Oil titans Shell and BP try to go green

Linda J. Dodson

In the last two weeks, both BP and Shell have announced that they are writing down the value of their assets by a combined total of nearly $40bn, a clear sign that they believe the golden days of oil are gone.

The pandemic has created a window of opportunity, climate activists say, to force through structural changes to the energy sector that could set up Britain for a world without fossil fuels.

This vision of a carbon-free country leaves little room for oil companies. 

“We have reset our price outlook to reflect that impact and the likelihood of greater efforts to ‘build back better’ towards a Paris-consistent world,” Looney said as he announced the writedown, in reference to the 2015 Paris climate agreement.

‘Build back better’ has become the rallying cry of those who are pushing for a new system to be born out of the ashes of the industry.

So how can BP and Shell play a part in this process of reassembly? 

While BP has so far revealed few details about its strategy to survive the move away from oil, Shell has been less circumspect.

“We believe we can be the largest electricity power company in the world in the early 2030s,” said Maarten Wetselaar, director of Shell’s new energies division, on Bloomberg TV last year.

In this iteration of the 113-year-old company, Shell believes it can become the world’s biggest power company by focusing primarily on natural gas and renewable energy. 

The company is betting on the growth of electric vehicles and smart homes, and on customers who demand that their electricity is generated by renewable sources such as solar and wind power.

“All of these technologies and solutions exist, but offering all of these things as a package doesn’t,” says Tom Heggarty, a solar analyst at consultant Wood Mackenzie. “There are not many companies with the balance sheet that would make all the investments that you need to do that, and that seems to be the way that Shell is going.”

Shell believes that with the government-mandated restructuring of carbon-intensive businesses on the horizon, it can still appeal to investors, and offer healthy returns, with a new model.

BP has also seen this tidal wave of change coming.

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