* Shell oil output peaked in 2019, will decrease gradually
* Emissions peaked in 2018
* Spending on low-carbon to increase
(Adds electricity sales target, CCS and offset targets,
Greenpeace comment, updates share price)
By Ron Bousso and Shadia Nasralla
LONDON, Feb 11 (Reuters) - Energy giant Royal Dutch Shell
vowed to eliminate net carbon emissions by 2050,
raising its ambition from previous targets, as its oil output
declines from a 2019 peak.
The Anglo-Dutch company is in the midst of its largest
overhaul yet as it prepares to expand its renewables and
low-carbon business in the face of growing investor pressure on
the oil and gas sector to battle climate change.
Shell last year laid out a plan to reach net zero by 2050,
in line with the Paris climate agreement and European Union
ambitions, but it said the goal depended on its customers.
In a strategy update on Thursday, Shell outlined plans to
curb its emissions through rapid growth of its low-carbon
businesses, including biofuels and hydrogen, although spending
will stay tilted towards oil and gas in the near future.
"We will use our established strengths to build on our
competitive portfolio as we make the transition," CEO Ben van
Beurden said in a statement.
Investors welcomed the upgraded targets.
"Shell's net zero target is industry-leading and
comprehensive as it covers all their carbon emissions," Adam
Matthews, Director of Ethics & Engagement for the Church of
England Pensions Board, who led investor engagement with Shell,
said in a statement.
Shareholders have an advisory vote on Shell's transition
plan at this year's general meeting, an industry first, Matthews
added.
Although such votes would be non-binding, investors see them
as a mechanism to hold management publicly accountable for their
progress on meeting targets to cut emissions.
Shell shares were down 1.9% at 1142 GMT at 1337 pence,
dragging on the FTSE 100 index.
Historically, oil projects have delivered a return on
investment of at least 15%, while renewables developers expect
6%-9%, but Shell and BP have said their complex marketing and
trading units can increase renewable returns to around 10%.
Shell's strategy is to remain reliant on its retail
business, the world's largest. It has a goal to increase the
number of sites to 55,000 by 2025 from today's 46,000 and
increase the number of electric vehicle charging points to
500,000 from 60,000 now.
It did not outline plans to grow its solar and wind power
generation capacity, marking a difference from rivals, such as
BP and Total, which aim to boost their
ownership of physical wind and solar farms.
Van Beurden said Shell aims to sell 560 terrawatt-hours of
power a year by 2030, doubling current volumes, but said it was
too early to say how much of this would come from its own
capacity.
GROWTH PILLAR
In the near term, Shell will invest at least $5 billion a
year in what it calls its growth pillar, dividing the investment
roughly equally between its trading and retail business and
renewables units. It previously aimed to spend up to $3 billion
on renewables and marketing combined.
Its upstream business, or oil and gas production, will
attract a larger share of its budget at $8 billion.
It will also spend $4 billion on its liquefied natural gas
(LNG) business and up to $5 billion on chemicals and refining.
Total spending is expected to remain within a range of $19 to
$22 billion per year.
For shareholder returns and financing the transition away
from hydrocarbons, Shell will rely on revenue from its oil and
gas division.
ROAD TO NET ZERO
Most European energy majors have set some kind of net-zero
carbon target by 2050.
The ambition of Shell, the world's largest oil and gas
trader, stands out in that it covers the emissions from the
end-use of products other companies have produced but which it
sells to customers.
Its total emissions peaked in 2018 at 1.7 gigatonnes.
Oil production peaked in 2019 at around 1.8 million barrels
per day and is expected to recede by 1% to 2% each year,
including divestments of oilfields and the natural decline of
fields.
Shell aims to reduce its net carbon intensity by between 6%
and 8% from 2016 levels by 2023. The target rises to 20% by
2030, 45% by 2035 and 100% by the middle of the century.
The company previously said it would reduce its net carbon
footprint emission intensity metric by at least 3% by 2022, 30%
by 2035 and 65% by 2050 from a 2016 baseline.
Intensity levels represent emissions per unit of energy
produced, technically allowing higher production.
To offset emissions from its hydrocarbon products, it plans
to re-inject emissions into the ground or plant trees, a
strategy Greenpeace said is delusional.
Greenpeace also said Shell's plans did not reduce
hydrocarbon production enough.
"Without commitments to reduce absolute emissions by making
actual oil production cuts, this new strategy can’t succeed nor
can it be taken seriously," Mel Evans, the head of Greenpeace
UK’s oil campaign, said.
(Reporting by Ron Bousso and Shadia Nasralla
Editing by David Goodman and Barbara Lewis)
