Dolfines

Shell continues to progress on the energy transition with the acquisition of Eolfi. The major has strong ambitions in renewables as it wants to reduce its Net Carbon Footprint (NCF) by half by 2050. The NCF is the volume of CO2 emitted divided by the amount of energy sold. While relative (absolute CO2 emissions could grow within this scheme), the NCF includes scope 3 emissions. Scope 3 emissions are indirect (i.e. emitted by the end users), yet represent the vast majority of the oil & gas sector (i.e. CO2 emitted by the refined oil products). Shell faces the choice of winding down its oil & gas activities (and decreasing the CO2 emitted) or investing in renewables power capacity (and increasing the amount of energy sold). This is, in our view, important to understand, as Shell is not likely to curtail its oil & gas (lucrative) activities. Thus renewables are the perfect vehicles to achieve this strategy. The group plans to invest $2bn to $3bn per year in its New Energies division by 2025 with the desire of becoming the world’s largest electricity company.

This implies sustaining investments into offshore wind, which oil & gas majors seem to favour. Along with Shell, Equinor, BP, Eni and Total are also committing into the sector. The IEA recently found that global offshore wind capacity may increase 15-fold by 2040. Europe has a major role in offshore wind farm development, with the potential to become the region’s largest source of energy. For France, this move is positive for the domestic supply chain, where Shell sees “opportunity to grow the offshore wind business”. The acquisition of Eolfi will bring expertise in the technology, boosted to Shell’s stated ambitions. Eolfi and partners are developing a pilot floating wind project in France (three turbines) set for 2022, off the coast of Brittany (Groix & Belle-Île). The floaters are semi-submersible and designed by Naval Energies. The wind turbines have a 9.5MW capacity and provided by MHI Vestas.