Shell plans to adapt to an unfavorable future

shell-plans-to-adapt-to-an-unfavorable-futureBen van Buerden, the CEO of Royal Dutch Shell, said the firm has adopted a ‘lower forever’ mindset in order to control costs. The long term strategy is to become “fit for the forties” he said on Thursday.

Presently Shell thrives on oversupply, the company’s long term concern is weak demand. With UK, Germany, France, Norway, India and China preparing to phase out IC engines and Volvo planning to completely move towards electric vehicles by this decade end, the demand for fossil fuels will stall. Van Buerden expects the demand for fossil fuels to plateau by 2030s. But this is not necessarily bad for the company, he argues. He applauds this effort to combat global climate change.

Shell intends to invest $1 billion per year on energy sources like hydrogen fuel cells and biofuels. It will also advance its presence in the renewable electric power sector as well. Yet Shell recently acquired BG Group and is still a major player in the fossil fuels market. However, it will make attempts to get ready for a future where conventional fuels will play a lesser role.

Shell CFO, Jessica Uhl points out that cash flow from operations rose for four quarters running even at prices less than $50 for a barrel. The firm managed to reduce its net debt, make capital investments and cover its cash dividend sufficiently to deliver growth. Integrating refining, marketing and trading activities as well as performance of their chemical business has added to their resilient success, she says.