The company has achieved this through reducing operating costs by 20%, changing the working culture, for example by centralising certain business functions through Shell Business Operations, and digitalising operations such as IT, finance and contracting. Operators are increasingly being trained in maintenance, cutting reliance on contractors. It has also continued to divest non-core assets, including its oilsands business in Canada and the Corrib gas field in Ireland. All of Shell’s new projects have very low break even prices which can be profitable with oil prices even at around US$40/bbl, in what van Beurden termed “fit for the 40s”.
In an interview with Bloomberg, van Beurden said that the company had been “reinvented and reinvigorated” since the BG takeover, which he said had been good for Shell, and that the company was adapting its approach to business.
He acknowledged that it is difficult to predict what will happen to oil prices in the future but said: “The fundamentals still tell us that oil prices will drift up in the next few years. Of course we don’t know how and when that will happen, it may also still come down, but we need to have a strategy that is resilient with oil prices in the 40s but can also take advantage of oil prices in the 50s and 60s.”
This week, the UK became the latest country to announce a future ban on petrol and diesel cars, in this case by 2040, following France, China and India. Van Beurden told Bloomberg that his next car would be electric and said that diversification in the vehicle market, whether to electric, hydrogen or natural gas, was largely a positive move, and vital to keep within agreed climate targets. Liquid fuels, however, will still be necessary for some applications, with demand, van Beurden predicted, peaking in the early 2030s, and oil peaking a little earlier as biofuels enter the market. Shell will have to adjust.
“There is a huge opportunity in new mobility forms. You see our retail footprint changing, our ambitions changing, you see us invest more in gas which we think is a much longer-lived hydrocarbon, and you see us going into renewables, you see us going into petrochemicals more and we have to in that sense, continue to reinvent the company,” van Beurden told Bloomberg.