Shell’s new chief executive has vowed to be “relentless” in his pursuit of higher returns for shareholders as he tries to chart a new path for the company through the energy transition.

Last week in New York, Wael Sawan, who was appointed in January, addressed a plan for Europe’s biggest energy company to cut costs, increase payouts to shareholders and devote a higher proportion of spending to oil and gas.

While some investors welcomed the pitch, others questioned whether Sawan was abandoning the strategy launched two years ago by his predecessor, Ben van Beurden, to achieve net zero emissions by 2050 by increasing investment in clean energy.

Speaking to the Financial Times after the investor day, Sawan insisted on 2021 strategy to reduce emissions by gradually rebuilding the company remained. But it was also clear to him that his regime was new.

“While the target is unchanged . . . the way we get there is really different,” Sawan said.

In a set of pledges seemingly designed to appeal to the many American investors gathered at the New York Stock Exchange, Shell stressed the plans maintain oil production at current levels of 1.4 million barrels per day by 2030 and expand its giant liquefied natural gas business. It will also be more selective about the types of clean energy projects it supports.

“Ultimately, we need to be able to create long-term value for our shareholders,” Sawan told the FT. “The answer cannot be: ‘I will invest [in clean energy projects] and have bad returns, and that will justify my conscience”. It is bad.”

Since assuming the top job, Sawan has focused on ending the yawning valuation gap with US competitors remaining more committed to oil and gas production and valued at much higher multiples of their cash flows.

According to Shell’s new plans, a $40 billion investment over the next three years will help add 500,000 barrels of oil equivalent per day of new oil and gas production by 2025.

Over the same period, $10 billion to $15 billion—about 20 percent of total spending—will be invested in low-carbon technologies such as hydrogen, biofuels and vehicle charging.

“We’ve been testing different models and different concepts over the last few years,” Sawan said. “As confidence grows in some, such as biofuels and electric car charging, we will try to go even further. In other areas where we have experienced significant headwinds, such as retail energy sales to consumers, we are pausing and thinking.”

He singled out Indian renewables group Sprng, US solar developer Savion and European biogas company Nature Energy – all acquired from 2021 – as “foundations” of Shell’s clean energy plans. Other, less profitable parts of the business, such as the UK, German and Dutch household energy divisions, will be offloaded.

Charging stations for Shell electric cars
Shell EV charging station © Lauryn Ishak/Bloomberg

Sawan, who has spent his entire career at Shell, said he has no qualms about cutting parts of the business that don’t add enough value.

“The strength of our company is the level of cooperation with employees. . . but we are at risk when we confuse the concept of caring for people with being decisive about how we actually allocate capital.”

The moves are expected to help Shell reduce annual operating costs across the group by $2 billion to $3 billion by the end of 2025, while capital spending will also fall.
to $22 billion to $25 billion annually in 2024 and 2025, down from a projected $23 billion to $27 billion this year.

As a student at Harvard Business School, Sawan said he was told to be “good-hearted but stubborn,” advice he says he carries with him to this day. “I don’t tend to get emotional about business decisions,” he said.

This approach may have helped Sawan when he moved quickly to reduce his executive committee from nine to seven in his first month as CEO. As part of the changes, Sawan has ended the role of chief strategy officer held by Ed Daniels, who will step down from the senior team next month and then leave Shell.

“It’s very strange to have a strategist who is divorced from a CFO because the decisions you make in terms of where you want to strategically deploy your capital also have to….[fit] with your financial framework,” he said.

The strategy now sits under chief financial officer Sinead Gorman, who also used the world “ruthless” in Wednesday’s presentation.

Gorman, upstream director Zoë Yujnovich and downstream director Huibert Vigeveno have emerged as Sawan’s key team over the past six months.

Sawan said: “It’s about having a handful of people around the executive table who can then become really accountable for bigger chunks of responsibility. . . rather than having to discuss everything.”

Vigeveno, a Dutch national who joined Shell in 1995, two years before Sawan, was a rival candidate for CEO. Its portfolio will expand from next month with the addition of a renewables and energy solutions division to the downstream division.

Australian Yujnovich joined Shell from Rio Tinto in 2014 and quickly rose through various positions in the oil, downstream and integrated gas business.

All three executives were key architects of Shell’s new direction, Sawan said.

Analysts at Bernstein described the investor day as “the most evident cultural reset and upside potential within Shell in decades.” Other investors were more cautious.

Legal & General Investment Management, the UK’s largest asset manager, has questioned whether Shell is on track to achieve net zero emissions by 2050. “As part of our engagement with Shell following its recent announcements, we will assess how this meets our expectations,” stated .

Shell shares closed the week up 2 percent.

For Sawan, a simpler Shell can be a more effective Shell.

“Shell can play in many different areas, but really our strength is when we focus on a handful of things and really mobilize the organizational power to deliver.”

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