Introduction from the CEO
It was a significant year for the global community in 2015 with the adoption of the historic Paris Agreement by 195 countries demonstrating a commitment to bring about a lower-carbon energy system.
The year also presented Shell with a difficult business environment. A low oil price meant making some tough choices about our long-term investments. As we continue on this path, I am determined that operating our business responsibly – with respect for people, their safety, communities and the environment – remains a priority. Sustainability, for me, is essential to our responsible operation and to being a valued and respected member of society.
Improving our operations
At Shell, we have long had a strong focus on safety and, in 2015, our safety performance improved in many areas. However, seven people lost their lives at our operations in Nigeria. This deeply saddens me and my thoughts are with the families of those involved. Incidents like these are simply unacceptable.
We made progress in our environmental performance: spills were reduced by around 30% while our total greenhouse gas emissions decreased. We are also making headway to end continuous flaring by 2030, which helps to reduce our methane and carbon dioxide (CO2) emissions. Another achievement was the start of Quest – our carbon capture and storage (CCS) project in Alberta, Canada – that is designed to capture up to 1 million tonnes of CO2 a year from our oil sands operations.
The energy landscape
The shift to a low-carbon energy system is critical but will take time. The meeting of states at COP 21 in Paris at the end of 2015 has set the ambition to limit the increase in global temperature to under 2°C, even if countries move at different paces to achieve their targets. Long-term solutions probably include a hybrid of energy sources where countries will rely on a combination of renewable energy, hydrocarbons and CCS.
We all need to take steps to achieve a sustainable world economy. To achieve a low-carbon society, three main areas must be addressed. Firstly, the world needs to become more energy efficient. This means adopting fundamentally different approaches in areas such as city planning, infrastructure and transport, and better energy efficiency standards. Secondly, there is a need for more renewable energy in the system, working in combination with gas to provide reliable electricity. This involves significantly increasing the use of electricity, including providing electricity to the 1.1 billion people who currently do not have access. Thirdly, the world needs to reduce the carbon intensity of the fossil-fuel share of the energy system.
Today, fossil fuels meet more than 80% of global energy needs. This share will be reduced over time but hydrocarbons will remain a substantial part of the world energy system in the coming decades. Renewable energy sources have a key role to play and should, in future, provide a large part of the world’s electricity demand. But electricity is only a part of our energy system: today it accounts for almost 20% of total energy use. There are still many areas that cannot be met by renewables alone – such as the chemicals used to make so many everyday products.
Supporting the energy transition
Shell can presently best support the transition to a lower-carbon world by working to reduce carbon in the energy system. We urge countries and industries to make the switch from coal to lower-carbon natural gas and we share our knowledge of CCS technologies to keep CO2 out of the atmosphere. We also invest in hydrogen and advanced biofuels as transport fuels.
We continue to work to reduce our own greenhousegas (GHG) emissions over the long term. A screening value for GHG is included in our planned projects to inform our investment choices. Natural gas already makes up about half of the energy we supply. The acquisition of BG Group in 2016 brings more gas to our production. It is likely that over the next few decades, through the global energy transition, Shell will emerge as a different company.
Governments can also make choices that enable the transition: we support energy policies that incentivise businesses and consumers to choose low-carbon options. I believe that greater co-operation across society is needed for a successful energy transition. More cross-sector coalitions – where business, government and civil society work effectively together – will accelerate the pace. The Energy Transitions Commission, of which Shell is a founding partner, brings together leading individuals from the public, private and social sectors to make recommendations that will contribute to the energy transition.
Our Sustainability Report details our activities during 2015. I would like to thank the members of the External Review Committee, consisting of leading sustainability experts, for their input to the report this year. They play an important role in developing our reporting and our thinking on sustainability. We were a founding member of the UN Global Compact and continue to support its 10 principles.
Ben van Beurden
Chief Executive Officer