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Jun 14, 2023

Shell abandons plans to limit oil production despite previous pledge

Energy giant turns focus to increasing shareholder payouts

Shell has backtracked on plans to reduce oil production by 1 percent-2 percent each year and will instead focus more on shareholder payouts.

Updating investors on the firm’s strategy today, CEO Wael Sawan says the changes will increase shareholder distributions to 30 percent-40 percent of cash flow from operations. Shell also plans to raise the dividend per share by roughly 15 percent in the second quarter of 2023 and commence share buybacks of at least $5 bn during the period.

Shell abandons plans to limit oil production despite previous pledge
Wael Sawan, Shell

‘We are investing to provide the secure energy customers need today and for a long time to come, while transforming Shell to win in a low-carbon future,’ Sawan says. ‘Performance, discipline and simplification will be our guiding principles as we allocate capital to enhance shareholder distributions, while enabling the energy transition.’

Lowest environmental impact

The energy conglomerate had previously pledged to reduce its oil production by around 1 percent-2 percent each year, including divestments and natural decline, in a strategic update to shareholders in 2019.

Ben van Beurden, CEO at the time, said: ‘We must give our customers the products and services they want and need – products that have the lowest environmental impact. At the same time, we will use our established strengths to build on our competitive portfolio as we make the transition to be a net-zero emissions business in step with society.’

At the latest AGM, shareholders voted 80 percent in favor of the energy giant’s climate report, which includes targets to become net-zero for emissions by 2050, despite protests from activists.

Sawan adds: ‘We need to continue to create profitable business models that can be scaled at pace to truly impact the decarbonization of the global energy system. ‘We will invest in the models that work – those with the highest returns that play to our strengths.’