Carbon-heavy assets offloaded for $8.5bn as company ties 10% of directors’ bonuses to how well it manages emissions

This article is more than 3 years old

This article is more than 3 years old

Royal Dutch Shell has agreed to sell most of its carbon-heavy Canadian oil sands assets for $8.5bn (£7bn) as the chief executive warned that the industry risked losing public support without progress towards cleaner energy.

The world’s second largest publicly-traded oil company plans to increase its investment in renewable energy to $1bn (£800m) a year by the end of the decade, Ben van Beurden said on Thursday, although it is still a small part of its total annual spending of $25bn (£20.5bn).



Shell also said that 10% of directors’ bonuses would be tied to how well it manages greenhouse gas emissions in refining, chemical and upstream operations.

Shell's 1991 warning: climate changing ‘at faster rate than at any time since end of ice age’ Read more

Van Beurden said that the transition to a low carbon energy system would take decades and government policies including putting a price on carbon emissions would be essential to phase out the most polluting sources of energy such as coal and oil.

“If we’re not very careful, with all the good intentions and advocacy that we have, we may, as a sector and society, not make the progress that is needed,” he told the CERAWeek energy conference in Houston.

He said the “biggest challenge” the company faced was maintaining public acceptance of the energy industry.

“I do think trust has been eroded to the point that it is becoming a serious issue for our long term future,” he said. “If we are not careful, broader public support for the sector will wane.”

Shell’s disposal of the tar sands interests is part of wider plan to offload $30bn (£25bn) worth of assets to cut debt following its acquisition of BG Group last year as it comes under investor pressure to mitigate climate change risks.

Analysts welcomed the deal, under which Shell has agreed to sell its existing and undeveloped Canadian oil sands prospect to Canadian Natural Resources and to cut its share in the Athabasca Oil Sands Project (AOSP) to 10% from 60%.



“This significant divestment should help de-gear Shell’s balance sheet over 2017 and help remove concerns around the dividend,” said Biraj Borkhataria, an analyst at RBC Capital Markets.

Shell is also buying half of Marathon Oil Canada, which brings the deal’s net value for Shell to $7.25bn (£6bn) and its divestment plan total to around $20bn, as it works towards its target of $30bn by late 2018.

Other oil firms including Exxon Mobil, Conoco Phillips and Statoil have written down or sold their Canadian oil sand assets which have become more expensive as the oil price has fallen from more than $100 a barrel in 2014 to around $50 today.

Shell said it would remain as operator of the AOSP Scotford upgrader and the Quest carbon capture and storage project.