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Delivering our energy transition strategy

To ensure the resilience of our Powering Progress strategy, our responses to the risks and opportunities identified are:

  • delivery through our integrated business model;
  • decarbonisation of our energy value chains and operations; and
  • a demand-driven decarbonisation approach – recognising that we need to work with our customers to identify low-carbon energy solutions for their energy demands in the sectors where we have competitive advantages.

Our net-zero target includes emissions from our operations, as well as from the end-use of all the energy products we sell. We will seek to reduce emissions from our own operations, including the production of oil and gas. More than 90% of the total emissions we include within our NCI boundary are indirect emissions associated with third-party products and end-use emissions of energy products we sell, so we are also working with our customers to support them in transitioning to low-carbon products and services. Our integrated approach allows us to withstand volatility in oil and gas markets. Our financial framework is based on continued capital discipline, capital flexibility and a strong balance sheet.

  • In Integrated Gas, we are growing our world-leading liquefied natural gas (LNG) business. We see continued strong demand for LNG, especially in Asia, and plan to grow our LNG business by 20-30% by 2030 compared with 2022. LNG provides energy security and flexibility because it can be easily transported to places where it is needed most. LNG is a critical fuel in the energy transition and plays an important role as a lower-carbon alternative to coal for industry, and provides grid stability alongside wind and solar power in electricity generation.
  • In Upstream, we continue to focus on more value and less emissions and expect that our oil production will remain stable through to 2030. The oil we are producing will increasingly come from our world-class deep-water business. Through innovative designs, our deep-water platforms are producing higher-margin and lower-carbon barrels. As we work towards net-zero emissions, we will continue to approach capital and carbon allocation with discipline and focus.
  • In Downstream and Renewables and Energy Solutions, we are making clear choices and changes to enable this business to thrive through the energy transition. We are focusing on developing low-carbon energy and solutions where we have competitive advantages and are starting to see increasing demand. We are focusing on value over volume across all our businesses in Downstream and Renewables and Energy Solutions, while driving both our emissions and our customers' emissions lower.
  • We are repurposing our refining portfolio to focus on four regional Energy and Chemicals parks, which we are transforming into the low-carbon hubs of the future producing biofuels and hydrogen. Our energy transition plans for this decade across our Downstream, Renewables and Energy Solutions business are focused on: growing our electric vehicle charging business; expanding our biofuels business; continuing to grow our integrated power positions, and developing technologies related to CCS and carbon removals.

See "Outlook" for more information.

Our research and development (R&D) activities are also key to achieving our net-zero emissions target. They are an important way to address the technology risk as mentioned in the "Transition risk and opportunities" section.

In 2023, our R&D expenditure on projects that contributed to decarbonisation was around $628 million, representing about 49% of our total R&D spend, compared with around 41% in 2022. This includes expenditure on reducing GHG emissions:

  • from our own operations, for example, by improving energy efficiency and electrification;
  • from the fuels and other products we sell to our customers – for example, biofuels, synthetic fuels and products made from low-carbon electricity, and hydrogen produced using renewable sources;
  • by carbon capture, utilisation and storage applied to hydrogen production from natural gas and other carbon emissions;
  • by researching nature-based solutions to offset emissions; and
  • for our customers through renewable power generation, storage, e-mobility and other electrification solutions.

Examples of R&D areas other than decarbonisation, include safety, performance products such as lubricants and polymers, automation and artificial intelligence.

Decarbonising our value chains and operations

We will seek to base the decarbonisation of our value chains and operations on a deep understanding of the decarbonisation strategies and plans of our customers and users of our energy products. We are focused on decarbonising our own operations by:

  • making portfolio changes such as acquisitions and investments in new, low-carbon projects. We are also decommissioning plants, divesting assets, and reducing our production through the natural decline of existing oil and gas fields;
  • improving the energy efficiency of our operations;
  • transforming our remaining integrated refineries into low-carbon energy and chemicals parks, which involves decommissioning plants;
  • using more renewable electricity to power our operations; and
  • developing carbon capture and storage (CCS) for our facilities.

If required, we may choose to use high-quality carbon credits to offset any remaining emissions from our operations, in line with the mitigation hierarchy of avoid, reduce, and compensate.

In October 2021, we set an interim target to achieve a 50% reduction in absolute Scope 1 and 2 emissions under our operational control by 2030 on a net basis, when compared with 2016.

We aim to eliminate routine flaring from our upstream-operated assets by 2025 [A] and maintain methane emissions intensity for operated oil and gas assets below 0.2% and achieve near-zero methane emissions by 2030.

[A] Subject to completion of the sale of SPDC.

Supporting our customers in achieving net-zero emissions

Changes to the supply of energy products and decarbonising the energy system require structural changes in the end-use of energy. This requires energy users to improve, update or replace equipment so that they can use carbon-based energy more efficiently, or switch to low- and zero-carbon energy.

We aim to lead in the energy transition where we have competitive strengths, see strong customer demand, and identify clear regulatory support from governments. The transport sector is the largest market for our oil products. We are building on our customer relationships and expertise to help drive the decarbonisation of passenger cars, heavy-duty trucks, planes and ships. We want to become a world leader in charging for electric vehicles, and remain a world leader in biofuels as they become sustainable aviation fuels or renewable diesel made from waste. By transforming our refineries into four regional energy and chemicals parks, we are creating the low-carbon production hubs of the future.

For example, in the transport sector, decarbonisation includes replacing internal combustion engine vehicles with electric vehicles and converting heavy-duty transport to biofuels such as sustainable aviation fuel, renewable diesel, renewable gas and, in the future, hydrogen and its derivatives. In the industrial sector, LNG plays an important role as a lower-carbon alternative to oil- and coal-fired furnaces, and provides grid stability alongside wind and solar power in electricity generation. Such structural changes will help to trigger transitions along the supply chain of individual sectors and across sectors, including the production of energy and emissions over time. The IEA estimates that these changes in the end-use of energy will require substantial investment. Under the IEA Net Zero Emissions by 2050 scenario, for every one US dollar spent on fossil fuels, a further $5.7 need to be spent on clean energy and a further $5.6 spent on efficiency and end-uses.

We will seek to change the mix of energy products we sell to our customers as their needs for energy change.

Emissions resulting from customer use of our energy products make up the largest percentage of Shell's carbon emissions. We believe we can make the greatest contribution to the energy transition by helping to enable our customers to switch to low-carbon energy products and services. This is reflected in Shell's strategy to develop a portfolio that seeks to:

  • develop low- and zero-carbon alternatives to traditional fuel, including biofuels, hydrogen, and other low- and zero-carbon gases;
  • provide more electricity to customers, while also driving a shift to renewable electricity;
  • work with customers across different sectors to help them decarbonise their use of energy, for example by substituting the use of coal with LNG; and
  • address any remaining emissions from conventional fuels with solutions such as CCS and carbon credits.

We have set targets to reduce the net carbon intensity (NCI) of the energy products we sell by 9-12% by 2024, 9-13% by 2025, 15-20% by 2030, and 100% by 2050.

The intended use of the NCI metric is to track progress in reducing the overall carbon intensity of the energy products sold by Shell. NCI measures emissions associated with each unit of energy we sell, compared to a 2016 baseline. It reflects changes in sales of oil and gas products, and changes in sales of low- and zero-carbon products -- such as biofuels, hydrogen and renewable electricity.

Unlike Scope 1 and 2 emissions, reducing the NCI of the products we sell requires action by both Shell and our customers, with the support of governments and policymakers to create the right conditions for change.

Our focus on where we can add the most value has led to a strategic shift in our power business. We plan to build our integrated power business, including renewable power, in places such as Australia, Europe, India and the USA. We have withdrawn from the supply of energy directly to homes in Europe because we do not believe that is where our strengths lie.

In line with our shift to prioritising value over volume in power, we are concentrating on select markets and segments. One example is our focus on commercial customers more than retail customers. Given this focus on value, we expect growth in total power sales to 2030 will be lower than previously planned. This has led to an update to our NCI target. We are now targeting a 15-20% reduction by 2030 in the NCI of the energy products we sell, compared with 2016, against our previous target of a 20% reduction.

Acknowledging uncertainty in the pace of change in the energy transition, we have also chosen to retire our 2035 target of a 45% reduction in NCI.

We have set a new ambition to reduce customer emissions from the use of our oil products by 15-20% by 2030 compared with 2021 (Scope 3, Category 11). That is more than 40% compared with 2016 reported emissions. [A] This level of ambition is in line with the European Union's climate goals in the transport sector, among the most progressive in the world.

Achieving this ambition will mean reducing sales of oil products, such as petrol and diesel, as we support customers as they move to electric mobility and lower-carbon fuels, including natural gas, LNG and biofuels.

Our approach to climate change emphasises the need to work collaboratively. We aim to make strategic alliances with customers, other companies and entire sectors so we and they can make profitable progress towards net zero. As a founding member of the Oil and Gas Climate Initiative (OGCI), we are part of a group of 12 national and international energy companies. The OGCI supports the climate goals of the UN Paris Agreement and recognises that collective actions can help drive the energy transition.

[A] Customer emissions from the use of our oil products (Scope 3, Category 11) were 517 million tonnes carbon dioxide equivalent (CO2e) in 2023, 569 million tonnes CO2e in 2021 and 819 million tonnes CO2e in 2016. Of the 40% reduction by 2030, around 8 percentage points are related to volumes associated with additional contracts being classified as held for trading purposes, impacting reported volumes from 2020 onwards.

Energy transition in action – selection of portfolio changes and actions in 2023:

Growing sales of low-carbon products and solutions

  • Shell completed the acquisition of Volta Inc. in the USA. We now operate one of the largest electric vehicle charging networks in the country, with more than 3,000 charge points across 31 states. We also acquired evpass, which owns Switzerland's largest network of electric vehicle charging stations.
  • In China, we opened our largest electric vehicle charging station globally, which has 258 public fast-charging points partially powered by the station's solar photovoltaic panels.
  • In Germany, we launched Hydrogen Pay-Per-Use, through which truck operators can hire hydrogen-fuelled trucks to explore transitioning their fleet from diesel to hydrogen and reduce their carbon emissions.
  • The Hollandse Kust Noord (HKN) wind park, built by CrossWind, a joint venture between Shell and Eneco, became operational. It will add 759 MW of renewable energy to the Dutch electricity grid after final commissioning.
  • Shell completed the acquisition of Nature Energy, one of the largest producers of RNG in Europe. This acquisition supports Shell's ambitions to build an integrated RNG value chain at global scale and to profitably grow its low-carbon offerings to customers across multiple sectors.
  • Shell announced a multi-year offtake agreement for sustainable aviation fuel with Montana Renewables, one of the largest sustainable aviation fuel producers in North America.
  • Our Northern Lights CCS project (Shell interest 33.3%) in Norway signed contracts in 2023 to transport and safely store 1.2 million tonnes of CO2 a year. The CO2 will be shipped from two of Orsted's biomass power plants in Denmark and a Yara ammonia and fertiliser plant in the Netherlands.
  • Shell and Esso were jointly awarded three carbon storage appraisal licences in the UK's first-ever carbon storage licensing round. The joint venture (Shell interest 50%) will evaluate three sites in the North Sea for the potential storage of CO2 captured and transported from industrial facilities in the UK.
  • Shell continued to build a high-grade portfolio of carbon credits. In the USA, we launched Greenline Climate with the Spatial Informatics Group to provide development services for projects generating forest carbon credits. We also invested in and partnered with carbon project developer Kateri to accelerate advanced grazing management practices to improve rangeland productivity and carbon sequestration.
  • We moved forward with our construction of Holland Hydrogen 1 (HH1), which will be one of Europe's largest renewable hydrogen plant once operational in 2025. The renewable power for the electrolyser will come from HKN. The renewable hydrogen produced will supply the Shell Energy and Chemicals Park Rotterdam, helping to decarbonise products like petrol, diesel and jet fuel. In the future, renewable hydrogen could also help cut emissions from commercial road transport.

Reducing emissions from our own operations

  • In the US Gulf of Mexico, we are the leading operator and have one of the lowest greenhouse gas intensities in the world for producing oil, compared with those of other oil and gas producing members of the International Association of Oil & Gas Producers. Our latest Shell-operated development, Vito (Shell interest 63.1%), started production in 2023. Vito is a third the size of its original design, which will reduce its emissions by around 80% over its operating life. We are using the same design concept for our Shell-operated Whale (Shell interest 60%) and Sparta (Shell interest 51%) projects in the US Gulf of Mexico, which are expected to start production in 2024 and 2028 respectively. Sparta will also feature all-electric topside compression equipment, significantly reducing greenhouse gas intensity and emissions from our own operations.
  • We delivered first gas from the Timi platform in Malaysia, which is powered by solar and wind. This unmanned platform is also more cost efficient, since it is around 60% lighter in weight than a conventional tender-assisted drilling wellhead platform that relies on oil and gas for power.
  • We started to build the Rosmari-Marjoram gas project, which will be partially powered by 240 solar panels.
  • We are continuing to transform our refining business as part of our drive to create more value with less emissions. In early 2024, we announced our investment decision to convert the hydrocracker at our Energy and Chemicals Park Rheinland in Germany into a unit that will produce premium base oils, used to make high-quality lubricants, such as engine and transmission oils. The hydrocracker at the Wesseling site near Cologne will stop processing crude oil into petrol, jet fuel and diesel by 2025. The planned changes are expected to reduce Shell's Scope 1 and 2 carbon emissions by around 620,000 tonnes a year.
  • The final investment decision was taken to build Porthos, Europe's largest CCS facility, at the port of Rotterdam, starting in 2024. Shell will be the biggest customer, supplying 1 million tonnes of CO2 a year.
carbon capture and storage
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carbon dioxide
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carbon dioxide equivalent
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greenhouse gas
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International Energy Agency
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liquefied natural gas
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net carbon intensity
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Oil and gas climate initiative
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Research and development
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Renewable natural gas
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