Royal Dutch Shell is hedging its bets over the next two decades with expectations that motor fuel consumption will be diminishing and other markets rising.
Since the oil price plummet it 2014, Shell has transitioned its business model over to refining oil, offering other refined oil products, and producing petrochemicals. The oil giant will produce well beyond gasoline to serve other growing economic sectors, and to offset the role EVs will play by the 2030s.
Rapid growth in the global economy, especially Asia, will grow demand for other refined oil products and petrochemicals.
Asia will see new roads added, with demand creating economically viable substitutes for asphalt. Shell wants to be poised and ready to provide that supply.
The oil giant will also be ready to provide the polymers and chemicals that go into plastics used in vehicles and many other products, said Shell’s head of manufacturing Lori Ryerkerk, who is in charge of refining.
Shell will double the size of its chemical operations by the mid-2020s with several new plants coming to Louisiana and Pennsylvania that benefit from access to cheap shale gas.
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Refining oil will be part of the company’s portfolio to an even larger extent than it was years ago.
“Refining will continue to be part of our portfolio for decades to come,” Ryerkerk said.
Shell expects that gasoline demand will likely reach its peak by the 2030s, with owners switching over to electric vehicles and traditional engines becoming even more efficient. The supermajor has become the most aggressive oil company in its forecast for gasoline demand reaching its peak by the early 2030s.
As several nations—including France, the United Kingdom and possibly China—adopt regulations banning the sale of gasoline and diesel around 2040, oil companies and automakers are taking a serious look at alternatives.
OPEC’s newly released annual World Oil Outlook confirms that forecast. A boom in electric vehicle sales could cause global oil demand to peak and flatten out by the late 2030s, according the study.
Global oil demand could reach a peak of about 109 million barrels a day during the second half of the 2030s, OPEC said.
With 43,000 gas stations in 70 countries, Shell is the world’s largest fuel retailer. The company wants to be prepared for more diverse fueling stations in the future.
Shell wants to see 20 percent of revenue at its fuel stations to come from electric vehicle charging stations and low-carbon fuels by 2025. The company also recently introduced EV chargers at a number of stations in Great Britain, and is making serious investments in hydrogen fueling stations.
Governments see hydrogen fuel cell vehicles as zero emission vehicles, adding them along with EVs to the list of accepted vehicle technologies as fossil-fuel bans take hold.
Earlier this year, Shell became part of a global hydrogen council that included Toyota, Total SA, Liquide SA, and Linde AG. The companies will invest about $10.7 billion in hydrogen products over the next five years.
Shell’s presence in hydrogen stations is spreading across Europe and the U.S. The company has four hydrogen stations in Germany, one in London’s Heathrow Airport, and two in California. Shell and Toyota have also partnered to add seven more of these stations in California. More fueling stations will be added in Germany.
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Oil isn’t going away anytime soon, but its applications will change, according to Shell. The company sees it as a period of “energy transition.”
One example of this is lubricants used in cars, trucks, and heavy industrial machinery. Shell now supplies 11 percent of it to the global market.
It also has a growing presence in aviation fuel.
“Downstream is a highly resilient business. It is pretty independent to changes in crude price,” said John Abbott, head of Shell’s downstream business. “We have a competitive edge going into the energy transition.”
By Jon LeSage for Oilprice.com
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