Latest / The Pivot Podcast with Fexingo: How Businesses Change Direction and Survive Disruption / How Shell Pivoted From Oil to Clean Energy
Transcript
- Lucas: Shell. One of the most recognizable logos in the world. That yellow scallop shell on a red background — you see it at gas stations across the planet. But for the last decade, Shell has been trying to convince investors, regulators, and the public that it is no longer just an oil company. Luna: Right. The pivot to clean energy. But Shell's story is a lot more complicated than a simple 'we're going green' press release. Lucas: It really is. Let's go back to 1997. That's when Shell rolled out something called the 'Beyond Petroleum' campaign. It was bold — the company changed its logo, invested in solar and wind, and talked about a future beyond fossil fuels. Luna: And then what happened? It kind of fizzled, didn't it? Lucas: It did. By the early 2000s, Shell scaled back those investments. The solar division was sold off. The wind projects were quietly deprioritized. Oil prices were high, and the core business was just too profitable to mess with. Luna: So that pivot was more of a PR experiment than a real strategic shift. Lucas: Exactly. And it left a legacy of skepticism. When Shell started talking about clean energy again in the 2010s, a lot of people said, 'We've seen this movie before.' But this time, the external pressure was real. Luna: What changed? Lucas: Three things. First, the Paris Agreement in 2015. That created a regulatory direction. Second, activist investors — groups like Follow This started filing shareholder resolutions demanding Shell set emissions targets. And third, the cost of renewable energy dropped dramatically. Luna: So the economics started to align with the rhetoric. Lucas: They did. In 2021, a Dutch court actually ordered Shell to cut its carbon emissions by 45% by 2030. Shell is appealing that ruling, but it sent a signal. And later that year, Shell committed to spending up to $2.5 billion a year on low-carbon energy. Luna: That sounds like real money. But how much is that relative to their total capex? Lucas: Great question. Shell's total capital expenditure in 2022 was about $25 billion. So the clean energy spending was roughly 10% of that. The other 90% still went to oil and gas. That's the tension at the heart of this pivot. Luna: So it's not really a pivot — more like a small bet while keeping the core engine running. Lucas: That's the honest framing. Shell calls it a 'transformation', but the numbers tell a different story. Still, within that 10%, some interesting things are happening. Shell is now one of the largest operators of offshore wind in Europe. They have a stake in the Hollandse Kust Noord wind farm, which will power a million Dutch homes. Luna: And they're also building out EV charging infrastructure. I've seen Shell Recharge stations popping up. Lucas: Yes. Shell aims to have 500,000 electric vehicle charging points globally by 2025. They already have about 100,000. That's a real business — they acquired a company called NewMotion and Ubitricity, a street-charging operator in the UK. Luna: So there's genuine investment. But when you look at Shell's overall emissions — including the emissions from the products they sell — they've barely budged. Lucas: That's the critical distinction. Shell's 'net zero by 2050' pledge covers its own operations — what's called Scope 1 and 2 emissions. But the vast majority, Scope 3 — the emissions from customers burning Shell's gasoline and diesel — those are still going up in absolute terms. Luna: So the pivot is real but incomplete. And the pace is being dictated by courts and activists, not by Shell's own strategy. Lucas: Exactly. And that creates a fascinating strategic tension. Shell's CEO, Wael Sawan, who took over in 2023, has actually dialed back some of the renewable ambitions. He said Shell will be 'selective' in renewables and focus on higher-return projects. That's a signal to investors that the pivot won't sacrifice profitability. Luna: But doesn't that risk making the pivot too slow? If the world does decarbonize, Shell could be left with stranded assets. Lucas: That is the trillion-dollar question. Shell is essentially hedging. It's betting that the energy transition will take decades, not years, and that oil and gas will remain profitable for a long time. If that bet is wrong, Shell's reserves become liabilities. Luna: Let's talk about one concrete example of where Shell has actually moved decisively. The North Sea. Lucas: The North Sea is a great case. Shell has been extracting oil and gas there for 50 years. But now it's also building the world's largest offshore wind farm — Dogger Bank — in partnership with SSE and Equinor. That's a direct pivot: using the same marine engineering expertise for a different energy source. Luna: And it uses the same supply chain, the same workforce, the same project management skills. Lucas: Right. That's the smartest part of Shell's strategy. They're not trying to become a solar panel manufacturer — they're leveraging their existing strengths in large-scale energy infrastructure. Hydrogen, carbon capture, offshore wind — those are capital-intensive, engineering-heavy fields where Shell's experience matters. Luna: So the pivot isn't about abandoning oil and gas overnight. It's about gradually shifting the portfolio toward lower-carbon energy, while keeping the cash cow alive for as long as possible. Lucas: That's the textbook definition of a managed decline — for the carbon-intensive part, anyway. And honestly, that might be the most realistic path for a company of Shell's size. The question is whether it's fast enough. Luna: If these conversations have moved your work forward in some small way, consider supporting the show. It's listener-funded and ad-free — that's how we keep the focus on substance. You can find us at buy me a coffee dot com slash fexingo. Lucas: And we genuinely appreciate that. Back to Shell — one way to measure the pivot's seriousness is to look at what Shell is NOT doing. It's not selling its oil and gas assets. It's not spinning off its renewables into a separate company. It's trying to do both under one roof. Luna: And that creates internal conflict. The oil division is competing for capital with the renewables division. Which one gets the money? Lucas: Historically, oil wins, because the returns are higher and more certain. But that's changing. As carbon pricing expands and regulations tighten, the risk-adjusted return on renewables improves. Shell is essentially running an experiment in real time: can a legacy fossil fuel company transform itself without destroying shareholder value? Luna: I think the honest answer is: we don't know yet. But Shell's progress — or lack thereof — will be a bellwether for the entire industry. Lucas: Absolutely. And that's why we watch Shell. Not because they've figured it out, but because they're trying, and the outcome matters for everyone.