Shell Highlights Lubes in New Strategy

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Royal Dutch Shell on Feb. 11 outlined plans to accelerate its drive to reduce carbon dioxide emissions, stating that it also plans to expand its marketing business – including lubricants – and its gas-to-liquids business, which includes GTL base oils and finished lubricants formulated with them.

Shell set out details of how it will achieve its target to be a net-zero emissions energy business by 2050, in step with global efforts to slash emissions of greenhouse gases. The target covers the emissions from its own operations as well as the use of all the energy products the company sells. “We believe our annual oil production peaked in 2019, and we expect our total oil production to decline by 1-2% a year until 2030,” the company stated.

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The company has three pillars to its business, Royal Dutch Shell CEO Ben van Beurden said during the company’s main strategy day presentation: growth, transition and upstream.

The growth pillar encompasses the company’s marketing business, along with renewables and energy solutions. Lubricants is a key part of the marketing business, Beurden said. “Our marketing business is our single largest customer-facing business. It has high, resilient returns and is primed for future growth.”

He noted that the marketing business delivered more than $4.5 billion net earnings in 2020 and, by 2025, is expected to generate more than $6 billion. “Today more than half our gross margin in retail and lubricants comes from differentiated offerings like premium fuels and premium lubricants, fleet solutions and convenience retail,” Beurden said. “So we start from a good place, and we push on for more. Today, one in nine machines and engines in the world use Shell lubricants, and by 2025, we will make it one in eight.”

The transition pillar includes the company’s integrated gas business. He noted that liquid natural gas demand is expected to grow, by up to 4% a year until 2040. “With 70 million tons sold last year, we are the world leader in LNG,” he said. “And we are also the leading producer of gas-to-liquids … products.”

He said Shell will increase its LNG volumes and markets. “We will grow our volumes by sourcing long-term LNG supply from third parties,” he said. “We have also included selective investments in our capital plan to expand our own portfolio of LNG plants and to grow natural gas supply to keep our plants full.”

The Pearl joint venture between Shell and Qatar Petroleum in Ras Laffan, Qatar, produces base oil, and Shell also makes finished lubricants formulated with GTL base oil. Beurden noted that on the GTL side, “while we have no plans for new greenfield plants, we still see opportunity to further develop premium markets and to expand margins.”

Maarten Wetselaar, Shell’s integrated gas, renewables and energy solutions director, added during a video presentation that in GTL, “we will continue to deliver strong free cash flow, and we see potential to further optimize this in the future, by expanding premium markets for our high-value differentiated GTL products.”

Last autumn the company announced plans to sell or close eight of its 14 refineries, saying it will retain six high-value energy and chemicals parks. “We will be done by 2030, if not sooner,” Beurden said. “And some of this transition is already well underway with the divestment and closure of non-core refining positions.”

Robin Mooldijk, Shell’s executive vice president for chemicals and products, said the company is reshaping its chemicals and products business by bringing them closer together. “It strengthens our ability to respond to future demand for low-carbon products, to grow our chemicals business and, crucially to deepen our already successful integration with trading – delivering the most value from our manufacturing assets and products,” he said.

Mooldijk said the six energy and chemicals parks “will maximize the efficiency benefits of integrated fuels and chemicals production – and use repurposed assets to produce more low-carbon and synthetic fuels – in addition to high-value products such as bitumen and lubricants.”

The six remaining refineries will be in Scotford, Canada; Deer Park and Norco, Texas, in the United States; Pernis, the Netherlands; Rheinland, Germany; and Pulau Bukom, Singapore.

“Changes to our product portfolio will help cut emissions generated by their use, while more renewable and recycled feedstocks will help lower the emissions generated in making them,” he said.

The company also said it will reduce its waste from operations and increase its recycling of plastics. “By 2030, we will increase the amount of recycled plastic in our

packaging to 30% and ensure that the packaging we use for our products is reusable or recyclable,” Shell stated. “We are aiming for zero waste by increasing reuse and recycling in our business and supply chains.”

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