Chief executive officer of Royal Dutch Shell, Ben van Beurden, has disclosed the company’s intention to invest between $1-2 billion annually on new energies and buying back at least $25 billion in shares while ramping up focus on improving safety performance of its facilities and doubling its returns.
Beurden said he was particularly troubled by declining safety operational standards in the company activities, stressing on plans to make improvement in 2018.
Beurden, in an interview published on Shell’s official website, said, “The safety performance at our facilities has not been good enough and that gives me concern. We have to redouble our focus and continue to bring the number of incidents down. And the tanker lorry tragedy in Pakistan was just terrible. It is a stark reminder for all of us that we must never forget the role that safety plays every day,” .
The CEO, also talked about the company’s plan on scrapping of scrip dividend and his own experience of using a hybrid car. “The safety performance at our facilities has not been good enough and that gives me concern. We have to redouble our focus and continue to bring the number of incidents down. And the tanker lorry tragedy in Pakistan was just terrible. It is a stark reminder for all of us that we must never forget the role that safety plays every day,” Beurden said.
Beurden also stressed on the need to thrive through the global energy transition and the urgency to bring more bio-fuels, hydrogen and electric vehicle charging into the mix including investments in renewable energy projects. Shell had on Monday announced its plan to buy 43.86 per cent stake in US-based solar company Silicon Ranch Corporation for $217 million. The move comes at a time its British rival BP has just announced re-entering the solar sector with a $200 million investment in UK-based solar company Lightsource.
While talking about Shell’s aim to become a world-class investment case, Beurden said, “If you look back on how we have been doing, in terms of total shareholder return, you could argue we are already number one in the industry. Now we need to sustain that..for three years, ten years and beyond. Nothing in the bag yet, but I am very confident. We also said we need to be the leading company in terms of overall value. At the moment, we are number two and we are closing in on number one. We almost have the tiger by the tail. So, yes, I feel pretty good about progress towards our world-class investment case.”
However, he said the company has a long way to go and needs to further streamline its operations by bringing down overall costs in operations, reducing debt, turning off scrip dividend from the fourth quarter and focus on posting double digit returns.
“In the third quarter, we made around 5 per cent return on capital employed – the amount of profit made from our capital investments. That is not good – we need to get to double digit returns. We need to continue to bring debt down. And although costs have come down, there are still potential cost savings out there. We have picked the low hanging fruit..but there is more to be had,” he said. Beurden added that the company has not yet started buying back shares while the plans for buying $25 billion in shares by 2020 are confirmed.
Beurden also talked about owning a Mercedes 500 plug-in hybrid car and stated that battery-based electric cars is the future and the company is gearing itself to be a big part of the Electric Vehicle business. “The message really is that we are a company of the future. We have to embrace the future and the future will include battery electric cars. That is very clearly going to be part of our business. We cannot deny ourselves the opportunity to participate in this,” he said.
He also said that the era of oil and gas and petrochemicals is not over even as the era of electric transport is coming in. “The world will need refineries for a long time to come because many parts of the transport sector will not be able to run on electricity or hydrogen, or whatever, very quickly. Take heavy duty transport, aviation, shipping, even most trains. Some 50 per cent of the trains in Europe run on diesel. And in the developing world especially there is no prospect of a quick shift to an electric system or a hydrogen system,” Beurden said.
The Shell CEO further talked about the need to strengthen the brand Shell. “We are not yet telling our story well enough. That is something I know more intuitively than scientifically,” Beurden said, adding that the company needs to deal with issues which are hurting its reputation, increase awareness of its products and provide access to affordable energy for those who do not have it.