There is an article in the Financial Times today which presents the increasingly conventional view that Royal Dutch Shell should concentrate its business future on non hydrocarbon energy – Renewables. This assertion, I’m afraid, ignores the reality of Shell’s business profile and, in particular, how it became what it is and the core competencies it developed along the way. Let’s look back at this history. I should declare an interest. I was a small cog in this journey and am currently a Shell pensioner!
Oil and Gas replace Coal.
The elimination of coal burning in the home and in industry and countless other sectors came because oil and eventually gas replaced solid fuel. This had major environmental benefits but it wasn’t why Shell did it – the benefits were collateral to the oil/gas companies expansion and marketing. In those days Shell had an active coal to oil conversion plan. I was there ! We also invented central heating in Britain. The earlier home heating initiatives were driven by the oil companies – especially Shell-Mex and B.P. – it was later that gas came along. It’s a fascinating story – google “Mrs 1970” for the background.
I mention the past of the switch from coal to make the point that energy consumption did indeed change in its mix because of oil company initiatives. However the cleaner air benefits were a response to Government actions. The Clean Air Acts of the 1950s and 1960s for example made a reliance on coal in the sitting room grate or in an industrial boiler unacceptable and in most cases kerosene, gas oil or fuel oil replaced them – to the benefit of the environment and our lungs.
The switch from oil and gas to cleaner alternatives.
We are now, rightly in my view, making progress in the switch from oil and gas to cleaner alternatives. However this is and has to be a response to Government action and legislation not because the oil/gas giants are driven by altruism. Shell and the rest are not involved, as once they were, in creating demand for their products but only in supplying it. The consumption of hydrocarbons is not a consequence of Shell creating markets any more. The markets are there. Shell supplies its customers. In expanding its customer base Shell may seek to take business away from its competitors. That’s competition. But it is not seeking to create new demand.
Shell’s products pollute. But it’s the customers who do it.
Those who lambast their oil/gas corporations for what they do have the wrong target. It’s the customers that need to be persuaded and encouraged. The move into renewables by Shell or BP is unpersuasive and, in my opinion largely inappropriate. Businesses prosper because they build successful strategies based on their collective corporate memories. Shell’s memories on renewables are ones of failure. In short the various failed diversification initiatives over the years (Nuclear, Coal, Forestry, Power Generation, Solar…) were because we did not understand these industries. We should have stuck to our knitting.
Shell should communicate its message better
Shell should be much proactive in it’s corporate communications. The world needs oil and gas and will do for generations to come. Many uses are oil specific (aviation, marine and much of road transport for example) and there is no realistic alternative in the short to medium term. Shell does not need to be defensive in acknowledging that it supplies this customer demand. It should explain the real situation – there is no need to be apologetic. Hospitals across the country have boilers and power generators running on gas. Again there is no realistic alternative – if Shell produced that gas in one of its offshore fields it does not need to say “sorry” for doing so.
Shell deserves and should demand a voice at the table
Shell’s Planning activities were cutting edge. We used Scenario techniques to analyse alternative futures. The corporation has the capability to participate in the Energy debate. It should be encouraged to do so. In the meantime it is frankly ignorant to blame the corporation for supplying demand it in no way creates.