LONDON— Royal Dutch Shell PLC said it would begin reducing oil production, ending a decades-long strategy focused on pumping more hydrocarbons as it and other energy giants try to capitalize on the shift to low-carbon energy.
The move is a historic change for the company, which after importing shells began selling kerosene in the 19th century and had since tried to grow its oil business. Until recent years, he carried out costly and environmentally challenging projects on Canadian oil sands and in Alaska, driven by fears that the world would run out of oil. Now, he sees demand faltering long before oil runs out.
Shell said Thursday that its oil production had already peaked and expects production to decline 1-2% a year, including asset sales, reducing its exposure to long-term commodity prices . The company plans to reduce production of traditional fuels such as diesel and gasoline by 55% in the next decade. At the same time, the company said it would double the amount of electricity it sold and deploy thousands of new charging points for electric vehicles.
The strategy follows similar plans by rivals BP PLC and Total SE to reduce its dependence on fossil fuels as it expands into renewable energy such as wind and solar, in part in response to growing regulatory pressure and investors . By contrast, the American companies Exxon Mobil Corp. and Chevron Corp. they have no plans to invest substantially in electricity and both say the world will need large amounts of fossil fuels over the next few decades. Exxon, however, plans to invest in technology to reduce carbon emissions.
However, analysts see the pivot to low-carbon energy as a challenge because it requires investments in areas where major oil companies do not necessarily have a competitive advantage and lower performance. Renewable projects typically generate returns of around 10%, compared to the traditional 15% earmarked for oil and gas projects.