The CEO of oil & gas giant Shell admitted demand may never recover from its coronavirus slump, as he said the company will protect energy transition initiatives that now hold the key to the supermajor’s future as an attractive investment.

Ben van Beurden said activities repositioning the company for the energy transition will be shielded where possible from cost cuts imposed in response to the downturn, which the Shell boss acknowledged could have hastened the peak of demand.

“It’s hard to say,” Van Beurden said when asked if demand would ever return to 2019 levels, and the implications of that for the company’s future attractiveness to investors – especially in light of a cut in dividend to shareholders for the first time since World War 2. “We don't know what's on the other side of this crisis.”

Like other fossil groups Shell has seen demand and prices plunge as economies grind to halt during the pandemic, a slump described by the International Energy Agency as “staggering and unprecedented”.

Van Beurden said: “We’ve always said we expect oil and later on gas demand to peak. We said oil demand could peak as early as this decade.

“I think the likelihood of that happening has indeed gone up.”

But Van Beurden said the supermajor’s early moves in the energy transition and its recently-announced 2050 net-zero goal could secure a viable future.

“It may sound a bit difficult on a day like this, but we absolutely have an ambition to be world class investment case,” said van Beurden discussing the company’s first quarter results.

“We continue to be focused on the energy system of the future. We will see an evolution of our portfolio towards our net-zero ambition.

“Our ambition is to thrive in the energy transition … is essentially to remain investable, a very attractive company in the decades to come.”

The CEO said the group’s New Energies unit, focus of most of its early forays into sectors such as offshore wind, solar and power storage would be spared the worst of Shell’s response to the crisis, which aims to cut operating expenses by $3-$4bn this year, with operating expenditure $5bn lower planned.

“Where possible we try to spare [New Energies] that a little bit. We still believe there’s an energy transition underway, which may even pick up speed in the recovery phase of this crisis.

“If we do find we have a project that makes sense but the affordability constraints make us make choices, we will probably give preference to the projects that will serve us in the long-term future.”

Transition

Shell boss says oil may never recover as supermajor shields energy transition projects