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 (AMS: RDSA) 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to emerge dominant within the coming decade, saying to The Financial Times that its competitors were handicapped by outdated business models that weren’t flexible.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.
Dutch Royal Shell Company Profile
The Royal Dutch Shell plc, incorporated on February 5, 2002, explores for crude oil and natural gas around the world, both in conventional fields and from sources, such as tight rock, shale and coal formations. The Company works to develop new crude oil and natural gas supplies from various fields. The Company’s segments include Integrated Gas, Upstream, Downstream and Corporate.
The Integrated Gas segment is engaged in the liquefaction and transportation of gas and the conversion of natural gas to liquids to provide fuels and other products, as well as projects with an integrated activity, ranging from producing to commercializing gas.
The Upstream segment includes the operations of Upstream, which is engaged in the exploration for and extraction of crude oil, natural gas and natural gas liquids, and the marketing and transportation of oil and gas, and Oil Sands, which is engaged in the extraction of bitumen from mined oil sands and conversion into synthetic crude oil. The Downstream segment is engaged in oil products and chemicals manufacturing, and marketing activities. – Reuters