Shell Energy Transition update, underwhelming rebase

Shell released its 2024 Energy transition plan today. What surprised us most was how little has changed.

The tweaks made to lower the Net Carbon Intensity target (and removal of the FY35 target) might seem like a big move backward, but as our analysis has shown, this was never achievable with the current strategy. For those doing the numbers, it was expected.

What was new?

Shell has a new scope 3 target for oil sales, targeting a 15-20% reduction between FY21-30. However, oil production guidance was unchanged (stabilising at 1.4 Mboe/d to FY30), signaling no change to production ambitions, but with some intention to reduce oil sales, replacing some of it with growing gas.

Shell’s new target is broadly aligned to TotalEnergies, when rebasing to the same year (-40% between FY15-30, and -18% between FY21-30) and with the oil demand outlook under the IEA Announced Pledges Scenario (-9% between FY23-30).  

It was good to see Shell provide more visibility on its outlook for FY30 emissions from oil sales and its expected energy portfolio mix, with oil reducing in contribution from 48% to 39%.

Our view:

Shell's transition strategy is still missing critical elements, trailing peers in its FY25 target for energy transition capex and no guidance for FY30, high use of offsets increasing 5x from FY22 to 20 Mt, and remuneration incentives for energy transition now incentivising expansion of fossil fuels.

Key takeaways:

Summary of changes to Shell’s Energy Transition Strategy