Exclusive-Shell slows offshore wind spending, splits power business in CEO review

By Ron Bousso

LONDON (Reuters) -Shell is stepping back from new offshore wind investments and is splitting its power division following an extensive review of the business that was once seen as a key driver of the company’s energy transition strategy.

The changes are part of a company-wide review launched in 2023 aimed at reducing costs as CEO Wael Sawan focuses on activities with the highest returns. In many cases that has meant reducing spending on low-carbon and renewable businesses and increasing the focus on oil, gas and biofuels.

“While we will not lead new offshore wind developments, we remain interested in offtakes where commercial terms are acceptable and are cautiously open to equity positions, if there is a compelling investment case,” a company spokesperson said in a statement.

Shell and other major energy companies have in the past touted offshore wind as a key market they can invest in as part of the world’s energy transition, drawing on their decades-long experience in offshore oil and gas production.

But the sector has been hit in recent years by soaring costs, supply chain issues and rising interest rates, leading companies to review investments as profit margins narrowed.

Shell’s retreat mirrors moves by rivals BP and Equinor that have slowed investments in renewables and low-carbon business as they face investor pressure to boost returns and maintain large shareholder payouts.

Their change of direction reflects two major developments – the energy shock from Russia’s invasion of Ukraine and a drop in profitability for many renewables projects.

Shell will continue to develop offshore wind projects already underway, it said. The company in recent months has retreated from several offshore wind projects, including in South Korea and the United States.

The changes were announced in an internal presentation by Shell Energy boss Greg Joiner on Wednesday, two company sources said.

SPLIT

Shell Energy, which includes renewables, power generation and supply to customers, will be split into two separate power generation and trading units, the company spokesperson told Reuters.

“These two parts of our business will work closely together. In line with our simplification drive, the change is aimed at improving focus, accountability and delivery,” the person said.

Joiner will become head of Shell Power, while David Wells will lead Shell Energy, company sources told Reuters.

Shell, one of the world’s largest energy traders, will focus on selling power to customers and developing battery storage sites.

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