Shell CEO Warns of Risk From Volatile Policy in DC Visit

(Bloomberg) -- Shell Plc’s chief executive officer used a trip to Washington to deliver a plea for stability months before a US presidential election that threatens more upheaval in the global energy sector.

Wael Sawan’s remarks during his two-day visit to the US capital come as the oil major reorients its strategy for navigating the energy transition amid investor pressure to focus on its prime petroleum business.

“There is nothing more important than stability and predictability,” the CEO said Tuesday during a discussion at the Center for Strategic and International Studies.

The November election looms especially large for oil and gas companies, with President Joe Biden and presumed Republican nominee Donald Trump promising different visions of US energy and environmental policy. Trump has vowed to dial back environmental regulations and expand opportunities for US oil development, replicating the approach that marked his first term in the White House. Biden has prioritized the fight against climate change, targeting federal incentives to low- and zero-emission energy while pausing new authorizations to export liquefied natural gas.

The decisions made in Washington — “the capital of the energy world” — will have “massive impacts” and influence spending around the globe, Sawan said. “We continue to look for the concrete actions that are going to be taken over the coming months — in particular post-November — to be able to then determine what moves we will make.”

Political risk surrounds US government incentives for supporting advanced energy, including Inflation Reduction Act tax credits that can help underwrite hydrogen production and carbon capture systems. Some Republicans have campaigned on promises to repeal portions of the climate law. A future administration could rewrite limits on what projects qualify.

Where there is generally a “healthy” value proposition for renewable generation, Sawan said investments in other technologies, such as blue hydrogen produced using natural gas or green hydrogen powered by renewables, depend on “the appropriate signals” regardless of the administration.

“We cannot be myopic and just look at what’s the political narrative,” he said. “If we were to invest in green hydrogen here or in blue hydrogen, how competitive can we be against the alternative? If some of the incentives are taken away, are we able to continue to survive?”

Sawan cast liquefied natural gas as an antidote to the volatility posed by government policy, geopolitical shifts and even the limits of renewable power itself. The turbulence “creates a premium for flex” that LNG can fill — especially for growing industrial demand in Asia, he said.

“If we are to truly move toward the low-carbon energy system of the future” the world must address growing industrial power demand in Asia, where gas can displace coal, he said. Sawan said he anticipates LNG to make up 20% or more of the total gas sold in the next two decades, up from around 12% today.

Shell sold 67 million metric tons of LNG globally, according to last year’s annual report, and the Institute for Energy Economics and Financial Analysis says the company has the largest LNG portfolio in the world. Shell has supply under construction or in operation in 10 countries, major interests in two LNG import terminals in the UK and India and long-term access in other import terminals across Europe, Asia and North America. 

Sawan also criticized the US halt in new gas export permitting, saying the move undermines confidence in US LNG.

“If the US does not supply it, I believe others will supply it,” he said. “What a shame not to be able to create that opportunity in the US, not to mention the ability from a broader energy security perspective for many of the US allies to be able to receive US gas.”

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