‘Shell sees record profit as encouragement to stay fossil as long as possible’

Shell is investing around three billion euros in green energy projects this year. At the same time, the energy company posted a record profit of almost 40 billion euros and claims to be embracing the energy transition.

How serious is the oil company with the switch to sustainable energy generation? Why isn’t it investing more in wind and solar energy?

First the numbers. It is abundantly clear that energy companies are benefiting greatly from the energy crisis. “The gas price was historically high last year,” says economist Mathijs Bouman. “That while it has not become more expensive to extract oil or gas from the ground.”

Shell earned more than 350 billion euros, compared to about 250 billion in 2021. Of that turnover, 38.5 billion euros remained in profit, a record for the company.

Other oil companies made even bigger profits:

It is less clear how much of that turnover Shell invests in green energy projects. The financial director said at the presentation of the annual figures that one third of all investments go to sustainable energy.

But: in the annual report, Shell reports that it invests only 14 percent of the 23 billion euros in investments in the ‘Renewable energy and energy solutions’ division.

According to the director, the difference lies in the money that goes to charging stations and biofuels, including a biofuel factory in Pernis. These cash flows fall under other divisions, but are sustainable investments, according to the director.

But critics question that explanation. It is impossible to verify which investments are actually green, says Mark van Baal, director of Follow This, a group of activist shareholders who are trying to change Shell’s course. “They must clearly show the shareholder how much they invest in sustainable energy.”

Even Shell’s ‘renewable’ division includes “a lot that doesn’t really belong,” says Van Baal. Gas, for example, is regarded by Shell as climate-friendly. Although gas-fired power stations are cleaner than coal-fired power stations, they still emit a lot of CO2. “Gas is the oil industry’s ‘light’ cigarette.”

Shell says plan to stop half of investments in renewable energy by 2025. Gas will not be included, the company promises.

But Van Baal is sceptical. Shell’s green claims are “primarily PR,” he says. “It’s still a very fossil business.”

“Worse still: it is a company that wants to stay fossil for as long as possible. They do not see the profits they have made now as an opportunity to make that leap forward, but as confirmation that they should continue to invest in fossil fuels for as long as possible. fossil.”

Shell’s policy therefore seems to have hardly changed since then Shell CEO Ben van Beurden in 2016 News hour said, “I’ll pump up whatever I can pump up to meet the demand.”

Selling oil and gas is simply still very lucrative. Economist Bouman: “It is very difficult, with the current prices, to keep your fingers off the candy jar and not to extract fossil fuel from the ground.”

But, Bouman emphasizes, it is not only in the interest of shareholders’ wallets that Shell continues to pump. Stopping fossil fuel investments altogether now would be a bad idea.

The graph shows that the growth of renewable energy production in the Netherlands is not fast enough to compensate for the loss of natural gas. For the time being, we must therefore continue to import gas and oil to meet demand. Bouman: “We are now at the very lowest point of the picture. We just need fossils for a while.”

And yet: Shell is not or hardly increasing sustainable investments this year, while the company does aim to emit zero CO2 in 2050. “You would expect an energy giant to take that road up,” says Bouman. “But it is now even more difficult to earn a lot of money with sun and wind than with oil and gas.”

Governments could make these sustainable investments more lucrative, for example by increasing taxes on electricity and gas. In the Netherlands, large consumers such as Shell pay a lower rate than households.

In Europe, there is already an emissions trading system, which ensures that polluters pay for their emissions. Bouman: “The price for a ton of CO2 has recently risen to about eighty euros. That is really starting to hurt.”

But, says Bouman, Shell is increasingly avoiding this because “it is gradually becoming a company that mainly earns its money in Asia and the United States”.

Van Baal therefore continues to insist on the oil company’s own responsibility. “It is 5 to 12. Emissions must be almost halved by 2030. Sustainability must now be done very quickly because the oil industry has been on the brakes for so long.”