LONDON (Reuters) - The ongoing transition to low-carbon energy sources may accelerate as economies recover from the impact of the coronavirus crisis, the head of oil and gas company Royal Dutch Shell said on Thursday.
Chief Executive Ben van Beurden said while Shell was not ringfencing its low-carbon Integrated Gas and New Energies division from spending cuts to weather the crisis, those businesses would be shielded from the worst of the reductions.
“Where possible, we try to spare (New Energies) a little bit and that is basically because we still believe that there is an energy transition underway which may even pick up speed in the recovery phase of this crisis and we want to be well positioned for it,” he said after Shell announced first-quarter results.
Under pressure from a slide in oil prices, Shell slashed its dividend by two-thirds on Thursday having already announced a $5 billion cut to its 2020 investment budget to $20 billion last month.
About 45% of the spending cuts will hit Shell’s upstream - or exploration and production - business, with 30% for downstream which includes the refining and marketing of oil products, van Beurden said.
He said the other 25% in cuts would come from Integrated Gas and New Energies but added that the crisis would not distract the company from its shift to low-carbon energy as it braces for a complete overhaul over the next 30 years.
The head of the world’s energy watchdog, Fatih Birol, told Reuters this week that global efforts to minimise the fallout from the pandemic presented an historic opportunity to scale up the technologies needed to move to cleaner energy.
The European Union, meanwhile, is working on a revised work plan for its climate policies because of the crisis which is set to include new, more ambitious targets for 2030, according to a draft seen by Reuters.
Shell’s low-carbon energy division, which includes wind and solar energy and retail power distribution, was due to receive investment of up to $2 billion in 2020 and then up to $3 billion a year thereafter.
Chief Financial Officer Jessica Uhl said the fundamental outlook for Shell’s focus on shifting from liquid fuels to generating and distributing electricity had not changed.
“Companies growing low-carbon businesses should eventually be rewarded by the market, and ultimately we see this as the most likely way for Shell to rebuild its ambition to be a world- class investment case over the longer term,” Barclays equities analysts said in a note.
Reporting by Shadia Nasralla and Ron Bousso; Editing by David Clarke