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‘Shell is ready for the energy shocks to come’

Like a pair of mysterious soothsayers, Maarten Wetselaar and John Abbott are peering into the future. The world they see is almost unrecognisable from the one we inhabit today, and yet it is only just around the corner.

In the west, the petrol car has become obsolete. Lorries are powered by liquid natural gas. Freight liners criss-cross the oceans fuelled by hydrogen. Solar and wind provide the energy to our homes.

And the petrol station has been reimagined as an unlikely retail hotspot where people routinely gather to do their food shopping, pick up parcels, and sip artisan coffee. A convoy of vehicles are being rebooted at one of many charging points on the forecourt.

At Shell the changes are being taken very seriously, triggering one of the most dramatic corporate reshaping acts ever undertaken as it attempts to reinvent itself in the face of arduous new climate change targets agreed in Paris nearly four years ago, which set a 3.6F (2C) ceiling on global warming.

“The world that we all grew up in was remarkably stable in terms of energy provision. It has barely changed over the last 40 years. In the next 20 years that is really going to change,” Wetselaar says.

Some experts have compared it to a new industrial revolution. Although there is much debate about when the world will hit peak oil, most agree that hydrocarbons, which have provided 80pc of the world’s energy during that time, are on their way out. Gas, wind, solar, and above all electricity, are the future.

The adjustment will be a Herculean task for a company that has spent the last few decades plundering the earth’s natural resources, but Shell boss Ben van Beurden appears to be embracing the shift. Instead of talking proudly of its engineering might and deep water drilling capabilities, today management boasts of its retailing prowess, marketing nous and brand power. Wetselaar argues that Shell is simply going back to its roots.

“This is not how we have talked about ourselves over the last 30 years. We’ve always talked about our engineering achievements and wells but our initial story was about customers – we were selling kerosene for lighting, then petrol for cars.

“It is only since the 1970s crisis when there was an OPEC-induced throttling of crude oil that the industry became fascinated with producing hydrocarbons rather than selling them. With the energy transition it’s giving the customer options to decarbonise their lives.”

Wetselaar and Abbott are the generals tasked with trying to navigate this dramatic change smoothly. Get it right and Shell could become a pioneer in a brave new world where clean energy dominates. Get it wrong, and the FTSE-100’s biggest constituent has admitted it faces the unthinkable: a battle for its very existence.

Abbot oversees downstream operations at Shell, stretching from its refinery and chemicals operations, to marketing, and the company’s global network of more than 40,000 filling stations. Wetselaar is in charge of the oil behemoth’s integrated gas arm and new energies business.

While both insist that the so-called “energy mix” will continue to be varied, as it becomes cleaner, the biggest shift will be in how much electricity the world uses. Without it, climate change targets have no chance of being achieved.

“The world relies on electricity for about 20pc of what is consumed – less than what most people think – but that needs to go to 50pc and beyond for the Paris Agreement to be realised,” Wetselaar says.

Shell has already taken some bold steps. It has bought NewMotion, which makes electric car charging points for homes and workplaces; snapped up First Utility, a supplier of electricity and gas to nearly 1 million homes; and taken a big stake in Silicon Ranch, an operator of US solar power plants. With these moves, it is no stretch to say that Shell envisages a time when it will supply all your energy needs.

“We will start to link these companies so you cannot only buy your electricity but you can also charge from it and get more integrated solutions … We are essentially trying to put the pieces of the puzzle together and to become a fully integrated supplier of electricity to business and consumers around the world”.

The motor car will be at the forefront of change. Today, battery-powered cars account for a measly one per cent of all vehicles on Europe’s roads. There are only 115,000 in Britain. Yet, by 2040, a third of all vehicles sold could be electric, according to some predictions.

Here, Shell believes it is primed to take the lead, thanks to a sprawling network of once-neglected petrol stations and a brand that is among the most recognisable on the planet. The company has built up a chain of 44,000 filling stations across the globe, all emblazoned with the distinctive red and yellow Shell logo, which is more than 100 years-old.

“We have petrol stations in 70-80 countries. That is bigger than Starbucks and McDonald’s. We have 30m customers coming into those daily,” Abbott boasts.

“The brand will become increasingly important. Shell’s logo has been valued at $39b (£30b). That’s greater than Coca-Cola and Nike.”

Significant expansion is planned. “We want to have 55,000 sites by 2025. Growth will be predominantly in China, India, Indonesia, and Mexico. Demand for those fuels is still increasing.

“We are increasingly opening up products that we are selling to our customers, so we are looking for about 50pc of what we sell to be things other than petrol or diesel,” Abbott says.

But before the electric car revolution can become a reality, charging infrastructure needs to drastically improve. As Wetselaar is quick to point out: “There are only two hydrogen stations in the UK so it doesn’t give people the trust.”

The company expects to become ubiquitous in the home too, tapping into its vast trading operations and employing some radical methods to manage consumers’ energy.

“If you have a big battery in your car or house and you can tell me ‘I would like it to be 80pc full in the morning”, but if at 3am you can make money draining it, you will say ‘Be my guest’ and we will share the benefit. There is money in this, so you can save it by allowing me to understand your electricity use to the point that we can optimise it for you, so it will become fully automated,” Wetselaar says.

Still, it is easy to forget that the transition to a lower carbon world isn’t going to happen overnight. The industry is obsessed with the question of “peak oil” – when the world’s consumption of crude will reach a high. But even that moment isn’t as significant as when use starts to dwindle, and that will take much longer. The switch will take decades, and in the meantime a wide range of fuels will be part of the “mix”.

“We spend a lot of time looking at oil demand and supply. There are a billion cars on the road today. The estimate is that will double by 2050. If you say there will be certain increase in hybrids, electrical vehicles and LNG, you still end up with more internal combustion engines in 2040 than today so the reality is that we have to fuel all those vehicles.”

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