Ejiofor Alike with agency reports
The Chief Executive Officer of Royal Dutch Shell Plc, Mr. Ben Van Beurden, has said his next car will not run on oil or gas as he is set to switch from a diesel car to electric car in September 2017.
Europe’s largest energy company thursday released its 2017 second quarter results where Beurden stated that the company is gearing up for a world of “lower forever” oil prices, after the company’s profits tripled.
The results beat expectations as the company was able to boost profits after cutting costs to adapt to a world of $50-a-barrel oil.
With the assets sales and big savings it introduced since the oil price crash kicked in, Shell was also able to increase cash flow to $12.2 billion (9.31 billion pounds) and reduce debt.
Shell had responded to the oil price crash with its $54 billion takeover of BG Group Ltd., betting that demand for natural gas will rise as the world shifts to cleaner-burning fuels.
But Beurden’s plan to switch over to electric car has potentially exposed the future threats to fossil fuels.
The company’s Chief Financial Officer, Jessica Uhl already drives a BMW i3 electric car and Beurden will also switch from a diesel car to a plug-in Mercedes-Benz S500e in September.
“The whole move to electrify the economy, electrify mobility in places like northwest Europe, in the US, even in China, is a good thing,” Van Beurden said in an interview on Bloomberg TV.
“We need to be at a much higher degree of electric vehicle penetration — or hydrogen vehicles or gas vehicles — if we want to stay within the 2-degrees Celsius outcome,” he added
The United Kingdom on Monday said it would ban sales of diesel- and gasoline-fueled cars by 2040, two weeks after France announced a similar plan to reduce air pollution and meet targets to keep global warming below 2 degrees Celsius.
Carmaker Volvo AB said this month it will manufacture only electric or hybrid vehicles from 2019.
Changes in automotive technology, the fight against climate change and slowing economic growth in China are dampening the world’s once boundless appetite for crude.
“If policies and innovation really work well, I can see liquids peaking in demand in the early 2030s and maybe oil will peak a little bit earlier if there’s a lot of biofuels coming into the mix as well,” Van Beurden said.
It is projected that electric cars will outsell fossil-fuel powered vehicles within two decades as battery prices plunge, according to Bloomberg New Energy Finance.
Beurden said Shell had adopted “what we call a lower-forever mindset,” as the company’s oil and gas production dipped versus the previous quarter as a result of reduced output from a facility in Qatar.
Van Beurden said with oil prices hovering around $50 a barrel and forecasts of only a modest recovery by the end of the decade, Shell was not planning to stop its cost cutting drive.
It was now “getting fit” to be profitable in a world where oil trades at $40 a barrel, he said.
“Shell’s strong results this quarter show that we are reshaping the company following the integration of BG. Cash generation has been resilient over four consecutive quarters, at an average oil price of just under $50 per barrel. This quarter, we generated robust earnings excluding identified items of $3.6 billion, while over the past 12 months cash flow from operations of $38 billion has covered our cash dividend and reduced gearing to 25 per cent,” Beurden said
“The external price environment and energy sector developments mean we will remain very disciplined, with an absolute focus on the four levers within our control, namely capital efficiency, costs, new project delivery, and divestments. I am confident that we are on track to deliver a world-class investment to our shareholders,” Ven Beurden added.
Shell reiterated its plans to spend around $25 billion this year, at the lower end of its long-term range, but said it could cut further if needed.