Climate Concerns Are Pushing Oil Majors to Look beyond Fossil Fuels

In 2016, Royal Dutch Shell PLC, one of the largest oil and gas companies in the world, started a historic plunge into new businesses.

The British-Dutch-controlled company began spending $2 billion a year on joint ventures that had little or nothing to do with oil and gas. One of its new companies sells biofuels made from sugar cane in Brazil. Another built an advanced demonstration project in Bangalore, India, that makes biofuels from agricultural wastes.

Shell and other oil majors see potential chaos in their markets. Their carbon-rich product is one of the most valuable commodities on the planet, generating $1.7 trillion in sales in 2016. Transportation consumes more than a quarter of the world’s energy, and projections estimate the number of passenger cars will double by 2050.

Here’s the hitch: Governments concerned about climate change might impose stiffer taxes on carbon emissions.

To some companies, that’s a green light to invest in electric cars. Shell bought its way into the hydrogen fuel business in Germany, becoming a partner in a network that is building 400 hydrogen filling stations, needed to supply a growing market for fuel-cell-driven cars. They are electric vehicles that get their power from hydrogen; the result is emissions that consist mainly of water.

Shell also bought a Dutch company called NewMotion, which makes chargers for electric cars in Europe. They can recharge a battery in 30 minutes. Another major, BP PLC, invested in an Israeli company called StoreDot. It is working on a new electric car battery that could be recharged in as little as five minutes.

Meanwhile, Shell is building a solar park in Moerdijk, in the Netherlands. It has 50,000 solar panels that will provide renewable energy to run Shell’s nearby chemical plant and reduce its emissions.

Ben van Beurden, Shell’s CEO, begins press interviews by explaining that Shell is no longer just an oil and gas company. His views have become contagious among the leaders of some other major oil companies. Ten of them, led by Shell, Total SA and BP, put up $100 million apiece in November 2016 to help promote the goals of the Paris Agreement by forming the Oil and Gas Climate Initiative.

“There are plenty of questions facing our industry,” van Beurden explained last year at an energy conference in Houston. “But I believe the biggest of them is climate change.”

That means “the reality is change” for the oil and gas business, he explained.

“For me, the second-biggest question is how our industry can succeed through all this change,” van Beurden said. Shell’s ambition is to remain a “world-class” investment while it ramps up new products and drops others, he said.

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