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Despite stronger-than-expected 3Q24 earnings, driven by solid performances in Integrated Gas, Upstream, and Marketing segments, Shell continues to face challenges in its Renewables & Energy Solutions (RE&S) segment. Adjusted earnings for RE&S were -$162m, marking consecutive quarterly losses as the company scales back its strategy. The company reiterated it remains committed to oil and gas, with a focus on LNG growth. While Shell continues to frame LNG as a decarbonisation lever, its impact will be minimal.

Our view

These developments, combined with biofuels setbacks last quarter, highlight a key issue in Shell’s strategy: meeting its emissions intensity target will likely require an increased reliance on offsets. Given FY24 performance to date with minimal changes to its reported sales portfolio, Shell is expected to exceed the 20 Mt of offsets retired in FY23 to achieve its 9-12% NCI reduction target, up from 6-9% last year.

3Q also saw Shell maintain its focus on prioritising shareholder distributions over investment. FY24 capex guidance was downgraded to under $22bn from the previous $22-25bn, while announcing $3.5bn in buybacks for 4Q24. Over the past 12 months, Shell distributed 43% of its CFFO, surpassing its 30-40% target range.

Priority questions ahead of 2025:

1) Quantification of levers to achieve net carbon intensity (NCI) targets:

• How much of the emissions reduction from oil product sales will come from divesting refineries and retail sites? The company is targeting 15-20% by FY30, and refinery and retail site sales are identified as key levers in meeting Shell’s target.

• How much will offsets contribute to Shell’s NCI targets? Shell’s offset surged 5x in FY23, with 20 Mt surrendered accounting for over half of their FY23 NCI progress.

2) Increases in low-carbon investment:

• What would Shell need to increase low-carbon capex ambition in line with peers? Shell ranks last among peers, with a ~19% short-term target compared to other Euromajors (28%-50%), and is one of only two companies, alongside Eni, without an FY30 investment target.

Key findings