Published by yourcollegebars on July 29, 2017

Shell Gets Ready for “Lower Forever” Oil Prices

Shell Gets Ready for “Lower Forever” Oil Prices

On Thursday, Royal Dutch Shell CEO Ben van Buerden said the company has adopted a “lower mindset ever,” focusing on cost control. Its long-term strategy is “fit for forty years.”

While overproduction is the driving force behind today’s low prices, Shell’s long-term concern, in fact, refers to weak demand. The United Kingdom, France, Germany, Norway,

China and India, all move towards the elimination of vehicles with internal combustion engine, and Volvo is committed to become electric by the end of the decade.

With electric cars in place, van Buerden expects fossil fuel needs to reach the plateau since the 2030s – much earlier than anticipated by organizations such as the International Energy Agency.

Van Buerden does not see this as a bad thing – far from it. He told Bloomberg TV that he thought electric vehicles are an important part of efforts to limit global climate change.

“We should be in a much higher degree of penetration of electric vehicles – or hydrogen or gas vehicles – if we want to stay in the 2 degree Celsius result,” he said, referring to the commonly accepted threshold for Dangerous Warming.

It intends to do its part by purchasing a plug-in hybrid Mercedes-Benz S500E.

According to this perspective, Shell plans to invest another billion dollars a year in new energy sources, such as biofuels and hydrogen fuel cells, among other technologies. It is progressing little by little in the area of ​​renewable electricity.

That does not mean it will stop being a leader in oil – the recent acquisition of BG Group confirms its role as a leader in oil and gas – but it will prepare for a future in which fossil fuels play a role in parallel with other alternatives.

Shell says it is well positioned to take advantage of a low oil price environment. Chief Financial Officer Jessica Uhl noted that cash flow from operations increased for four quarters of prices below $ 50 per barrel – comparable to the company’s performance when oil was around $ 100.

He added that even at these low price levels, the company managed to reduce its net debt to cover its cash dividend and invest enough in investments to ensure growth.

Part of the financial performance of diversification is downstream. “The integration of our refining, marketing and marketing as well as the performance of our chemical activities improve margins and make Shell’s portfolio more resilient to falling oil prices,” said M. Uhl.

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