesses last year, or approximately one-third of total expenditure. Of that, about US$4 billion was invested into its Renewables and Energy Solutions business, which includes electricity generation, hydrogen production, carbon capture and storage, and the trading of carbon credits. Meanwhile, Shell invested about US$12.4 billion into its integrated gas and oil exploration units in 2022.

Due to the ongoing war in Ukraine and resulting increase in energy prices, Shell has experienced a solid uptick in its oil and gas returns. Shell’s record earnings in 2022 were driven largely by its gas trading business. Just over 40% of Shell’s full-year earnings came from its integrated gas business, which includes liquefied natural gas trading operations. That unit alone was responsible for almost two-thirds of Shell’s US$9.8 billion in the final three months of 2022.

Now, shareholders want even more. But at what cost? Eventually the war in Ukraine will end and European energy supply and demand will stabilize, bringing with it flattening energy pricing. Meanwhile, humanity’s impact on the planet continues to worsen.

Cleaning The Slate

Brostrom became head of renewables in February 2022. He joined Shell from offshore wind giant Orsted in August 2021 to lead offshore wind as the company planned to rapidly grow its wind and solar operations as part of a strategy to cut greenhouse gas emissions under previous CEO Ben van Beurden. Following Brostrom’s departure, Sawan introduced a new structure to the company’s top leadership that eliminates Brostrom’s role.