MOSCOW (MRC) -- Shell says it will invest between USD4-5 billion annually to grow its chemicals and products business as part of a wider rebalancing of its group portfolio to reach its net-zero carbon emissions goal by 2050, according to Chemweek.
The investments, to be made “in the near term,” are part of a wide-ranging package of strategic measures the energy major announced today to accelerate its lower-emissions drive. Shell will also invest USD5-6 billion per year in renewables and marketing, around USD4 billion annually on its integrated gas business, and approximately USD8 billion on its legacy upstream assets. It also confirmed its expectation that its total carbon emissions peaked in 2018 at 1.7 gigatonnes/year and that company oil production peaked in 2019.
“We see chemical demand continuing to grow, outpacing GDP… so we will continue to grow our chemicals business with a focus on intermediates and performance chemicals. These are the areas where we have competitive advantages in technology, scale, and market access. We are currently building or studying projects in Pennsylvania and Louisiana in the US, and at Nanhai in China. We will also produce virgin chemicals from recycled waste,” says Shell CEO Ben van Beurden. “Between our opportunities to increase margins and the options that we have to invest for growth, we will increase our chemicals cash generation by USD1-2 billion a year by 2030,” he says.
Shell says it aims to complete before the end of the decade its previously announced plan to streamline its refining and chemicals business, reducing it from 13 refining sites currently to six core integrated energy and chemicals parks. These will deliver synergies and expand low-carbon product offerings, with the company to also undertake “selective growth in chemicals,” it says. It will utilize existing infrastructure and assets to enable a faster and more efficient transition, it adds.
“These six energy and chemicals parks will be highly integrated with our trading and optimization business, along with our standalone chemicals sites, of course,” says van Beurden. “Our shift to energy and chemical parks means we will reduce our production of traditional fuels by 55% by 2030. At the same time, we will produce more low-carbon fuels and performance chemicals,” he says.
The company’s enhanced focus on performance chemicals will achieve higher returns than from commodity chemicals due to increased resilience and lower volatility, according to Shell. It will also use value chains where it has a competitive advantage through advantaged feedstocks, scale, proprietary technology, and market access, such as the developments at Geismar, Louisiana; Monaca, Pennsylvania; and an expansion at Nanhai, China.
The chemicals business will be grown as an “enabler,” Shell says. It aims to achieve this through investments in integrated petrochemical complexes in emerging markets, and by reducing its commodity chemicals exposure by up to 70% by 2030. This will be done by increasing margins through its investments in intermediate and performance chemicals projects, it says. The company says it sees a “healthy funnel of opportunities to increase annual cash flow from operations by up to an additional USD1-2 billion by 2030 compared with medium-term cash generation.”
Shell estimates the average investment rate of return from projects in its chemicals and products business will range between 10-15%, describing the segment in its strategy presentation as “capital-intensive with longer-term cash flow profile and limited downside.” The average period for project payback on investments will be around 10 years, it says. Cash flow from its chemicals and products business has “limited exposure to commodity prices,” it adds.
The processing of 1 million metric tons/year of waste plastic by 2025 will also be targeted as part of Shell’s circular economy strategy to develop sustainable product offerings, as well as opportunities to use biomass feedstocks, electricity, and hydrogen as power sources, it says. It also aims to increase the amount of recycled plastic in its packaging to 30% by 2030 and ensure that the packaging is reusable or recyclable.
Shell will also seek to have access to an additional 25 million metric tons/year (MMt/y) of carbon capture and storage (CCS) capacity by 2035, with three projects totaling 4.5 MMt/y of capacity already operating, sanctioned, or planned, it adds.
To achieve net zero by 2050, Shell says it is targeting the reduction of its net carbon intensity by 6-8% by 2023, 20% by 2030, 45% by 2035, and 100% by 2050.
As MRC wrote previously, Shell expects its oil production to decrease by 1%-2% annually as it prioritizes spending on transition projects in an acceleration of its strategy to achieve net zero emissions by 2050.
We remind that Royal Dutch Shell has reported an outage at its olefins plant in Deer Park, Texas, USA, on 5 January, 2021. The plant flared for 16 hours following unspecified process upset. Maximum steam cracker operating rate in Texas falls to 89%.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market reached 1 240,000 tonnes in 2020 (calculated using the formula: production, minus exports, plus imports, excluding producers' inventories as of 1 January, 2020).
Royal Dutch Shell plc is an Anglo-Dutch multinational oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the biggest company in the world in terms of revenue and one of the six oil and gas "supermajors". Shell is vertically integrated and is active in every area of the oil and gas industry, including exploration and production, refining, distribution and marketing, petrochemicals, power generation and trading.