Shell blundering into something for which they have no collective corporate memory

“The Times” 15 August 2020

The key aspect of this project, acknowledged here, is that Shell is in partnership with a company called Eneco. Eneco is renewable energy company – they bring the expertise and experience. So what does Shell bring? Very little other than a capacity to raise capital in substantial quantities.

Shell has no collective memory in renewables – other than a series of past failures. There is no renewable energy history of success anywhere in the corporation – from Forestry to Solar to Wind Shell has dipped toes in the water and fairly swiftly withdrawn them.

Years ago in “In Search of Excellence” Tom Peters advised companies to “Stick to the Knitting” and this Shell has done with considerable success. You don’t become the world’s leading Oil and Gas corporation by taking your eye of the hydrocarbon ball. From Nuclear to Coal to Agrichemicals to Power Generation (and many others) Shell’s step out activities have eventually been abandoned. When playing around with Forestry Shell ran a TV Commercial which claimed that Forestry might “one day be our biggest business” – they sold it the following year.

The collective memory of hydrocarbons in Shell is considerable. That memory is technical and commercial. Oil and Gas is what they do because they always have. Frankly, as Tom Peters knew, it’s very different to teach monkeys to do new tricks. Shell is very big but not because it has diversified by acquisition – that never seems to work. Decades ago Shell went into Metals by acquiring Billiton. The logic was that looking for and extracting minerals was the same knitting as oil and gas. It wasn’t and the corporation struggled to make it work. Billiton went the way of other diversifications and was sold.

The future for oil and gas is not as gloomy as some predict. There are many “oil specific” uses of oil that will remain so for the foreseeable future. These include much of transportation including aviation, marine and a lot of road. The technology breakthrough that makes electric vehicles as convenient and cost competitive as petrol driven ones has still to happen. Across Northern Europe, Canada, the United States and elsewhere homes will continue to be heated by gas boilers. The hydrocarbon game is far from up.

The Oil majors are not popular but they do not create demand for the products they make, they supply it. This is nothing to be ashamed of. Grabbing the headlines briefly when you set up a Forestry or a Solar or a Wind business might make Shell’s high-priced help feel better when they face the strident environmentalists who chastise them. But the reality is that oil and gas is what they do and always will – so long as society needs energy from these sources. And that will be for quite a while yet!

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