The energy producer Royal Dutch Shell warned on Tuesday that it would reduce the value of its assets of $ 22 billion to compensate for the fall in the prices of oil and gas in the framework of the pandemic COVID-19. The epidemic of viruses, jeopardizing the long-term prospects of the world economy, the company said it continued to “adapt to ensure the resilience of the company” in these difficult times. Earlier this month, its competitor, BP, has also reduced the value of its own assets up to $ 17.5 billion.
The pandemic has hit the energy sector in a broad sense because it imposed heavy limitations on business, travel and public life. For example, there is no great need for fuel in the aviation, because most of the planes are locked in.
The supply of oil and gas was particularly high at the beginning of the epidemic, creating a perfect storm for the industry. With the filling of the storage facilities, the price of oil in the United States fell below zero in April for the first time.
Shell has predicted that the price of crude oil to Brent, the international benchmark oil, would be 50 dollars per barrel in 2022, after predicting a price of 60 dollars per barrel. Tuesday, it was trading near $ 41 a barrel.
The company’s shares have fallen 2.5% on the news.
“In a world where oil demand is falling and where the renewable energies are more and more numerous, these titans of the energy more and more similar to creatures of another time, which should encourage investors to think about,” said Chris Beauchamp, analyst-in-chief of markets at IG.
“Although neither Shell nor BP will soon be nowhere, their importance as a pouring of dividends is likely to fall relative to other sectors, and investors thirsty for yield should be prepared for this eventuality. ”
The anglo-Dutch told investors in April that it intended to cease adding greenhouse gases into the atmosphere by 2050. BP made a similar announcement in February.
Shell has also stated that she had the intention of setting a more strict to reduce the net carbon footprint of its energy products by 30% by 2030, compared to 20% currently, and aim for a 65% reduction by 2050, compared to 50% currently.
Emissions of carbon dioxide and methane emissions from the extraction, refining and combustion of fossil fuels are one of the main drivers of global warming of human origin.
Michael Bradshaw, professor of global energy at Warwick Business School, said the pandemic has forced a sort of turning point for the policy makers and the industry. Even if the environmental groups seek to prevent the Paris agreement on the reduction of carbon emissions becoming a victim of the pandemic, Bradshaw said that oil demand may never return to its previous highs.
Air travel, for example, may never be the same. Ditto in the office. All of this will be a challenge for the big oil.
“After the financial crash of 2008, there has been a rapid rebound from the use of fossil fuels. In two years, we are back on the same way to increased carbon emissions that we would have followed if the crisis had never taken place, ” said Bradshaw.
“World leaders are faced with a similar decision this time. They could seek another recovery quick and dirty, increase the consumption of fossil fuels for getting the economy back on the rails, or they can double on the promise of a clean growth and a green set out in the Paris agreement. and treat the recovery as an opportunity to decarbonise their economies. “