Shell scales down climate plans as profits drop by half

Shell saw its profits more than halve in the second quarter compared to the year before. The Anglo-Dutch fossil fuels company booked 4.6 billion euros in profit in the second quarter, compared to a record 10 billion in the same quarter last year. CEO Wael Sawan told investors the company was scrapping plans to reduce its oil and gas extraction. According to energy expert Jilles van den Beukel, that cannot be seen separately from the lower-than-expected returns, RTL Nieuws reports.

Shell expected to have less spectacular results this past quarter than the year before. In Q2 of 2022, oil and gas prices were sky-high due to the energy crisis sparked by Russia’s invasion of Ukraine. But the profit drop was still higher than expected.

The lower profit is not all due to lower energy prices. Shell’s chemical branch saw its profitability fall by approximately 900 million euros, and the sustainability branch (renewables & energy solutions) also made 180 million euros less.

To accommodate shareholders, Shell is buying back 2.7 billion euros in its own shares - the idea being that fewer shares in circulation can increase the value of and earnings per share.

According to energy expert and former Shell employee Jilles van den Beukel, the company is currently torn between its American investors - which will mainly be looking at major American competitors Exxon Mobil and Chevron and their better results - and its smaller European investors, which consider its climate goals more important.

“It is a difficult voice for the company,” Van den Beukel told RTL. “You see them struggling between their desire to have a long-term future and high short-term profitability, which is apparently necessary to meet the expectations of shareholders. Investors who are very often not in the Netherlands anymore. They struggle with that split.”

According to Shell CEO Sawan, the scrapped plan to reduce oil and gas extraction is to prevent the cost of living from skyrocketing again like it did last year in the energy crisis. But according to Van den Beukel, the fossil strategy cannot be viewed separately from the lower returns that Shell has so far obtained from green energy. “At Shell, they are a bit shocked by the amount of capital that has to be invested in renewable energy projects and the low margins that have been achieved so far.”

With this move to not reduce fossil fuel mining, Shell can expect further clashes with environmental organizations. “The fossil course of CEO Wael Sawan shows that he remains fully focused on profit for shareholders. That is immoral and irresponsible,” Milieudefensie responded. “Shell’s profits clearly show that the company chooses profits over human lives.”