Shell's Greenhouse Emissions Rise Despite Efficiency Strides

Royal Dutch Shell plc RDS.A, in its latest released sustainability report, declared that its greenhouse gas emissions were the highest last year since 2014, raising alarm for various energy consumers, investors, environmentalists and citizens who want companies to resort to cleaner energy practices.  

Glaring Greenhouse Emission Numbers

Per the report, Shell’s direct emissions ticked up to 73 million tons of carbon dioxide in 2017 compared with 70 million tons in 2016. Indirect emissions also increased to 12 million tons last year compared with 11 million tons in 2016.

The European oil giant attributed the higher emission levels to increased output from the refineries that it had acquired in the United States, reopening of its previously shut down manufacturing sites in Singapore and a rise in production from its QGC venture in Australia.  Nearly half of Shell’s direct emissions resulted from refineries and chemical plants, while 45% came from oil and gas production, and the rest from shipping activities.

These figures represent a tough road ahead for the Anglo Dutch giant, which aims to reduce its carbon footprint by 50% within 2050, aligning itself with the goals of the Paris Agreement. Shell carries a  Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Gradual Shift to Cleaner energy

With the energy demand expected to bolster in the coming years and commodity prices rebounding from their historic lows, the oil and gas firms are engaged in boosting their production to meet the burgeoning demand. While the investors appreciate the high revenues and earnings arising from increased production,  they also want the companies to pivot toward a low-carbon future at the same time.

As such, the shift in global climate has prompted many energy companies to adopt climate friendly measures, and invest in low-carbon energy solutions and technologies. Of late, various biggies including Shell, TOTAL S.A. TOT, Chevron Corporation CVX and ExxonMobil Corporation XOM have started to reorient and strategize for adapting to the changing times.  They have started making efforts to decarbonize the energy system with gradual shift to alternative fuels to sustain their business models in order to keep up with the investors’ and green-campaigners’ demand.

While the energy companies attempt to go greener in their activities, stringent regulations and their effective implementations will help in the reduction of carbon emissions in the future, and facilitate effective transition to cleaner and renewable energy sources. The companies should regularly and accurately disclose non-financial metrics that include carbon and methane emissions.

Shell’s Strategic Strides To Address Global Issues

Adapting to the changing times, Shell is successfully reorienting and re-strategizing its business to de-carbonize the energy system. In a bid to generate double-digit returns and maximize the value of its downstream segment, the company is focused on streamlining its portfolio by divesting various projects including Motiva JV, Showa Shell and SADAF petrochemicals.

The company is gradually shifting its focus to natural gas, touted as the cleanest burning fuel that accounts for about 50% of Shell’s total output. Shell’s Prelude Floating LNG project along with some of its projects in Australia, Nigeria, Trinidad and Tobago among others are notable mentions in this regard. The company also invests in a lot of carbon capture and storage projects.

Shell’s New Energies Division, set up in 2016, focuses on new and cleaner sources of fuel and power, battery charging electric vehicles and biofuels. Notably, the company remains committed to invest around $2 billion per year till 2020 to shift its focus toward cleaner and renewable energy sources. Shell’s collaboration with IONITY, New Motion and First Utility, Silicon Ranch deserves mention as it attempts to diversify its portfolio beyond oil and gas. With renewable energy becoming affordable, the oil conglomerate sees potential in developing projects like hydrogen fuel-cells, alternative energies, liquefied natural gas and next-generation biofuels.

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