Shell shocker: Once ‘green’ oil company guts renewables effort

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"Shell shocker: Once ‘green’ oil company guts renewables effort"

I guess you can’t teach an old dog new tricks — even if that trick is the only hope of saving the dog (and human civilization) in the long term.

The last of the faux green big oil companies — Royal Dutch Shell — shocked many yesterday “when it announced plans to scale back its renewable energy business and focus purely on oil, gas and biofuels,” the UK Times online reported.

Jeroen van der Veer, the chief executive, said that Shell, the world’s second-largest non-state-controlled oil company, was planning to drop all new investment in wind, solar and hydrogen energy.

“I don’t expect them to grow much at Shell from here, due to portfolio fit and the returns outlook compared to other opportunities,” he said.

As somebody who has interviewed many Shell executives and written extensively about the company, explicitly praising them for their strategic planning vision and understanding that the future belongs to renewables, I confessed I am a tad surprised myself (see My 1996 warnings and predictions: “MidEast Oil Forever?” — Part I: Drifting Toward Disaster).

But perhaps nobody should be surprised. Shell is, after all, a big greenwashing oil company, which is obviously redundant (see “Investors warn Shell and BP over tar sands greenwashing” and “I see a green wash and I want it painted black” and “Shell spanked for greenwashing ad“).

And Shell understands we are close to peak oil, which means industry profits are going to be huge, at least for a while (see “Shell: Conventional oil peaks within 7 years“). But there is the rub. Consider this seemingly ironic story about Shell’s reserves, from Bloomberg today:

Royal Dutch Shell PLC failed to match all of last year’s oil and gas production with new discoveries, in contrast to smaller rival BP PLC. Shell’s reserve replacement ratio, including oil [tar] sands, fell to 95 per cent in 2008 from 124 per cent the previous year, the company said yesterday in a strategy update.

The future ain’t oil. Indeed, Shell’s Chairman basically acknowledged this when he wrote shareholders:

“Three hard truths still shape our approach,” said Jorma Ollila, chairman of Royal Dutch Shell, in a message to shareholders. “When the economic crisis passes, global demand for energy will continue upward as populations grow and living standards rise; supplies of easy-to-access oil will struggle to keep pace with demand; and an increasing use of fossil fuels will drive up emissions of carbon dioxide (CO2).”

Well, isn’t that precisely why a company that is widely considered to be the best at strategic planning should have a transition plan off of oil?

Sure, hydrogen is a cul de sac (see “California Hydrogen Highway R.I.P.“). But wind and solar are seeing staggering growth (see here and here). And Shell certainly understands they will see even greater growth in the future because of global warming. Yet:

Linda Cook, who heads Shell’s gas and power business, said that wind and solar power “struggle to compete with the other investment opportunities we have in our portfolio”.

And CEO Jeroen van der Veer’s plan makes little sense:

He said that instead Shell would focus its remaining renewable energy investments on biofuels, where it is conducting research into “second generation” fuels, so far with little commercial success.

Biofuels seem unlikely to be a sustainable long-term replacement for oil at scale in a globally warmed world (see “Are biofuels a core climate solution?“). For the foreseeable future, biomass is far better (and cheaper and easier) to use as a direct replacement for coal (see “If Obama stops dirty coal, as he must, what will replace it? Part 2: An intro to biomass cofiring“).

Here are some more reactions to this shortsighted and ultimately self-destructive decision:

John Sauven, the executive director of Greenpeace UK, said that Shell had “rejoined the ranks of the dirtiest, most regressive corporations in the world … After years of proclaiming their commitment to clean power, they’re now pulling out of the technologies we need to see scaled up if we’re to slash emissions.”

A spokesman for the Department for Energy and Climate Change said: “We believe renewables have a strong future as part of the UK and global energy mix in the fight against climate change.”

Shell has invested $1.7billion on alternative energy in the past five years, compared with total capital expenditure of $32billion this year. It holds stakes in 11 wind power projects, mostly in the United States, with the capacity to generate 1,100 megawatts of electricity. It also operates research programmes into thin-film solar and hydrogen technology.

Shell also said that it will maintain its spending on carbon capture and storage projects in Germany, Netherlands, Norway, Canada, Australia and America — most of which also receive state support.

Great. Put your money on CCS — the technology of the future, the distant future (see “Is coal with carbon capture and storage a core climate solution?“).

Note to Shell: The world — joined by Canada — is eventually going to ban production and use of oil from the tar sands once we become truly desperate to stave off 1000 ppm and 5-7°C warming. My guess is that happens no later than 2030.

Royal Dutch Shell, R.I.P. You have written your own epitaph.

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23 Responses to Shell shocker: Once ‘green’ oil company guts renewables effort

  1. NFJM says:

    Shell bought Siemens solar in 2004. Parallel to this, they published a report in which their future energy scenario saw a 30% of energy supply from solar by 2050… This however did not stop them from selling their solar assets a year later, just before the solar market boom.

    There is a quote in my native language which says “No drugstore has a pill against idiocy”.

  2. Bob Wright says:

    A couple other Shell items: They bailed out of the huge “London Array” wind farm project last year for apparent cost and permitting problems. The developers may not have yet found another partner.

    They have applied for enough water rights in the upper Colorado watershed to build and fill a dam needed to supply water to oil shale extraction. It sounds like they have some nifty process where they seal off an area with some sort of liner and pump steam or something extracting and floating the tar to the top. Then move on to the next area.

    It sounds like they plan on staying in petrochemicals to the bitter end. Even coal liquifaction? Better keep an eye on these guys. The southwest can’t sustain even a fraction of what they have done in Alberta.

  3. Bob Wallace says:

    Post “bitter end” is there a “super fund cleanup” scenario awaiting oil companies?

    If so, it might make sense to pull maximum profit out of the corporation while they can, invest in different industries, and walk away from the mess in bankruptcy.

    Just ride this old horse to the ground and grab a new one….

  4. Dan McCuaig says:

    What does Canada have to fear from modest (or even not-so-modest) global warming? Longer growing seasons? Easier sea trade routes? Access to additional natural resources?

    Canada seems uniquely positioned to thrive in a globally warmed world. With its current sparse population and its geographic isolation, it doesn’t even have the serious climate refugee concerns that afflict other far northern countries. In short, why would Canada “ban production and use of oil from the tar sands” just as that oil is set to become extremely valuable?

  5. Craig says:

    Isn’t this good news? It means one less competitor for those creative, visionary entrepreneurs who see an opportunity to grow profitable businesses in alternative, renewable energy. If the opportunity is really as great as claimed, there should be flood of opportunists charging in to pursue that which Shell can’t see. Is it really an objective or priority of the environmental movement to keep Shell Oil healthy and profitable for the long term? Instead of grousing about bad decisions by a sclerotic company, seek out those companies that have a better plan: invest in them, work for them, and buy their products. If you can’t find one that is worthy, start your own.

  6. nsrig says:

    As a race we really exemplify perfect short sightedness. Our govornments are so focused on terrorists suicide bombing when there are companies like shell that are going against all scientific warning and knowingly dooming our planet. This is so overwhelmingly duisgusting I sometimes can’t bear the weight of knowing what is happening to us, we are fucked, fucked, fucked, fucked!!!!! So primative, so idiotic, so painful to watch. Im only twenty years old. I know that you talk about to future generations paying for the mistakes of yours, but this is not some distant reality, we are already paying the costs!!! My fiancee and I have a dream of raising a family, but that dream is ruined, we are both aware of global issues and the thought of our children growing up on a doomed planet is so saddening. All I can do is scream out in frustration!!!!!! YOU FUCKING IDIOTS WHAT HAVE YOU DONE!!!!!!!!!!!!!!!!!

    The point of no return was fifty years ago when the president received the report on his desk informing him of the truth. Those monsters did not yeild to the truth and to this day our decision makers, policy makers, and shitbags in power are all demonic beings in my eyes and the eyes of my generation, we are the innocent ghosts that you have condemmed. And we will haunt you all on your death beds when you have no choice but to accept that concequences of your actions, when you knowingly continued destroying the rarest jewel in the universe, our planet, our home. YOU FUCKING IDIOTS!!! YOU DEMONIC BEINGS!!! YOU SOULESS PEICES OF SHIT!!! I wish i did beleive in god so i could imaging these fuckheads burning in hell for eternity, but I am a realist, I know they will all profit from their crimes, and live lavishly as kings, sqweezing the last drops of life out of our planet and denying future generations, so they can fatten themselves ever more.

    FFFFFFFFFFFFFFFFFUUUUUUUUUUUUUUUUUUUCCCCCCCCCCCCCCCCKKKKKKKKKKKKKKK!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

  7. NFJM says:

    to: Dan McCuaig

    What Canada would lose? let me give you in 30 sec a short draft:

    * Its forestry
    * Part of its agriculture

    Canada could experience some droughts as for rain (water precipitation) you need according to thermodynamics for a mass of air saturated with vapour to meet a colder mass of air. The problem here is that with the polar areas warming much more than the average, you would not get as much rain as you would wish.

    Secondly, the soil in large parts of Canada is extremely poor as the country was one of the last to be covered by glaciers during the last ice age. The level of accumulation of fertile soil is in some centimeters per century… So sure, the place will perhaps be great for agriculture in some centuries. We however need to feed a growing number of people now.

    Canada could probably become a giant country of climate refugees. I am talking here about a number of climate refugees which would dwarf all past migration waves to Canada and even dwarf its present population.
    I am not sure how positive this scenario would be for everybody.

  8. Dan McCuaig says:

    Thanks for the input, NFJM. I don’t find your explanation terribly compelling, though. Say, just for the sake of argument, that I spot you that precipitation in the far north will decline as the polar areas heat up — so what? There wouldn’t be any forestry or agriculture loss to speak of (because there’s no forestry or agriculture to speak of there now), and you’d still get the mineral and petroleum access plus the sea trade routes. Likewise, Canada’s soils aren’t going to be made worse by global warming (except to the extent they’re used more intensively due to longer growing seasons). So your whole argument seems to hinge on a massive wave of climate refugees showing up. From where? Canada borders only one country, and that country is, on whole, relatively sparsely populated, and populated by people who don’t want to leave. Sure, the U.S. will have climate refugees, but they’ll be mostly internal — southwesterners fleeing to the northwest and the like — and Canada can pretty easily close the rest of its borders.

  9. Too bad we are not privy to the internal debates leading up to this group-think blunder. It will be interesting to see how their PR chooses to spin this.

  10. Jonsi says:

    We need exactly what you’ve recently argued Joe: a different economic model. As lunch as a company measures it success benchmarked against it’s competitors, they are going to invest in what is immediately profitable; this means dropping everything else and attempting to replenish their reserves at the expense of other projects, because that is where the immediate value is to shareholders. To me, what does not make sense is that these large companies know how to bring energy to market better than anyone, and their best asset is their intellectual capital. Oil companies have the largest collection of Earth scientist and civil engineering talent in the world at their disposal. While those people are especially trained in petroleum geology and engineering, most of them do possess transferable skills. What is missing is the leadership and business model, which is why I see those truly capitalizing on clean tech coming from outside the industry.

  11. Jeff Wishart says:

    Dan McCuaig:

    Your prediction that Canada will benefit from climate change parrots the views that denier Tim Ball gets paid by the fossil fuel industry to peddle around the country. To people who live a country like Canada that has very cold winters, the idea of warmer weather indeed doesn’t sound so bad. But there are unforeseen consequences of climate change that could easily vastly outweight the supposed benefits.

    For example, have you flown over the interior of BC lately? The sheer number of dead trees that have succumbed to the pine beetle is horrendous to see. The forest has, according to some recent studies, become a net carbon source instead of a sink. The pine beetle has recently shown up on the east side of the Rockies, and thus could march all the way to the east coast, devastating all forests in its path. The warmer winters that have allowed the pine beetle to flourish is one such unforeseen consequence.

    Since we are currently engaged in an experiment with the planet with an uncertain outcome, more unforeseen consequences are likely to occur. The logic that: cold country + a little warmth = benefits for all, while seemingly simple and common sense, is in fact ludicrously imbecile and dangerous.

  12. Harrier says:

    If the situation demanded it, however, could we potentially replant Canada, adapt it to a warmer climate? We could use biochar to increase the nutritive yield of the soil.

    I don’t think global warming will be ‘good’ for Canada. But it could be better there than in some of the southern latitudes, and some adaptation could make it bearable when it does happen.

  13. Jeff Wishart says:

    Harrier:

    I agree that climate change may potentially impact Canada less than other countries. However, because of the looming risk of those unforeseen consequences, the situation may turn out to be like trying to pick out the most benign and painless capital punishment. To base governmental policy and public opinion on wishful thinking is a recipe for disaster: Canada will almost certainly suffer from the drastic changes to its climate along with the rest of the world, and so we need to convince Harper that rhetoric is no longer acceptable when it comes to discussing GHG emission reduction policies.

  14. Dan McCuaig says:

    Thanks, Jeff Wishart, for the thoughtful posts. You obviously are correct that with any significant change comes significant risk, and your pine beetle example may be an instance of such a risk realized.

    My larger point is that, at least in the short- and medium-terms, global warming is likely to create winners (Canada and, more ominously, Russia, for example) as well as losers, and it would be foolish to act under the impression that those likely winners will willingly subvert their own short- and medium-term interests for the long-term health of the planet. I’d be quite surprised (although very pleased) to see Canada outlaw the extraction of oil from tar sands, ever, without being bribed or beaten into doing so by the international community.

  15. Harrier says:

    The sentiments of my comment weren’t really intended to take place in the context of ‘wishful thinking.’ Quite the opposite. It was my attempt to ponder what could happen to Canada in the event of truly bad climate change, like a 3-4C rise in temperatures. Canada’s claimed territory stretches the furthest north of any nation, unless one counts the Franz Josef islands claimed by Russia. If the Earth’s habitable climates recede toward the polar regions, Canada’s northern bounds will become a frenzied frontier of people escaping the desertification of the southern latitudes. In those circumstances, northern Canada is going to have to be transformed into terrain that can support farming, and I was wondering how it might be possible to bring that about.

  16. NORMAL USA says:

    This is great! Shell has finally come to their senses. All the Global Warming Man Made bullshite and green scam projects, Climate Change-blah blah blah…This is good for them as I will now seek out shell station and fill up my SUV everytime for now on! Naive idiots fall for that global warming crap. Get the real facts at NormalUSA.org.

  17. bargreen says:

    “normal????”USA has just encapsulated everything that is wrong with America. Bushthink is no longer in, haven’t you heard? (THANK GOD)
    And to Dan McCuaig, if nothing else about Canada’s losses (and they WOULD be losses) doesn’t touch you, their fishing industry would cease to exist – now I don’t know about you, but I appreciate the ability to have good COLD water fish on my menu. And as far as the benevolent oil companies go, read the article “Scraping Bottom” in the March issue of National Geographic. If you have any decency, it’ll make you sick.

  18. LightBearer says:

    I just saw CRUDE today. Brilliant film, and I won’t be buying Chevron’s gas EVER AGAIN. I encourage everyone else to do the same. We vote everytime we open our wallets or swipe our credit cards, and it is easy to feel helpless, but the fact remains that small changes have large aggregate effects. So do your part. Only buy green cleaning products, including toilet paper that is 100% recycled. If people can’t get the horror of cutting down trees to wipe their ass, they are in some sorry shape. Make no mistake, the Earth is going to PURGE us. We are greedy selfish bastards and we can point the finger and blame, but we need to take a hard look at what we use and consume and are doing. Without a concerted effort to use less, our species is going to slam into a brick wall that much sooner. The greed, corruption, and lies are all going to be dealt with, and in the end, all of the so-called wealth of those at the top is going to be worthless. Picture famine, disease for which there is no treatment, flood, fire, and the violence that people are going to do to each other in this state of profound chaos and you start to get a glimpse of what is coming….not in 50 years….not in 10 years….within the next two. As it begins to get really crazy, see it as the new beginning, not the end. Peace and love to all of my brothers and sisters even those who are selfish and destructive, for we are ONE, and I pray for the collective awakening.

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