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.