Shell’s (LON: SHEL) new boss said cutting oil and gas output would be bad for consumers, echoing a pivot by other major producers toward fossil fuels and energy security.
“I am of a firm view that the world will need oil and gas for a long time to come,” Shell Chief Executive Officer Wael Sawan said in an interview with Times Radio on Friday. “As such, cutting oil and gas production is not healthy.”
Europe’s largest energy majors are increasingly echoing the strategies of their less climate-minded American peers and leaning into the oil and gas businesses that drove record profits last year and payouts to their shareholders.
BP Plc, Shell’s closest peer, said last month that it would slow the planned decline in its oil and gas production to guarantee the reliability of energy supply following the disruption caused by Russia’s invasion of Ukraine. The company’s shareholders applauded the news by sending BP’s shares up about 17% since the announcement.
The renewed emphasis on fossil fuels follows a year of high and volatile prices after Russia’s invasion disrupted gas supplies and the recovery of economies from the Covid-19 pandemic drove demand for oil.
“We’ve seen of course through 2022 the fragility of the energy system,” Sawan said. “To see prices start to skyrocket, that’s not healthy for anyone, particularly consumers.”
But at the same time, CO2 emissions rose to a record last year, meaning the world will need to move even faster if it wants to achieve its climate targets and avoid the worst impacts of global warming. To do that would require a steep cut in demand for oil and eventually gas as well.
Under Sawan’s predecessor, Ben van Beurden, Shell had a target to reduce oil production by 1% to 2% per year, a pace that it’s more than achieved. Much of those declines are attributed to a reconfiguring of Shell’s production portfolio to shed lower-margin assets. That approach will continue under Sawan, who’s committed to boosting value for shareholders.
“We focus on value over volume,” Sawan said. “So it’s not how many barrels we’re producing, but the margin that we extract from the barrels we produce.”
Sawan said the company remains committed to a strategy to invest in both oil and gas as well as low-carbon and zero-carbon technologies.
Shell slipped 0.4% as of 8:36 a.m. in London trading, paring this year’s gain to about 12%.
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