Editor & Publisher, Marcellus Drilling News (MDN)
Jim Willis reports Shell aims to become the world’s biggest electric producer using natural gas, which demonstrates their commitment to the resource.
Here’s a mind-blower: Royal Dutch Shell is the world’s second largest oil producer (by market value). Yet, a Shell official recently said his company wants to be “the largest electricity power company in the world in the early 2030s.” Within 15 years Shell wants to be the world’s #1 electricity producer! And, they plan to do it by using natural gas as the fuel to create all that electricity.
This is hard for us to wrap our brains around! We’ve known for years that Shell loves natural gas. In February 2017, Shell completed a merger with/purchase of BG Group–the largest such megamerger since Exxon bought Mobil in the 1990s. Shell’s purchase of BG was all about LNG–liquefied natural gas.
So yes, Shell loves natural gas. And, now they want to put all of that natural gas to good use making sparks:
As the global geopolitical situation surrounding the energy industry continues to change amidst a growing U.S. shale output and restricting OPEC output, the world’s energy giants are shifting their operations in response to these developments. Royal Dutch Shell is one of those companies, which announced recently that they are planning to become the world’s largest electricity producer by 2030.
As the world’s second largest oil producer in market value, Shell is already spending around $2 billion per year on new-energy investment divisions. The main reason for this is that these new-energy sectors can increase the companies bottom line as executives hope these new investments could bring in 8 to 12 percent returns.
“We believe we can be the largest electricity power company in the world in the early 2030s. We are not interested in the power business because we like what we saw in the last 20 years; we are interested because we think we like what we see in the next 20 years.” said Maarten Wetselaar, director of Shell’s new-energies unit. “With our brand, our global presence…and the adjacency to our gas business – we can get our hands on the cheapest gas anywhere – we should be able to win.”
By 2020, the company expects to be investing between $1 billion to $2 billion annually in new energy technologies as initial investments, before scaling this figure up in the years to come. Currently, Shell’s business is around 65 percent focused on oil producing, 25 percent on natural gas, and 10 percent coming from chemicals.
Wetselaar added that he considered Shell the most likely company to emerge dominant within the coming decade, saying to The Financial Times that its competitors were handicapped by outdated business models that weren’t flexible. “Many of them are at a disadvantage, because they have this enormous legacy position, with coal plants and nuclear plants, but also a very centralized philosophy. We see the future customer group being much more decentralized, where people do have a battery in their basement, people do have solar panels on their roof, and they want us to help them optimize.”
Alternative energy industries are expected to steadily increase in demand over the coming years. While solar, wind, and geothermal are all valid sources, there’s also a case to be made for Uranium, with demand for the energy commodity skyrocketing over recent years. What’s almost certain, however, is that with American shale output increasing and current forecasts predicting the country will become a net exporter of oil in the next couple of years, prices will further decline as supplies increase. Companies that transitioned into other, alternative energy businesses will fare better than those that did not.
Shell’s declaration that they want to dominate electricity production raises lots of questions for us. How many natural gas-fired electric plants does the company own now? Do they own/operate any? Will the plants they decide to buy or build be regulated or unregulated? Will they target the Marcellus/Utica region for many of those plants? Will most of Shell’s electric plants be located in other countries, not the U.S.? We’re just reeling thinking about it all.
Stay tuned as the Shell shell logo turns into a lightening bolt logo.