Shell, the global oil and gas giant, reported lower than anticipated profits for last year, as the company faced challenges across both its traditional and renewable energy segments. While cost savings were achieved, these were overshadowed by declines in revenue, leading to a drop in profits from $28 billion to $24 billion in 2024. Despite these setbacks, Shell’s CEO, Wael Sawan, remains optimistic about the company’s financial performance.
The company’s quarterly results, released on Thursday, highlighted a $3.7 billion profit for the fourth quarter, falling short of expectations. Analysts attribute this decline to the combination of high costs and reduced revenues from liquefied natural gas (LNG), alongside persistently low oil prices. Historically, Shell and its peers have benefited from high energy prices, particularly during the disruption in Russian natural gas supplies following the outbreak of war in Ukraine. However, the landscape has shifted, impacting Shell’s profitability.
In response to the challenging market conditions, Sawan emphasized Shell’s strong financial management, noting that the company has reduced costs by over $3 billion since 2022. Furthermore, a 4% increase in dividends was announced, providing some relief to shareholders. The company also continues its trend of share buybacks, committing to a further $3.5 billion.
Challenges in Renewable Energy
Shell’s renewable energy division, which encompasses solar, wind, and hydrogen projects, reported a loss of approximately $300 million in the last quarter. This setback was largely attributed to underwhelming profits from green electricity ventures. The company’s decision to scale back investments in offshore wind farms, particularly in the United States, has raised concerns about its commitment to sustainable energy.
This cautious approach aligns with a broader trend among fossil fuel companies, which have shown hesitance in fully embracing renewable energy projects. External factors, such as the stance of political leaders like the US President Donald Trump, who has expressed preferences for fossil energy over wind power, further complicate the landscape.
Environmental Impact Concerns
Critics argue that Shell’s reluctance to invest more heavily in renewable energy projects is a significant concern for environmental sustainability. Environmental organizations and green investors highlight that Shell’s current trajectory could endanger its future by not aligning with the global energy transition towards cleaner sources. Mark van Baal, from the green shareholder group Follow This, emphasizes that Shell’s ongoing investments in fossil fuel projects are “on a collision course with the Paris Agreement” aimed at reducing global carbon emissions.
The controversy surrounding Shell’s energy strategy underscores the growing tension between its traditional oil and gas operations and the increasing push towards sustainability from both the public and private sectors. As Shell prepares to unveil its strategic vision in March, the balance between maintaining profitability and advancing environmental stewardship will be critical to its long-term success.
The company’s next moves will be closely observed by stakeholders who are keen to see how Shell plans to navigate these environmental challenges while continuing to drive financial performance.