SHELL has provided further evidence of how the terms of the debate about the global energy system have changed amid the fallout from the war in Ukraine, with potential implications for the North Sea.
In the years leading up to the war oil and gas firms came under huge pressure from campaigners to curb production amid calls for urgent action to cut carbon emissions.
In response both Shell and BP claimed they could play a key part in supporting the transition to a cleaner energy system by investing heavily in renewables. The majors held out the prospect that oil and gas production would fall as they morphed into integrated energy businesses.
Shell provoked outrage in some quarters yesterday when it said it intended to maintain oil production at current levels until 2030 at least.
The company insisted it did not need to cut output further as it had met the target set in 2019 around eight years early, helped by moves to rationalise its portfolio.
READ MORE: North Sea oil field development plan could fuel emissions and cost jobs
New chief executive Wael Sawan said the decision to maintain production reflected the belief that demand for oil and gas would remain strong for years in the absence of alternative energy sources on the scale required.
He reckons the surge in oil and gas prices seen after Russia launched its full-scale invasion of Ukraine partly reflected the impact of years of global under-investment in new developments.
Shell expects to use the profits generated in the oil and gas business to fund big payouts to shareholders and investment in the new energy economy.
In February BP unveiled plans to increase investment in oil and gas, which it said would help support energy security and energy affordability.
READ MORE: Scottish Government's green plan to fuel boom for overseas investors
Champions of the North Sea industry will welcome Shell’s announcement although the firm has stoked controversy with its actions in recent years.
Shell retrenched in the North Sea amid the last downturn and shed hundreds of jobs.
In 2021 it shelved plans to develop the Cambo oil find off Shetland after facing fierce opposition from campaigners, citing economic factors and the potential for delays.
Shell did not say yesterday how the North Sea business will be impacted by Mr Sawan’s plans to rein in spending to support plans to increase payouts to investors.
READ MORE: Warning North Sea investment may be halved but oil firm boss confident about Cambo
However upstream head Zoe Yujnovich highlighted the significance of the investments it is making in the Pierce and Penguins fields off Scotland.
Shell was unhappy with the decision to impose a windfall tax on oil and gas firms but said last week’s pledge by the Government to cut tax rates if oil and gas prices fall below set levels could increase investor confidence in the area.
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