How will Shell limit emissions in the future?
For many, the ruling of the Hague court in the case brought by Milieudefensie against Shell came as a surprise – pleasant or not. The oil and gas company must have reduced its greenhouse gas emissions by 45 percent by 2030 compared to 2019. That means that Shell must significantly increase its own strategy for reducing greenhouse gases. But the verdict is less clear about how exactly.
On Wednesday, the court made a distinction between various types of emissions. ‘Scope 1’ emissions revolve around Shell’s own emissions, such as from the extraction, processing or transport of oil (products).
Scope 2 and 3 emissions come from Shell suppliers and customers who use, for example, gas or petrol. Here Shell has a ‘weighty best efforts obligation’ to reduce emissions.
In the first category, the requirement is binding: Shell is required by the court to reduce its own emissions by almost half. But how? One of the major problems with so-called Scope 1 emissions is the leakage of methane, the main component of natural gas. In addition to leakages during the production of gas, oil extraction can also be accompanied by gas leakages (the two hydrocarbons are often located together in a reservoir).
Less methane leaks
Methane leaks are still common, says Jilles van den Beukel, energy analyst and former Shell employee. “Compressors and wells can leak. Tackling that is a matter of good checking and a lot of maintenance.” According to Shell, between 0 and 1.3 percent of the natural gas leaks during their gas production and transport.
Moreover, natural gas is not always seen as a useful by-product in oil drilling, such as for the energy supply of households. In many countries, natural gas is flared because the construction of infrastructure, such as gas pipelines, is in remote places or is economically unfeasible with relatively small quantities of gas. And to be able to transport it by ship, the gas must be cooled to -160 degrees Celsius. Nevertheless, the only way to combat flaring is to build this infrastructure, a measure that Shell also wants to take.
Shell can also start using more green energy for the extraction of oil or gas. With heavy oil, for example, a lot of energy goes into heating water to steam, which is then pumped into the ground under high pressure. The steam heats the oil, making it less viscous and easier to pump back up. “You can produce that steam by burning gas again, but you can also use solar energy for it,” says Van den Beukel. Shell is already doing that in Oman.
Exactly what the verdict expects from Shell with regard to the Scope 2 and 3 emissions will be debatable in the coming years. Should the company accommodate its suppliers, or put more pressure on them to become more sustainable more quickly?
Scope-3 in particular, ie the customers, is expected to be a long-drawn-out issue. 85 percent of the group’s emissions – according to Milieudefensie, that is 1.6 billion tons of CO . annually2 – after all, it falls under that.
“This concerns, for example, the gasoline we drive on, the kerosene in airplanes and the gas we burn at home,” says Machiel Mulder, professor of energy economics at the University of Groningen. “Shell must help its customers make an energy transition, for example by building more electric charging stations and offering green gas.”
Shell must limit emissions. But does that also apply to suppliers?
How far Shell should go in this is food for lawyers. “I assume that the judge does not demand the impossible from Shell,” says Mulder, “for example, offering green gas below cost.”
In addition to solar and wind energy, Shell invests heavily in start-ups that are working on new technologies. Such as sustainable aviation fuel based on CO2 , water and renewable energy. Only: such innovative technologies are probably not going fast enough to help Shell with the ambitious reductions. In that regard, 2030 is coming very soon.
The company can also CO2 capture and store. This is how it wants CO2 in empty gas fields under the North Sea. This should happen from 2024, with the help of a 2 billion euro subsidy from the Dutch government. As of 2024, this means 2.5 million tons of CO2 must be captured. But setting up such projects takes years, so nine years is short for this solution too. Critics see CO . storage2 also not as a real solution, but as an expensive way to reduce CO2delay reduction.
Finally, Shell can also divest: divest activities. “Only: if they sell certain activities – such as oil fields – someone else will buy it,” says Hans van Cleef, analyst at ABN Amro. With him, more analysts fear that activities will fall into the hands of competitors, for example from China or the Middle East. In practice, this does not make the climate cleaner.