108. Climate, Fossil Fuels and the Future of Shell with Ben van Beurden

This week, something different. An exclusive interview with Shell CEO, Ben van Beurden.

In May 2021, the District Court in The Hague delivered its landmark ruling in the climate change case filed against Royal Dutch Shell (“Shell”). In her ruling on the case, Judge Larisa Alwin ordered Shell to reduce its greenhouse gas emissions 45% by 2030 from 2019 levels. The court found that Shell’s existing carbon mitigation strategy was “not concrete and is full of conditions … that’s not enough.” The court also ruled that Shell is responsible for emissions from its customers and suppliers, known as scope 3 emissions, and further that Shell’s activities constituted a threat to the “right to life” and “undisturbed family life,” as set out in the European Convention on Human Rights.

So, what next? Pending an appeal to the case, how is Shell going to follow the court ruling to reduce its greenhouse gas emissions 45% by 2030? We sit down with Ben van Beurden, CEO of Royal Dutch Shell Plc to discuss what the decisive decade looks like for oil and gas majors.

 

 

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EPISODE TRANSCRIPT

Tom Rivett-Carnac: [00:00:12] Hi, everyone. Great to have you here on this week’s episode of Outrage and Optimism. Today, we have something really very fascinating for you, and I think you’ll agree, it goes right to the heart of whether humanity will be able to transition to a net-zero world fast enough to deal with the climate crisis.

Ben van Beurden has been at Royal Dutch Shell for 38 years and he took up the responsibility of group CEO in January 2014. Over the last eight years, he had responsibility for steering one of the world’s oil super majors into a future that is more and more concerned about the damage that fossil fuels cause. Now, Shell states that it is fully committed to a world with no more than one point five degrees of warming. 

 

Earlier this year, Ben launched Shell’s climate strategy with a commitment to be net-zero by 2050, including, not only the company’s own operations but also all the fuel that Shell sells. Their plan is to achieve this with reductions, with fuel switching, with growth in hydrogen and renewables, and also through investments in nature-based solutions to offset residual emissions. The plan, of course, met with very mixed reactions, with some hailing it as a breakthrough that an oil and gas company should make such a commitment. And they are one of only a few that have, and others declaring it an act of greenwash and claiming it shows all that’s wrong with long term net-zero targets because it kicks the can down the road and allows even fossil fuel providers to claim that they are part of the solution.

 

Tom Rivett-Carnac: [00:01:45] The issue, however, got even more interesting just last month when the district court in The Hague delivered its ruling in the climate change case filed against Shell by Friends of the Earth Netherlands. In her ruling, Judge Larissa Olwyn ordered Shell to reduce its greenhouse gas emissions 45 percent by 2030 from 2019 levels. Shell itself had planned a 20 percent cut by 2030. The court also found that Shell’s existing carbon mitigation strategy was, quote, not concrete and full of conditions. In her words, that’s not enough. Now, the emissions target applies across all global regions and not just in the Netherlands. And the court also ruled that Shell is responsible for the emissions from its customers and suppliers, known as scope three emissions, and further, that Shell’s activities constituted a threat to the right to life and undisturbed family life as set out in the European Convention on Human Rights. Ben has said that the case doesn’t change Shell’s strategy. It just accelerates it. However, Shell have also said that they plan to appeal. As you will hear, this is something we dig into in this fascinating conversation. This is the first time that Ben has addressed this court case in a public conversation, we believe is the only time he’s planning to do it.

 

Tom Rivett-Carnac: [00:03:03] It’s a really interesting discussion to hear him dig in. We feel this discussion could not be more timely or important. Anger is rising around the world about the fact that we’re not transitioning fast enough to deal with the climate crisis. And on a week where the west coast of North America is on fire after smashing temperature records by several degrees, that anger is entirely justified and understandable. At the same time, easy answers like blaming the oil companies may be emotionally satisfying but ultimately, moral clarity doesn’t always cut through the complex messiness of the world to the outcome that we want. We need the outrage about what should be done and is not there yet, and also the optimism that despite the late hour, we can still find a way and do so together. So whoever you are, climate activist, oil and gas executive or engineer, we invite you to listen to this conversation with an open mind. This is a slightly different episode of Outrage and Optimism. We have a longer conversation with Ben. So we forewent the pre-chat with me, Paul and Christiana. We dive straight into the discussion, but we’ll be back with you after the conversation for some analysis, here is Christiana and the conversation with Shell CEO Ben van Beurden.

 

Christiana Figueres: [00:04:27] Ben, what a pleasure to see you again. And thank you so, so much for taking time, at a very hectic time for you, I must say. So thank you for being generous with your time and with your insights. We thought, Ben, that we would concentrate this conversation on hopefully helping our listeners to understand the complexity of the transition that we’re all in. Certainly the oil and gas industry, but everyone else as well, and try to steer away from simplistic arguments that are actually just not going to help us to move forward. So I just wanted to invite us to step into that complexity, but using language and arguments that are understandable to all of us. Because I have the suspicion, Ben, that if I walked in to a board meeting at Shell, I would understand absolutely nothing of what you’re saying because of the languaging and the terms that every industry uses. So here’s an invitation to help our listeners walk into the complexity, but with language tools that we can all understand. If that’s OK with you, that would be sort of our invitation.

 

Ben van Beurden: [00:05:57] Well, that’s great, Christiana. It’s great to be talking again. And, Tom, good to see you again. And Paul, nice meeting you. And I think you couldn’t have had a better invite from me, because if there’s one thing that I find is still an issue, it is the, sometimes the simplistic nature of the debate of an issue that is more complex than any issue I think humanity has faced.

 

Christiana Figueres: [00:06:21] Indeed. Indeed, indeed. So in that spirit, Ben, I thought, last night, to be honest, and I’m going to show you my little cheat sheet, here’s my little cheat sheet of our conversation, because I thought maybe it would be helpful for me anyway to list some of the dichotomies or paradoxes or contradictions that at least I see that are embedded in this transition and lay them out one by one to you and invite you to guide us through. I mean, obviously, you don’t have all the answers, but I am sure you have thought about this more than most people on this planet and can give us at least some light as to how do we navigate these paradoxes or these dichotomies. So I have a list of four and maybe, you know, my colleagues will bring in a couple of others. The first one that jumps at me, Ben, is your very interesting reaction to the Dutch ruling. If I have it right, your immediate reaction was one of welcoming the ruling in the sense that you said: this ruling will not change the Shell strategy. If anything, what this ruling is going to do for us is accelerate that decarbonisation strategy or decarbonisation strategies because it has many different components. So I was really interested in your reaction to that with the dichotomy that then, I understand, that Shell is actually going to appeal the ruling. So walk me through those two. Walk me through welcoming the ruling as pushing you farther in the direction that you’re already walking, but at the same time appealing the ruling.

 

Ben van Beurden: [00:08:13] Yeah, that’s a good one, Christiana. And thanks for the opportunity to clarify that. I think, maybe I have to add a little bit of context here, which I think is important. So the ruling, even though it came out in May, was a ruling on a hearing or a set of hearings that took place in December. Between December and May, we actually published our energy transition strategy. We put our strategy to the vote and a relatively detailed update with our investors on how we were going to approach it. And of course, as a result of all of that, the outcome of the court did not take into account what had happened since. That just happened, that’s just a fact. As a matter of fact, if you look at what the judgment was all about, which is, you know, you should actually do more to decarbonise customers because 45 percent reduction of our scope three, which is the best that was offered, by the way, is a reduction of our customers’ emissions. And you should work hard on your scope one emissions, so the emissions from our own facilities. But as a matter of fact, that is pretty much, at least directionally, what we told our investors we would do and to which our investors, 90 percent of them said: thumbs up, we support that plan and you have our support to go ahead with it.

 

Ben van Beurden: [00:09:44] So directionally, it is not any different. You could argue a little bit, is a 45 percent correct? But the point is that our strategy is to purposefully and to profitably decarbonise our customers on their road to net zero, which is exactly what the court asked us to do with significant best efforts. So therefore, you know, I’m quite OK to say, well, that is actually a confirmation of the strategic direction. Again, you can argue about the numbers, but we are going to rise to that challenge because it was actually our strategy to do that anyway. What I don’t agree with is that climate change and the orchestration of this and what is going to be needed to achieve this needs to be done in the courts, because ultimately, Christiana, if we are to reduce the emissions of our customers, shall we say, roughly half, 45 percent, roughly half. That is not going to happen because we supply them with less energy, less fossil energy, so to speak. We can do that but that doesn’t help the planet. That will only happen if there are supporting policies to make it happen.

 

Ben van Beurden: [00:11:00] If we want to sell half the petrol we sell to the automotive sector of society or half the jet fuel or whatever, then we need to see changes in those segments of the economy. Half the cars need to be electric, half the jet fuel pool needs to be biofuels. And these are things that we cannot make happen, that can only be made happen by government, obviously in close coordination with these different segments of society. So while I’m OK to say, you know, we will do everything to work with each and every sector in society to decarbonize that particular sector, to be held to account for the results through a court of law as a single company doesn’t feel like the right approach to tackling this very complex challenge. So that’s where I think the dichotomy for me sits. So we have to reflect on, you know, what are we going to do with this? And we are, at this point in time, reflecting what our appeal aspects should be, but rising to the challenge of reducing our own emissions and to work really hard to make the best efforts to decarbonise our customers, I have no issue with. There is no contest.

 

Tom Rivett-Carnac: [00:12:16] So it’s so interesting Ben. And thank you for setting it out like that in terms of these two different. And as I understand it, first follow up question, then I have another follow up question is that it’s a best-effort commitment to your customers that you will do your best to get them to reduce emissions by 45 percent. And if that’s the case, my question is, the reality is that some segments of the market look at companies like Shell with a pretty high degree of skepticism about your intentions. For whatever reason, they say, you know, there’s not that much trust sometimes that you’re serious about doing what you say you’re going to do. That’s just a reality. Leave aside the fairness of that or otherwise. So given that, if you now get this ruling and you appeal it, it will sort of play into what people expect of you in their worst view of a company like Shell of saying, oh, now they’re appealing it. They’re not that serious. So net, net, wouldn’t it be better to just say, you know what, we’re going to do it, we’re going to charge ahead, we’re going to try and meet this target rather than to sort of allow that potential reputational impression to grow in the world?

 

Ben van Beurden: [00:13:20] I think that’s a good point, Tom. And we have to really think through how we live with this particular apparent paradox, which in my mind is not a paradox at all. It’s for me, it’s perfectly OK to say, well, I embrace that. We’re going to do the 45 percent on our own emissions. We have to figure out whether we can do it and what it takes. We’re right in the middle of it. But if you can see a pathway to achieving that by 2030 and then we have no point to embrace that, to make that a commitment, a target, a sign, a component of our remuneration to it or whatever it is so people can say, OK, no, no, no, I get it, they are serious. But again, on the other 45 percent reducing the emissions of our customers, I’m quite OK to say we will do everything we can to indeed change the product portfolio and therefore change the energy use of our customers to alternatives. Which for them basically means changing their car, changing their house, changing their plane, changing their whatever. I’m OK to work on that but I find it at this point in time unreasonable to say and if you can’t get there, you will be you will be held to account unless you prove that you’ve done everything within your power to try and get there at least. Now, you know, that’s quite a difficult one to contemplate. So what am I going to say? Or rather my successor or my successor’s successor. Suppose we couldn’t have gotten there.

 

Ben van Beurden: [00:14:57] What are we going to say? Well, we tried everything. We really tried everything to get, say, the automotive segment of Pakistan to electrify, but we couldn’t get quite to 50 percent electrification of the fleet. Or do I say, well, you know, if that happens, I’ll just stop supplying that segment. I will just give up on these customers and let them be served by somebody else. Now, both of these are not exactly helping climate change. Both of them, I think, are also not fully showing the shortcomings of how a court should sort of play a role in the orchestration of the world when it comes to the energy system. And I think, you know, we are struggling with that. We have been struggling with that for some time. But I think this court ruling brings it in a slightly sharper relief. And you could argue, I know the cynicism and the lack of trust and everything else, but you could also argue that for us, there is an obligation to point out what a complex system challenge it is to convert. And there will be quite a few people who look at scope one, two, and three or whatever and think it’s some sort of different aspect of our operations. Not a lot of people understand that our scope three emissions are their scope one emissions. It’s surprising how big the gap in understanding is if you go outside sort of a circle like we have here. And, you know, there’s also an obligation on our part to point it out.

 

Christiana Figueres: [00:16:29] Well, there is an overlap there. As you say, your scope three are my scope one. Hence we should both be working on this together. Right? It doesn’t mean that either one can actually solve this. So that takes me quite nicely up and to my second dichotomy or paradox, which is our proverbial supply and demand paradox, which is so vexing. And so just to simplify that, let me just simplistically say climate activists will argue and do that it is the urgent responsibility and deep responsibility of fossil fuel companies to reduce their supply A.S.A.P. Fossil fuel companies will argue, and I’ve heard you argue, as well as many of the other CEOs, that there is an urgent and responsible need to reduce demand. Both of these are true, right? Both of them are true. Now, the question is, how do we actually orchestrate that? Because by looking at this as a chicken and egg, we’re not going to get anywhere by lobbying the responsibility across the fence between supply and demand. That doesn’t get us anywhere other than to a ping pong game. Meanwhile, we are running out of time. Now on top of that, n top of that, Ben, I would argue that the capital discipline that all of you have been exercising in the past few years, where you are committing to give cash back to shareholders, where you’re actually restricting already your capital investments in new exploration, meaning that you are not necessarily replacing, like you would have in the past. You’re not necessarily replacing the depletion of oil fields that are, let me say, that have come of age.

 

Christiana Figueres: [00:18:34] So all of that to me means that there is already in the system a reduction of supply. Now, on the one hand, what one could think, well, if there is a reduction of supply, then that might mean that the price will go up, making alternative energies much more competitive. So the market forces will be with us. On the other hand, one can say, well, if the prices go up, there are going to be many who will want to produce and take advantage of those higher prices. So it is quite a vexing question, not just the supply and demand, but the price volatility. Because you don’t have that price volatility in renewables, this price volatility. And I heard you recently in a panel, somebody asked you. So, Ben, do you think the price is going to go to 50 or to 100? And you said to both, but don’t ask me in what chronology? So that’s a very interesting, you know, that’s a very interesting answer because there is such a price volatility and that, of course, will affect both supply and demand. So I am sure that you have thought about this, Ben, very, very deeply, because it goes to the core of your strategy. How do we get away from the chicken and egg conversation that I find totally unhelpful about who has the first responsibility, whether it’s those who supply the fossil fuels or whether those of us who consume the fossil fuels? It has to be both. How do we do that?

 

Ben van Beurden: [00:20:12] No, you’re absolutely right Christiana. It has to be both and of course, we can have a long argument on the supply side and say, well, you know, we are just supplying existing demand. So, therefore, don’t blame us. If the demand changes to something else, then we’ll supply to something else. But there’s also the other argument where you just say, well, but the more you lock in existing infrastructure, the more that sort of strong incumbency of existing supply will perpetuate itself. You have to work on both. And I fully agree with that. And this is one of the curses, of course, of the energy transition, is that we are working against a very strong incumbent energy source that we had been honing for more than a century and that is really successful. So it’s not going to be easily dislodged. Of course, many people say, well, look at solar. Yeah, OK. But solar still is relatively small compared to where it needs to be. And it took a few trillion dollars to start dislodging, say, gas-fired or coal-fired power generation. So these are not trivial things. So I fully agree as a premise, Christiana, that we have to have supply and demand working in tandem.

 

Ben van Beurden: [00:21:30] And as long as we have people pointing at each other and said, no, you should go first, then, of course, nothing is going to be achieved. Let me give you a few examples and let me start with a really practical example. Let’s start with my own country, where quite often, of course, the criticism on our company is also quite, quite accentuated. To use a polite word. In the Netherlands, we have a obligation in our climate law to reduce the emissions of the country by 49 percent, say 50 percent from 1990 to 2030. Where did we get to from 1990 to now? We’ve done 20 percent cut. So it took us 30 years to 20 percent. And then the remaining 10 years or nine years, we have to do another 30 percent. So it shows you, first of all, how difficult it is to get this reduction done. Now, look at Shell in the Netherlands. We have done in 2019 compared to 1990, a 50 percent reduction in the Netherlands. So, hey, you know, we are done with our commitment and this is scope three, I’m talking about, scope one, two, and three combined. So we could say, you know.

 

Christiana Figueres: [00:22:50] Thank God for all those Dutch bicycles, Ben. That’s it, that’s who we should be grateful to. It’s all those Dutch bicycles.

 

Ben van Beurden: [00:22:57] That’s not the point. I think the Netherlands is going way too slow when it comes to reducing its emissions and the fact that we have gone much faster. It’s not because we have worked so hard on climate issues. It is just we have shrunk our product portfolio. We stopped selling products. We stopped selling heavy fuels, and we stopped selling LPG and we shrunk our natural gas business, et cetera. But, you know, even though we

 

Christiana Figueres: [00:23:24] Did you shrink because there was no demand for that, Ben?

 

Ben van Beurden: [00:23:28] No, this was just rational economic behavior. But the point is that if you shrink, you don’t necessarily make the demand go away. So the fact that we don’t supply anymore certain products to certain customers basically means that somebody else is supplying them. So it’s an anecdote, again, to prove that if you just tackle the supply side, you know, here’s a practical example. It didn’t really work well in this particular country.

 

Paul Dickinson: [00:23:57] So, Ben, can I come in on that exact point, please? I used to be a consultant to Shell in the 1990s, and then I was wondering about climate change and I saw a publication by Shell on Climate Change in 1998 that said it was pretty serious issues. So I thought, if Shell are taking it seriously, I should take it seriously. Now, look, here’s my challenge to you. You’ve said repeatedly government have got to step up to the plate. But if you’ll forgive me saying so, your enormous company has the most tremendous ability to change our societies, to influence society, to influence government. One of your predecessors, Mark Moody Stuart, actually wrote a letter in the Financial Times a couple of years ago and he said, look, he didn’t say his personal opinion, but he said: Why don’t these, you know, extinction rebellion or climate activists, why don’t they support 100 dollars a tonne carbon price? And I wondered if you and maybe some of the other oil majors could come together and say, look, we demand a high carbon price now and use your power to get that outcome.

 

Ben van Beurden: [00:25:00] Yeah, absolutely. And I think we probably have said that in a way that we support carbon price. That we have been on record umpteen times saying the carbon price is not enough, we need to have a higher carbon price, etc. and quite often then still, people believe that either we don’t mean it when we say it or somehow they don’t hear it because it’s us saying it. But our advocacy on carbon pricing has been very clear on this and on the record, I think for decades. I think, to answer the other half of the question and back to your point, why can’t we do more? Let me give the second anecdote, and that is, for example, rather, which is the aviation sector. So in the aviation sector, of course, we can say, let’s stop supplying jet fuel or let’s supply only half of the jet fuel that planes need. But that’s not going to improve anything. The only way this is going to happen, the energy transition in aviation, if in the near term, at least, if you will, provide bio-jet, so sustainable aviation fuel made out of waste product.

 

Ben van Beurden: [00:26:16] And we probably need it for a few decades before we have things like electric flying and hydrogen flying and everything else. The problem with it is at this point in time it’s four times as expensive as petroleum-based jet fuel. So I can say, well, you know, but I make it available. It’s available. You have to pay four times as much for it, so please come and get it. I am actually building five plants and I will make this fuel available. It will not happen until or unless there will be a mandate to increase the amount of sustainable aviation fuel and the fuelmakers. You can say oh, let carbon price take care of it. But we’re going to need a carbon price well over a thousand dollars per tonne for this to make sense. And that’s not going to work either. So here you have it, in some cases, better. And mostly this is in transportation, by the way, you will need mandates where governments say this needs to happen and then indeed it will happen. And then I think the supply and demand issue will solve itself because the demand gets mandated.

 

Paul Dickinson: [00:27:24] And just a challenge you. Would you support, I mean, and actually, I’m going to be blunt about this. Would you put financial resources into lobbying both for carbon prices and for mandating an increase in renewable jet fuel? Because I do believe, you know, it’s perfectly reasonable to put money into lobbying in support of your business plan. Right?

 

Ben van Beurden: [00:27:45] That’s exactly what we are doing, Paul. So this is not a matter of would I do it? We are doing it and we are quite vocal when it comes to this. And the same way we have been very vocal also on ICE bans. Now very vocal on how to make hydrogen and trucking and buses happen. But the point is, again, you’re not going to get by well, you know, make supply available, and then demand will come. It needs to be mandated. Simply back to Christiana’s question, because we have such a very, very strong incumbency after a century of optimization of oil and gas products. And therefore, you have to dislodge it with something quite significant that in some cases a carbon price might do it. But in many cases, it is absolutely not sufficient. And therefore, you have to have regulation and mandates to make it happen.

 

Paul Dickinson: [00:28:36] I’m sure with you backing it we’ll get both. Thank you, Ben.

 

Christiana Figueres: [00:28:38] Ben. Unless Tom and Paul want to come in with a follow-up there, I wanted to move us, thank you for that, to a third paradox or dichotomy, there is quite a bit of a conversation about why don’t oil majors, the large companies, simply sell off their assets? Why don’t they take all their oil fields and their plans and just sell them off? And that would take you to a very quick decarbonization if you divest your high carbon and invest the capital from that into alternatives that you are already starting to go into. Now, that’s one side of the argument. The other side of the argument is: really, whose responsibility is this? If you divest and if you just sell off those assets, presumably your large competitors won’t take them on because they have already understood the risk of stranded assets. So, I’m assuming, but please correct me if I’m wrong, that the only ones that would be in the mood to take up these assets would be smaller companies that are certainly under less scrutiny from the public as well as from court rulings, and that they would just operate them and hence continue the supply that is at the root of the problem anyway. So selling off assets is not an option. It might be or it is an option to manage a decrease of supply, to be prudent in walking down the curve of the supply. Obviously not overnight, but a prudent decrease of supply, a prudent decrease of production, a prudent closing of fields, oil fields that are currently in production right now seems to me like the only responsible way to deal with the fact that each of us have individual responsibility, but each of us also contributes to the collective impact. So that individual responsibility, what I’m arguing here, can’t be just farmed out to smaller companies. It has to be assumed on the shoulders of those who currently own those assets.

 

Ben van Beurden: [00:31:11] Yeah, I think that’s an interesting one as well. And I think you’re right in pointing this out. Let me answer it again in two different ways, Christiana. So, first of all, you’re right. If we were to just quickly sort of sell-off or liquidate our upstream portfolio, of course, the oil and gas that would be produced by us would simply then be produced by somebody else. Simply because the asset doesn’t change, the asset doesn’t evaporate, it just goes to different ownership. And more often, you have to also bear in mind every resource that we produce is a major resource of a country. So, you know, we can say, let’s stop producing in country X, but that doesn’t mean that we will plug the wells and say in this country you can’t produce anymore. They will just find another operator or have the national oil company or create a national oil company to produce a resource if they feel that there is a need or a rationale for doing so, and they are in the sovereign right to do so, we do not have tools, thank God, to forbid countries to develop their national resources. So that indeed is not really a solution. And indeed you’re right, if you sell it off to a small player or a non-public listed player, then of course you don’t necessarily do anything and you may not even improve the operation or the quality of the operations. So that is not a solution. But there is another way to looking at it as well, which is if we are going to be a major player in the energy system of the future, that we want to be, and therefore we want to build out an unprecedentedly large hydrogen business, a bio business.

 

Ben van Beurden: [00:33:04] We want to get into power in a big way and not just commodity power generation, but quite complex power systems that the world needs on the customer side. All these businesses that we are going to build up, they are going to be free cash flow negative. And I know I have to explain that in a moment, for at least a decade. So in other words, the amount of money we have to invest in these businesses to let them grow up to materiality, the investments in this is going to far outstrip the cash we will get out of it. Now, we can’t go to our investors and say oh, can we raise some money from you, please? Because we want to grow our baby businesses into full-blown businesses. We need that funding to come from elsewhere. And therefore, in my mind, the strategy of having a relatively healthy upstream business that you will go into managed decline with, but for which you will use the cash surpluses to fund the cash deficits of the businesses of the future is exactly the right way to do it, some investors may say, no, no, we don’t want you guys to do that. Just give the money back to me and I will invest it in startup companies. But I can tell you the energy transition is not going to happen at the pace that we need it to happen without strong incumbent players, with the scope and the reach and capabilities of companies like us to make it happen.

 

Ben van Beurden: [00:34:28] So I think it is legitimate to say I will nourish my legacy business as an important foundation piece for funding the rest of my strategy. But I will also be mindful that that business then goes into decline. There’s only very few companies in our sector that say that will manage the decline of their legacy upstream businesses. I can only count two and we are one of them. And indeed we will manage our business down with one to two percent a year so that it will still be a cash-generating business in the thirties. But if I do it prematurely, you get into so-called Valley of Death where your business of the future doesn’t generate the cash to still have a going concern, and the business of the past, you’ve just got rid off. And to get that balance right is incredibly important. It comes with lots of volatilities and uncertainty. So you have to make bets, sometimes strategic, sometimes tactical. And of course, at the same time, you’re being criticized for doing it this way. So that is quite a challenge to get right. But, you know, that’s the challenge of our time. And that’s in the industry. And it is one that I wouldn’t say lose sleep over but I see this as my legacy challenge as the CEO of the company at this stage of our life.

 

Christiana Figueres: [00:35:52] So one follow-up question to that, Ben, because it seems to me, and please correct me if I’m wrong, that your traditional investors would question whether you actually have a competence to go into hydrogen, into biofuels. They’ll say, what is your track record? And obviously, you know, offshore wind might be something that you could argue you have competence. You have a competence on the offshore part, but not necessarily on the wind part. But you don’t have any track record on hydrogen. You are a very low track record on CCS. Both of those have a long lead time. And is it not then difficult for investors to actually provide the support, both the, especially the financial support for you to do the transition that you need to do? Frankly, Ben, when you say two percent decline, many would argue that’s not fast enough. So, you know, it seems to me yet again, here we have a dichotomy of a managed decline that you are saying, you know, yes, we’re doing the managed decline more than others. Some would say that’s not fast enough. On the other side, you might have investors who are saying too fast. Where is the competency? Why are you going into some things that are completely new that you actually know nothing about?

 

Ben van Beurden: [00:37:17] Yeah, I think I would say two things to it. First of all, is a two percent fast enough? Well, it depends a little bit on how fast you grow up the business of the future, because if I can grow that business of the future much faster, then, of course, I don’t need the funding capacity of the legacy business quite as long. And as a matter of fact, if I would grow that business of the future much faster, it would probably be smarter to build on the legacy business and there wouldn’t be any need for it more in the world anyway. So in other words, I want to be driven by the pace with which we can grow the business of the future. I’m quite prepared to take risk in that, for that matter, probably more risk than our investors traditionally would like to see at stake. But again, I cannot do it the other way around. Where I just say, let’s go as fast as we can in building down this legacy business and then see whether we can build a Just-In-Time future business without knowing whether that future business is ever going to grow up in the way that we are currently planning for it. That’s point one. Point two on the competency piece. Yeah, I hear that a lot, but I fundamentally disagree.

 

Ben van Beurden: [00:38:27] There are two things there. First of all, I think many of our critics think too much that the energy transition is all about future assets. So, you know, you were very good at doing wells. Why would you be very good at doing solar panels? OK. Or, you said it yourself. You know, you can do offshore, but why would you be good at doing offshore wind? Now, first of all, we are pretty good at doing offshore wind. Just yesterday, we won one of the largest tenders in the United States on offshore wind. And as a matter of fact, we have won most of the tenders in the Netherlands on offshore wind. And we do quite, quite well for that matter. It’s just that we have to do more and we need to go faster, but so does everybody else. I think on hydrogen, we are the leading player in hydrogen for mobility. It’s a tiny business. But we’ve been at this game and we are ahead of anybody else in this sector now for probably a decade or longer. We started it in the 90s and then bio the same thing. We have amazing technologies that we can leverage and CCS, we have a proven portfolio which is absolutely world-leading there as well.

 

Ben van Beurden: [00:39:40] So the whole idea that, you know, you don’t have a position. I would sort of classify that as alternative facts. But then the other thing to bear in mind also, Christiana, the energy transition is not necessarily who has the best assets or who can build the hard assets with the highest return on steel or the highest return on concrete. The energy transition is going to be much more a customer denominated game, particularly if you want to indeed have as a strategy, how do you decarbonize your customers? If we are going to win in, shall we say, again, aviation and jet fuel? It is not so much because we have the best biotechnology, which we may well have, but it is because we have the best incumbency when it comes to the aviation sector. We are the largest aviation fuel provider. Now, that’s a great starting point. That’s something we can work with. We have network agreements with every major airline in every continent of the world. We are at a thousand airports. Bigger than anybody else. That is a much stronger position than maybe having a two percent efficiency on your biojet plant.

 

Paul Dickinson: [00:40:56] So Ben, can I come in at that point? Because that’s exactly the point I wanted to ask you about. What amazing relationships you’ve got in air fuel. I mean, you heard me earlier talking about your ability to influence governments. And I mentioned that because as you know very well, over 100 years you’ve been working with governments all over the world. I would say a core competence of Shell is working with governments. So I’m very excited to hear about you using your power there. But let’s just not forget, you know, you’re a giant global brand known to billions of people. You have hundreds and hundreds of millions of customers, probably billions of customers. You’ve got 45000 retail outlets in 80 countries. Can we can I ask you, will you use that position to change your customers? Because, you know, people used to say, you can be sure of Shell, maybe they’re looking for your leadership in your media.

 

Ben van Beurden: [00:41:49] That’s exactly it Paul. And thank you for such a great question. That is our strategy. Our strategy is to work from the customer back, figure out with the customer, what they are going to need in terms of solution sets to decarbonize, and then build a supply chain that you need for that. But you have to start with the fact that we have 30 million people visiting our retail sites every day, that we have a B2B business of a million B2B companies around the world who all have a need to do an energy transition, who most of which have committed to somehow net-zero or whatever else. And that was great on the day that did it. But today, they’re after that and are going to wonder: how am I going to get there? And believe me, quite often I come to companies like us. I say I need to do something. What do you have for me? Can you help me. So it is exactly working from the customer bank that we are going to achieve something. Same thing as with the airline example that I gave. Bear in mind a very important statistic that is always forgotten, but is so crucial to remember is that we produce a quarter of what we sell. Or let me turn it around, a market share of our products is four times as large as the market share of our production. So our market share of our production is one point two percent. So one point two percent of the primary energy in the world is produced by Shell, but the energy being consumed in the world is supplied for five percent by Shell.

 

Ben van Beurden: [00:43:26] Now five percent of all sales is a very small portion, etc. but I would much rather work with five percent market share to achieve something in terms of customer demand and transformation and everything else than I would work on the one percent. So this is back to Christiana’s first point. If I make my one percent off, predominantly oil and gas supply, say, green power and green hydrogen supply, that would not nearly be as impactful as when I work with my five percent market share and customers to say, how can I help you? And I will build whatever you need to supply you. But we need to understand how we’re both going to make money in this process. And if we can get it solved, we both need to turn up at the governments’ office and say, please implement this regulation, because then he can supply what I’m going to need. And that is our strategy. And that’s why I’m also going back to the very beginning of this conversation. That’s why I’m saying I’m OK to rise to the challenge of best endeavors to make that change of 45 percent, but we can’t do it without governments.

 

Tom Rivett-Carnac: [00:44:37] This has been so interesting. Thank you so much for taking the time to sell your strategy on this. Christiana is going to ask you a closing question in a minute. I just want to ask you something completely different if it’s all right before we go on, but it’s really helpful to have you unpack your strategy, how you’re approaching it, the complexity. But I’m going to ask you sort of a simplistic question. Right now, everyone’s doing something on climate change, but that wasn’t true as you know, a few years ago, even back in 2015 when we were reaching the Paris Agreement. And there was this spate of moments where CEOs would have this realization they needed to do something because their children would talk to them over the breakfast table. And you famously were one of those where your nine-year-old said to you that the Earth is warming and Shell was not doing enough or was being caused by Shell or something like that. And that had a big impact on you and sort of changed your approach to some degree. What does she think about your strategy now?

 

Ben van Beurden: [00:45:23] Well, I think it, and I remember mentioning this story to Christiana I think the first I met Christiana and indeed it was very impactful for me. I think this was my middle daughter who indeed was told at school that companies like Shell are not doing the right thing. And she was quite perturbed by that and she came home and was in tears, I found her in tears. And I asked, well, what’s going on? She told a story about how at school they explained that companies like Shell are doing the wrong thing for the planet. And how on Earth are we going to have a discussion like this? Where I think she was at the time 11 explaining, you know, scope one, two, and three what we are doing investment levels, what is needed, supply, demand, and everything else. The only thing at that point in time I could do as a father, maybe you could say that’s inadequate, is to say darling you have to trust me. Do you trust your father to do the right thing for you and for your life? And on the basis of that trust, which she handed me, I could say, well, you know, we are doing everything that we believe is reasonable and is possible to tackle this problem. So you have to believe me when I say, you have to trust me when I say that we’re doing what we can. Now, that argument works only for a while because I will indeed say, well, what have you done then? So coming with practical and tangible examples is really important. And I do. But the point is it is anecdotal and why I’m saying that is because I think also the way we are going to regain trust from society is through anecdotes. By saying, look at what we’ve done here, look at what we build there and not so much trust me when I say.

 

Ben van Beurden: [00:47:23] Because even if I say: “I believe in a carbon price or I believe in this regulation or I believe in X, Y or Z, so, therefore, don’t you trust me now on the basis of what I’ve said”. No, that’s not going to work. So we need to show a continuous stream of proof points, like the fact that we are today starting up the largest hydrogen electrolyzer in Germany, that we won the largest wind tender in the US, that we are doing all sorts of other things that people will say, well, OK, well, that clearly wasn’t just a poster they put up, that is real money that is going into real projects that will make real change. But if I may for a moment, I have a younger daughter. Who is now 11 and the discussion has moved on. She doesn’t come home anymore and just say. Yeah, and that also shows, I think, the hardening in society and the intolerance, which, on the one hand you could say is actually good news because society is waking up to the urgency and frustration is building. And frustration is a resource Tom, in my mind, that you need to channel and do something with. But it also shows that hardening of attitudes and with it perhaps feeding more simplistic stories is also potentially standing in the way of really constructive orchestration of this very, very complex problem.

 

Christiana Figueres: [00:48:52] Yeah. Thank you for sharing that, Ben. I have been thinking throughout this whole conversation that the very first time that you and I met and you told me the story of your daughter and how you reassured her that you would be judged to be on the right side of history. And at the end, I just want to put that into our final question, Ben, because at the end of all of these conversations, we always ask our guests whether they are more on the outraged side or the optimistic side. And I wanted to ask you the same question. But with respect to timing, Ben, with respect to timing, because you notice the difference between your daughters reaching that very important age and the hardening of attitudes, I think to me that demonstrates the very broad awareness that we are running out of time. So on the one hand, just to finish my list of dichotomies here, and I wanted your final reaction to that, we understand that, as you call it, a managed decline of the production of fossil fuels takes time. That’s what the “manage” piece is about, right? We understand that. On the other hand, Ben, we also know that we have completely run out of time. And so if I were in your shoes, I would be looking at time as the most difficult, or timing, as the most difficult challenge. And I don’t know whether, where are you on that? Are you frustrated? Are you concerned? Are you in any way optimistic that we will be able to squeeze through? Because this is the problem. The problem is timing. We don’t have that built-in alarm clock into any other social-environmental issue only on climate or more radically on climate. And so as the CEO of one of the largest oil majors, how are you feeling about the timing issue when you contrast what your sense of timing is from a corporate level and what your understanding is of timing at the planetary level, meaning, what your daughters will experience?

 

Ben van Beurden: [00:51:25] Well, Christiana, I worked in this sector now for 38 years, and you don’t thrive or succeed in this sector, with all its complications, et cetera, that we referenced as well if you’re not an optimist. So forgive me if I’m somewhat maybe sort of genetically predisposed to optimism, but I think there’s also a reason for it, for that matter. And maybe a little bit of context again, first. So there’s two things that we need to do. I mean, you talk about managed decline, but of course, managed decline needs to be enabled by growth on the low and low carbon side and not so much on the supply of low and low carbon. It’s not so much, you know, how many biofuel plants, how many hydrogen electrolyzers and whatever else can I build. No, how much, also, demand uptake can I create with new business models and regulations and all sorts of other enabling tools? And I see that as the bigger challenge at this point in time because I am absolutely convinced at this stage of the game that everybody who can make it happen and can see the pathway will embrace it and do it. There’s nobody who says, well, yeah, no, sure we could have a low carbon alternative but it’s a bit of a bother, isn’t it?

 

Ben van Beurden: [00:52:50] So why don’t we just stay with oil and gas? People want to change. And quite often I find actually the performance of my mine and gas applications works a whole lot better. I mean, I have an electric car myself. I’m much more enjoy it than the petrol car that I used to own before. And that actually applies to many of the other applications as well. So the challenge in my mind, Christiana, is how do we actually make the growth in all these sectors of the low or no carbon variety work? And the good news is that we have all the technologies that we need. It’s not as if we have to just say, we have to invent something that doesn’t exist yet. It may be that some of these technologies are not yet commercially viable and they are too expensive, but they all have the potential to get into the money quite quickly, provided you have the right conditions to put to work. If you look at my company, we have all the expertise, we have all the talent, we have the willpower and we have the business models. We have the risk appetite. We have the cash to make it all happen.

 

Ben van Beurden: [00:53:57] Quite often the missing ingredient is the magic to unlock the business model, the price on carbon, the mandate for the jet fuel, the differentiated taxation of hydrogen versus diesel, et cetera, and maybe a little bit of government support here and that infrastructure. But these things are relatively easy to unlock. The moment you have the right conversations with the right people, the moment whole sectors turn up in a unified way in Brussels and London and Washington and other places around the world to say, please do this to us and you will see change. Politicians are going to act. It is quite often when there is such a cacophony of different opinions that they also don’t know what to do. So my optimism is that we do not have fundamental physical, technological, or economic barriers. We basically have social and willpower barriers to make things happen and that can be turned around quite quickly. And I think what you will see is that for quite an exponential change the moment we get going, particularly, of course, in the more advanced economies, but the uptick in the less advanced economies is going to be so much faster. So, yes, altogether, I am an optimist.

 

Christiana Figueres: [00:55:18] Well, fantastic. Ben, thank you very much. We also are optimists. We actually base our optimism on the conviction that we don’t have an option but to decarbonize the economy. It’s just simply not an option. And secondly, that we are beginning to see exponential change. And I love that you have used that term and we are counting on you to help push us into exponential transformation. Ben van Beurden, thank you very much for joining us on Outrage and Optimism.

 

Ben van Beurden: [00:55:51] Thank you very much.

 

Tom Rivett-Carnac: [00:55:52] Thank you so much. Great to see you.

 

Tom Rivett-Carnac: [00:55:59] I mean, how fantastic, you got a chance to sit down with Ben Rvan Beurden, CEO of Shell, and spend an hour with him, pretty much, talking through the complexities of the issue that he’s facing. I thought was so great the way you managed that conversation Christiana going through those dichotomies. What did you both leave that discussion with?

 

Paul Dickinson: [00:56:16] You know, I’ve always been kind of really in love with giant corporations. I wrote a book called Beautiful Corporations that actually featured Shell. But I’ve also been terrified of large corporations because, you know, the five percent of the world’s energy is coming out of Shell and it’s pretty much all fossil fuels. So that company is in the middle of just a giant maelstrom and bends in the middle of it, too. And I really hope it is able to reconfigure its resources to carve a path out of this for itself, for the governments and for the citizens, and for the investors. It’s a huge responsibility on his shoulders. And we’ve got to wish that the Shell system success in helping decarbonize this world because it’s big enough and the urgency is there.

 

Christiana Figueres: [00:57:11] You know, as usually happens when I speak to Ben van Beurden, I was impressed at his humanity. Obviously, he knows the business. He’s been there practically all of his adult life. I actually am convinced that he’s very sincere about his intentions to transform that company, which, as Paul says, five percent market share of energy global is not small. And so he sits basically with an outsized position to accelerate the transition. And others may have a different opinion, but I feel that he is sincere. He is not glib about it. He is not simplistic about it. He understands the power of incumbency, the status quo, the paralyzation effect of incumbency. But he’s willing to chip away at it. And I think he’s directionally really moving in the right direction. Again, I’m very touched by the humanity that he has. However, having said all of that, I again, just as I said at the end of it, I sit with the concern of timing because, yes, every argument that he made is absolutely a very strong argument. And if we had 20, 30 years, you know, I would listen to all of this with much more calm. But we have so run out of time. And so to me, what he faces is not just the challenge of the direction, but the fundamental challenge of timing. And that’s not easy because he has to get, you know, his company on board, his directors on board, his investors on board, his technology. All of those ducks he has got to get in a row. It is totally a race against time. It is absolutely a race against time. So that’s where I finish off. Right? Looking at the alarm clock and going, holy shit, we have totally run out of time.

 

Paul Dickinson: [00:59:41] Christiana, are we allowed to say holy shit on. Clay will work out.

 

Tom Rivett-Carnac: [00:59:45] Clay will figure it out.

 

Clay Carnill: [00:59:47] No, I’ve already figured it out. It’s approved and it’s encouraged.

 

Christiana Figueres: [00:59:50] Holy bleep. Holy bleep. We have totally run out of time.

 

Tom Rivett-Carnac: [00:59:56] I completely agree with your analysis there, both in terms of his humanity, which he’s exhibited and we’ve seen on different occasions over the years that we’ve known him and also, I mean, it’s a sort of labyrinthine situation when you hear someone in his position describe the complexity of all the moving pieces that have to be moved forward together. And the trouble is, the point that he makes, which is you can’t just isolate Shell out of the system and accelerate it, which is understandably what many people want to do. But at the same time, as soon as he makes that point, it sounds like he’s an apologist for not going that quickly, makes that position just more and more untenable as time goes on. So something is going to have to give in that as the whole system kind of moves forward. Like you say, I think that he’s serious about this transition. I’m sure he’s committed to it. But the necessity of the emergency, I mean, what’s happening is we’re not treating it like a crisis because all of these different conversations are going on about the challenge of, you know, capital availability and transition risk and all these other different things. You wouldn’t say that if you were living in a country that was being attacked by adversaries who are kind of coming over your borders, you would just deal with the challenge. And what he’s exhibiting is an example of the fact that we’re not systematically treating this as a crisis so as a result of that, its difficult for them to go faster, but we need them to go faster. I think it is great to spend that time kind of getting under the skin of that and how touching that he was prepared to share the sort of impact on his family. And it’s awful that it’s a really terrible manifestation. But at the same time, you can see that people are getting really desperate about wanting change. So there’s no way you could ever condone that, it’s appalling. I don’t know what’s going to happen next. Paul, what’s going to happen next?

 

Paul Dickinson: [01:01:42] I mean, you know, I hope and believe that he means what he says, that the company will use its significant influence to go to the governments and say, this is over now. We need those laws in, we need that regulation, we need that price on carbon. He’s got the business models. He said himself that with those laws come in, when that regulation comes in, Shell can make money. So come on, it’s pretty simple. All right. There’s going to be some political flak and some people are not going to understand. But that’s maybe where the Shell brand and other oil companies can come forward and say, look, we fully support governments, we’re behind governments taxing this and with the marketing and with the communications and with the political, we just get the laws changed and we’ll be safe again.

 

Christiana Figueres: [01:02:25] And Paul, just to, you know, deliberately rain on that parade. Here’s the problem that has to be done.

 

Paul Dickinson: [01:02:32] I was so convinced by myself. Sorry, rain away. Rain away.

 

Tom Rivett-Carnac: [01:02:38] Clay can just drop in the clip of last time we rained on his parade, actually, which was only a few weeks ago.

 

Paul Dickinson: [01:02:43] An app where you can rain on Paul’s parade. Christiana, demolish away.

 

Christiana Figueres: [01:02:50] Well, the challenge here is the complexity of what you have just described. It’s every government in the world. It’s not like they can go to the Dutch government and get them, you know, to get a carbon price. There is already a carbon price in Europe. That’s not the point. The point is that this, you know, there is so much individual responsibility, as in Shell individual corporate responsibility, but there is so much collective responsibility. And so it’s that, you know, dichotomy that we didn’t. Well, yes, we touched upon it. But that dichotomy between we’re all in this together and everyone needs to work. That’s the thing, right? It is not just the tragedy of the commons. It is the urgency of the commons to which every single individual has to contribute, and every single individual corporation, every single government because otherwise we’re just not going to get there. That’s the piece, you know, that is just gnawing at me.

 

Tom Rivett-Carnac: [01:03:55] So it’s not just a question of changing the law and we’ll be safe. Episode three hundred fourteen.

 

Paul Dickinson: [01:04:01] It is actually, but I defer. It’s up to us, every single one of us. That was what I heard Christiana say and it couldn’t be more true.

 

Tom Rivett-Carnac: [01:04:10] So I think that’s it. We’ve run out of time. I hope you enjoyed this very different kind of episode. Special conversation with Ben van Beurden, delving into the issues facing Shell and indeed the whole oil and gas sector at a critical moment for the industry when the Dutch courts come out with this landmark ruling and we’ll see what happens next. You’ve got as much insight into it after that conversation as anyone does. It’s going to be a really interesting few months to see the appeal and see how Shell respond. Thank you for joining. We don’t have any music for you this week on this special slightly longer episode, but we will be back as ever next week. We really appreciate you joining us. Thanks for all the mail or the tweets. We greatly appreciate it. And we will see you next week. Bye-bye.

 

Clay Carnill: [01:04:54] So there you go. Another episode of Outrage and Optimism. I’m Clay, producer of the podcast. In a break from my usual longer credits. And in light of the importance of this topic, let me thank Ben van Beurden and his team for working with us to arrange this conversation. And as always, thanks to our team at Global Optimism, Sara Law, Katie Bradford, Lara Richardson, Marina Mansilla Hermann, Freya Newman, Santiago Monge, Sara Thomas, Sophie Baggott, Sue Reed and John Ward. And of course, thanks to our hosts Christiana Figueres, Paul Dickinson, and Tom Rivett-Carnac. So the climate crisis brings up many strong feelings and rightly so. It’s not surprising. It’s important. So keep listening. Keep sharing your views, engaging where there’s space, and keep doing what you can. And if you need a bit of inspiration, Tom and Christiana wrote The Future We Choose for you. We’ve got a link to that in the show notes so go check it out. OK, next week we have a Race to Zero Episode. If you have not heard the previous Race to Zero episodes, they’re really good. I’ve got a link to them in the show notes, you can go and listen, so get caught up. Next week we’ll be discussing the race to resilience. So hit subscribe and we’ll see that.

 

Climate, Fossil Fuels & the Future of Shell with Ben van Beurden