Royal Dutch Shell

Royal Dutch Shell

05 April 2018Reading time: 3 minutes

By the end of March, Shell presented their scenario study ‘Sky’ which discusses the worldwide goal to be climate neutral in 2070. According to the company this can only be realized if all the world leaders make drastic changes. Only Co2 restricted taxes and support for renewable energies won’t be enough. Shell claims that also largely scaled technologies are essential to reduce emissions and greenhouse gases in the coming decades. This is necessary because the demand for energy will continue to grow. Coal will continue to play an important role in the coming years, because renewable energy does not yet compensates this demand enough. Shell also expects that after fifty years from now, the oil production still will be approximately 50-60 million barrels per day, while the gas usage will decline after 2040. Shell expects a shortage of liquefied gas (LNG) in the middle of the next decade due to a possible rising demand. Throughout 2017 the demand for liquefied gas was 293 million tons, which is an increase of 29 million tons compared to 2016. According to Shell, this shortage could only be solved by implementing new LNG projects.

Because of the persistent demand, Shell continues to focus fully on oil and gas with special attention for the so called Downstream activities. This includes marketing, sales and refining. This division realized a net profit of USD 9 billion last year. Shell wants to invest USD 7-9 billion in Downstream annually. Within the next seven years Shell plans to open 11,000 gas stations, mainly in emerging markets in Asia and Latin-America. The company also wants to open 5,000 new shops at gas stations. With these investments Shell aims to realize a net profit increase of USD 1.5 billion within the next seven years. The company hopes that the Downstream division will generate a free cash flow of USD 9-12 billion in 2025, based on an oil price of USD 60 a barrel. However the future development remains to be seen.

Furthermore Shell continues to focus on shale gas. Early March Shell and investment company Blackstone together made a bid of USD 10 billion on the shale gas and oil activities of mining company BHP Billiton. Shell is not the only bidder and therefore it remains to be seen if Shell will win this battle. The company beside this has announced to continue to invest in shale gas for the coming years . Future developments are subjected to several political, industrial and sector specific, as well as economic factors. Investors should consider these risks when making their investment decisions. Developments can be different at any time than investors anticipated on, which could result in capital losses.

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18/10/2019 16:07:09