How Shell, the world’s second largest oil and gas company, wants to achieve net zero emission targets

Synopsis:
Oil and gas major Shell is prepping for a low-carbon future. The company’s India Chairman, Nitin Prasad, says the climate consciousness around the world provides a fantastic opportunity to transition the company’s business away from traditional oil and gas to an alternative energy base projects with Shell. They get to use our labs, our facilities, our network, and our partnerships.

What is the future of an oil and gas company when the world is looking at cleaner, more efficient means of energy and cutting down greenhouse emissions?
For the world's second-largest fossil fuel explorer, Shell, the buzzword in this environment is transition.
According to McKinsey, the oil and gas industry's operations account for 9% of all human-made greenhouse-gas (GHG) emissions. In addition, it produces the fuelsthat create another 33% of global emissions. Therefore, any efforts to mitigate the impact of climate change will not be successful if oil and gas majors do not play a pivotal part. When it comes to climate change management, Shell says it has a very important role to play.
Nitin Prasad, Chairman, Shell Companies in India, says as a company it has been pursuing energy transition for a long time and it was one of the first companies in the world to have a solar farm, in the 1980s. "At one point in time, we had over 15% to 20% of the solar panel manufacturing in the world and we were one of the first in the world to have a hydrogen business. Today, we are probably the largest player in biofuels and in many aspects of our business, we have always been part of the energy transition story. We have always been part of the story of developing energy solutions from now on beyond oil and gas," says Prasad.
Oil and gas is a big base for Shell, but as the global economy moves away from coal and gas and looks for alternatives to reduce carbon intensity, big oil companies would need to keep pace.
Prasad says while transition was always a part of the strategy of the company, the shift became more prominent during the pandemic in April 2020. At the heart of this is the "Powering Progress" strategy, a plan that in Shell's words looks to "generate value for shareholders; a vehicle in the transition to cleaner energy and net zero; powering lives and livelihoods; respecting nature; and underpinning core values of honesty and integrity."

While Shell looks to accelerate the transition of its own business to net-zero emissions, it faces a bigger problem. For the company to achieve the Sustainable Development Goals set in Paris in 2015, the toughest part is to help its customers and suppliers decarbonise.
Prasad says this is where collaborations will play an important part. "For a long time, we have worked with partners like BP, Exxon, Chevron and others to look at alternative energy bases. We are now looking to broaden that base and get more stakeholders involved, which is where startups will play a big role," says Prasad. For startups, the company has the Shell E4 Program that looks to tap into innovations and technologies that can help everyone leapfrog to clean energy.
In a conversation with ET Digital, Prasad talks about climate plans, the hurdles, the role of startups and the technologies that can power the future. Edited excerpts:

Economic Times (ET): What is the Shell E4 Program and what was the reason behind starting this?
Nitin Prasad (NP): Shell has always fostered the sense of open innovation and for decades the company has operated a venture capital fund, and runs an impact fund through the Shell Foundation.
About five years ago, looking at the emerging Indian startup ecosystem, energy and mobility was a key sector where a lot of the growth was coming in. We looked at the environment and wanted to recognise and develop this nascent ecosystem.
The way startups in the energy and mobility space need help to grow and develop is very different to what a digital tech or a fintech-type startup may need. So, to build that ecosystem, we felt the need for our efforts through Shell E4, which is effectively our incubation and acceleration programme for these startups. We look for startups in their series A-B stage, where they are ready for the first customer or already have their first customer stage and are now getting ready to scale up. We look at about over 1,500 to 1,700 startups a year and after a rigorous process, select those that we feel are ready to go through the programme.
Our aim with this India-specific programme is to help accelerate India's energy transition and to find the startups that will help speed up the process. Startups may be based or domiciled in other geographies, but we welcome them into India because their technologies or capabilities are relevant to our energy transition.
About 15 to 20 startups go through the programme every year.
A theme is picked every year, which can be around circularity, bio-resources, digital technologies or even battery tech. The startups come in for a six-month cycle where we help them develop their ideas a bit further, help them with theirgo-to-market strategies, develop their pilots, and also pilot their projects with Shell. They get to use our labs, our facilities, our network, and our partnerships.
ET: How does Shell and this E4 programme enable energy transition and net zero?
NP: India may have committed to the goal of net zero by 2070, but the company has set a much more ambitious target for itself: it wants to achieve the sameThe challenge for Shell is not to cut its own emission footprint, but also to ensure its customers and suppliers adhere to emission cuts. So, it is not the emissions associated with our assets, but the combustion of the fuels that we provide and are utilised by either B2B or B2C customers. This is about 88% of our emissions. It is, therefore, really important for us to work with a number of companies and partners because we have to effectively help them in accelerating energy transitions. So, what this means is that together, for example, we may support some bio startups offering a new technology in torrefaction, fraction, extraction, waste processing and even circularity.
ET: But how do you get to net zero goals? In terms of new areas of energy, what is it that Shell is looking at? We hear a lot about hydrogen. Is that something the company is looking at?
NP: It would be looking at different aspects of the ecosystem - from alternative sources of power to cleaner options. When it comes to low carbon intensity (CI), we must look at everything from EV charging to ethanol and also bio CNG. We are also very interested in carbon capture, utilisation, and storage (CCUS) and are a part of coalition partners in terms of developing that. Hydrogen is a big part of it.
Shell has also made a play with our multibillion-dollar acquisition of Pune-based Sprng Energy. This gives us access to three gigawatts of renewable power, which we are keen to grow and expand and take that into newer areas.
We are living in a world where several of the largest industrial companies in India have very ambitious net zero targets and many of them need help and support to decarbonise. If you look at steel, cement or aluminium plants or sectors like mining, textiles or fertilisers, each one of them would need a range and combination of solutions to decarbonise over the next couple of decades.
Most of them have a 2050 or less target to deliver that and we are now building out our businesses to come back and support their decarbonisation needs.
ET: How long do you think we will have to wait to transition to some of the new areas that you are looking at in terms of the future of energy?
NP: Every new technology in the energy space has a long gestation period, and it takes years in terms of design build, evolution and scale up. Are these new technologies ready for mass scale up and deployment for commercial purposes so that anybody can pick it up, or are they in a much earlier state where they need demo plants, pilot plants? What we need to effectively talk about is where they are in terms of technology readiness levels (TRLs).
For example, renewable power in the last five years has gone from something that was in a demonstration mode and very small in the megawatts to completely large-scale gigawatt capacity with a flourishing business. You are seeing the early signs of similar advancement in bio-based technologies, bio-CNG and ethanol where they are ready for mass deployment.
But when it comes to something like hydrogen, the technology is still in nascent stages. We are familiar with the hydrogen molecule since it's used in many refineries and chemical facilities. But utilisation of hydrogen in demand cases, like steel, cement, or mobility-well, that is going to require the next level proving itself out. I think towards the end of this decade you will see a lot of these technologies shift into a state where they are ready for commercial scale up.
ET: Personally, which technology excites you the most?
NP: What really excites me is that there is so much more that we need to learn about integrating all these technologies and how they are going to work together, and that is a big part of what I think is going to be interesting.
It is a fairly fundamental change in terms of how we do steel manufacturing or cement manufacturing and how we even think about building construction and standards. This is the bleeding edge of technological development.
For industries like steel and cement, we had set the manufacturing formula about 50-60 years ago and that has not changed, but now we are fundamentally changing this. It is a fantastic evolution of several industries that have not been touched for a long time. I find some of the most complicated technological conversations are not happening in the fintech world, but in the deep-tech energy related-space. And these are complicated problems that we are trying to solve.
Energy technology has typically taken 30 years to mature. But we do not have 30 years. It is amazing how startups have become absolutely essential for us to solve some of the enormous challenges and problems. This is another thing that is great to watch.
The other thing that is interesting to see is that our software world and the digital world are now advanced enough to introduce new business models and new solutions. And the combination of this with hardware is creating the ability to actually deliver the energy transition.