Tuesday, March 2, 2021

Oil giant Shell turning to hydrogen, biofuels in new climate-friendly drive

The company will focus more on becoming an intermediary between clean power producers and customers.

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Royal Dutch Shell is betting on rapid growth in hydrogen and biofuels as it shifts away from oil, rather than joining rivals in a scramble for renewable power assets, company sources have told Reuters.

Shell and its European and US rivals are all seeking new business models to reduce their dependency on fossil fuels.

They also need to appeal to investors concerned about the long-term outlook for an industry under intense pressure to slash greenhouse gas emissions.

Shell will present its strategy on Feb 11, and unlike Fance’s Total and the UK’s BP, the company will focus more on becoming an intermediary between clean power producers and customers than investing billions in renewable projects, the sources said.

The hydrocarbons giant will, however, keep its overall oil and gas output largely stable for the next decade to help fund its energy transition, though gas is set to become a bigger part of the mix, the sources told Reuters.

BP, meanwhile, plans to slash its oil output by 40% by 2030 and has swept aside its core oil and gas exploration team to focus on renewables.

Shell plans to boost its consumer base by expanding its network of electric vehicle charging points through its 45,000 petrol stations worldwide, far more than its European rivals.

The Anglo-Dutch power giant also wants to ramp up its production of biofuel made from plants and waste as an alternative source of energy for transportation, the sources said.

Hydrogen, and so-called green hydrogen which is made solely with renewable power, comes with high costs and infrastructure challenges though Shell is already investing. The company is betting on future growth in hydrogen, the sources said. While still a niche market, hydrogen has attracted huge interest in recent months as a clean alternative to natural gas for heavy industry and transportation.

The US state of California, for example, is backing the rollout of hydrogen fuel cell vehicles to help achieve its climate goals while countries such South Korea and Japan are also betting heavily on hydrogen as an alternative fuel.

Like Shell, rivals including BP, Total, Italy’s Eni and Spain’s Repsol also plan to expand in hydrogen and biofuels markets, as well as add electric vehicle charging points to generate new revenue away from oil.

However, Shell won’t chase the same ambitious targets some of its European rivals have for adding wind and solar generation capacity and will prioritise selling electricity instead, the sources said.

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