In This Article:
Shell plc SHEL, the British energy major, has announced that it plans to increase the sales of liquefied natural gas (LNG). This decision has faced criticism from a group of major shareholders, who filed a resolution questioning whether the expansion of LNG sales aligns with the company’s commitment to reduce carbon emissions related to its operations.
Shell's LNG Expansion Plans Under Scrutiny
Being the largest trader of LNG globally, Shell is banking on the anticipated rise in demand for the commodity in the upcoming years. However, the company is facing scrutiny from a major group of shareholders, including the Brunel Pension Partnership, Greater Manchester Pension Fund and Merseyside Pension Fund, for its decision to increase sales as it may conflict with the company’s long-term climate targets.
The shareholders have asked for further clarification on how Shell’s LNG growth strategy will remain consistent with the change in energy demand globally and with the company’s plans to become a net zero energy firm by 2050. The pension funds that filed the resolution own combined assets, whose total value exceeds $86 billion.
Natural gas is a cleaner burning fuel than coal and other fossil fuels. However, LNG emits a significant amount of greenhouse gases during the extraction and transportation process. As such, increasing LNG sales may hinder the company’s ability to reach its net zero target by 2050.
Shell’s LNG Demand Forecasts Exceed IEA Scenarios
Per the investor group, Shell’s projected LNG demand exceeds all the demand scenarios reported by the International Energy Agency (“IEA”). However, despite the inconsistency and the changes that the global energy market has undergone, the company has not substantially revised its demand projections.
Shell stated that LNG is expected to comprise approximately 30% of its hydrocarbon production in 2030. However, its demand forecasts are 301% higher than the "Net Zero Emissions by 2050" scenario presented by IEA.
A representative of the Australasian Centre for Corporate Responsibility mentioned that the significantly high demand outlook presented by Shell raises governance questions regarding the implications of Shell’s strategy and poses major financial risks for investors.
Additionally, Brunel Pension Partnership has raised its concerns about the inconsistency between Shell’s climate goals and its LNG strategy. The spokesperson from Brunel Pension Partnership emphasized that Shell must provide greater transparency over the alignment toward its long-term climate commitments. The concerns regarding Shell’s alignment toward its climate goals were the result of the company’s recent decision to scrap carbon intensity from its operations by 2035.