My gut feel is that it is not the “economics”driving Shell’s Cambo decision but concern about the public reaction

The economics aren’t good enough”, says Shell to explain its decision to withdraw from Cambo, the oil exploration off Shetland. I’m not so sure.

The principal driver of any upstream investment decision is the assumption about the oil price. And there is no more volatile and difficult to forecast factor than that. Obviously if the development costs of Cambo are exceptionally high then it requires a high oil price assumption to justify the capital expenditure. But are they?

My gut feel (no inside track !) is that it is not the “economics” at all but concern about the public reaction that is at the heart of this. Shell has become a very diffident corporation in recent times failing to robustly defend its business. Oil/Gas corporations like Shell do not (these days) create demand for hydrocarbons they supply it. This is not sophistry but reality. The criticism directed at the likes of Shell is mostly misplaced and ignorant.

The world needs oil and gas and until it stops doing so someone has to supply it. The need to reduce dependence on hydrocarbons is self evident but the main mechanism for this has to be government and consumer decisions.

If, over time, we continue to switch into renewables for power generation and to means other than oil fuels for our transportation on land, sea and air Shell, BP and the rest will lose customers. So be it, a good thing most of us would say. But for the foreseeable future we will continue to be hydrocarbon dependent. Shell should confidently state the reality of energy supply/demand and the part they play in it.

One thought on “My gut feel is that it is not the “economics”driving Shell’s Cambo decision but concern about the public reaction

  1. There is an argument which I am sure you wont agree with that says something like this. The hydrocarbon companies like Shell & BP don’t in themselves create demand for their products. I understand that. The public does this by using them. The company’s motive is entirely focused on profit to return dividends to its shareholders. So far so good. That’s how business works.
    However and its a big, however, if the product they are selling does substantial harm to the environment, public health and the planet don’t they have a moral responsibility to end their practices?
    Take the example of a drug dealer selling prescription pills on the black market. The pills in themselves are not illegal they are useful like oil but being sold and marketed the way they do creates harm. The drug dealer like the oil company doesn’t create the demand. It’s the public stupid! That is the fig leaf they all hide behind. The cop out for their complicity. The public can do without their gas guzzlers for the sake of the only home mankind has. They have to be coerced into it. Persuasion will not work.
    We know the harm is real, we know the planet is suffering and likely to become uninhabitable quite soon unless hydrocarbons are banned. Is it not better to try and limit the damage now? This is an existential crisis.
    It seems to me that these companies are missing an important point. When the harm they have aided and abetted for so long becomes blindingly obvious to everyone they will need more than PR to survive.
    Rupert Murdoch shut down the News of the World very quickly when it became clear the damage they had done.
    Oil companies are little different. Their time is coming to be closed down unless they adapt and change into renewables NOW.
    It just needs the political will and determination to carry it out.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s