Shell Braces for Change by Expanding Its Foothold in Electricity
“The era of oil and gas and petrochemicals is not over, but the era of electric transport is also coming in. The world is changing and if our customers’ needs are changing, we have to change with them,” said Shell CEO Ben van Beurden.
Royal Dutch Shell Plc is taking small steps toward a future dominated by electric cars, renewable energy and carbon constraints, demonstrating its intent not to remain solely an oil and gas company.
The energy giant agreed last month to purchase First Utility Ltd., the U.K.’s seventh-largest power provider. Its offshore-wind partnership with Eneco may expand further, with newspaper Telegraaf reporting on Friday that Shell is considering buying the Dutch utility outright.
Big Oil entering the heavily regulated European power market isn’t a natural fit today. Yet it makes sense for a future in which consumers want charging points alongside gasoline pumps at fueling stations, and iPhone apps and smart home devices generate vast amounts of energy-use data that itself becomes a valuable commodity.
“We’re on the cusp of a potentially rather fundamental reorganization of the way that consumers purchase and get access to electricity,” said Rick Wheatley, an executive vice president at Xynteo Ltd., which advises oil companies including Shell on long-term sustainable planning. The oil industry is realizing “that things may begin to move much faster” in renewables and the electrification of transport, he said.
Shell’s steps toward selling electricity have so far have been modest in comparison to its vast fossil fuels business. The company pumped 1.85 million barrels of oil and 10.47 billion cubic feet of natural gas every day in the third quarter, more than enough to supply the whole of the U.K. In contrast, First Utility has no generation of its own, instead buying power wholesale from a Shell unit, and supplies just 3% of the country’s residential energy market.
In October, Shell announced it was buying NewMotion, Europe’s largest electric-vehicle charging provider. In late November it reached an agreement with IONITY — a Munich-based venture between BMW Group, Daimler AG, Ford Motor Co. and Volkswagen AG — to start charging stations in 10 European nations.
Eneco, which pointedly shuns fossil fuels on the home page of its website, has a portfolio of sustainable energy projects across northwestern Europe. A Shell spokeswoman declined to comment on whether it was considering bidding for the Rotterdam-based utility or the company’s broader plans in the power sector.