Shell increases yearly investment to $30bn

Micheal Ajayi

Royal Dutch Shell (SHELL) has announced its plan to increase capital spending by improving its investment up from a prior range of $25 billion to 30billion per year.

The energy major in its strategy update said its focusing on its traditional oil and gas businesses despite a new push into power and cleaner fuels and that it’s new investing scheme will run between the years 2021-25.

The company’s chief executive, Ben van Beurden, said that the company would continue to make “sustained” investments into its traditional oil and gas businesses to ensure it “is resilient through the time ahead”.

Even as oil demand “might peak in the next decade or bit more” he said decline rates in existing fields would require new investment.

Shell plans to spend $11-13bn to maintain, rather than expand, its oil exploration and production business in the coming years.

Integrated gas, cleaner fuels and chemicals will be its growth divisions. “The bulk of our investment will be in themes that will drive energy transition”, said Mr van Beurden.

With its ambitions to become the largest electricity company by the 2030s, Mr van Beurden said Shell would move “in step” with society as the company prepares for a shift in global energy supplies towards lower-carbon sources.

“As long as people are showing up [at fuel stations] with their diesel cars we cannot do it with renewable power,” he added.

Mr van Beurden said that even as Shell would “act with conviction” in the power space, it would need to “prove the investment case before we scale up” in an acknowledgment of lower margins for traditional utilities.

However the Anglo-Dutch energy company becomes more confident in its ability to generate cash, having spent the last few years cutting costs as it recovered from the 2014 oil price crash. It has also sought to cut debt after its $53bn deal for BG Group in 2016.