Citi says Royal Dutch Shell Plc’s new strategy offers no real change to near-term

A change has been needed at Plc () for some time, according to Citigroup, though the American bank questioned how significant the change will actually be.

Shell on Thursday said that its oil business is past its peak as it added detail to a strategy that aims to accelerate the fuel major’s ‘drive to net-zero emissions’.

Oil production volumes are expected to have reached a peak in 2019, the company said, meanwhile, it added total carbon emissions peaked in 2018.

It comes as Shell plans its transition with investments into power generation, nature-based solutions and hydrogen-based fuels.

Shell’s oil production will decline by 1-2% per year each year, the company added. It highlighted that its upstream division will focus on value over volume, and, the reduction in production will be delivered by divestment and natural decline.

Reacting to Shell’s strategy, Citi analyst Alastair Syme said: “This new plan is somewhat nuanced, and offers no real change to the near-term financial metrics; rather the emphasis is put on the pathway to lower (unit) carbon emissions.

“We doubt whether this framework is incrementally enough to change the market view.”

Syme added: “Core to the plan is to reduce carbon emissions, ‘in step with society’s progress towards achieving net zero’.

“The bit about ‘in step’ is a relevant one as it makes the point that the company will not seek to move faster than price policy-makers and consumers are prepared to pay.”

Elsewhere, Berenberg described Shell’s transition targets as “ambitious”.

“The main differentiating point versus other European majors is the focus on the consumer and power sales rather than power generation, so the company does not have specific targets for renewable power generation,”

Berenberg repeated a ‘buy’ rating for Shell whilst noting the broader issue facing the major oil sector as they seek to transition towards their respective ‘net zero’ targets, with the bank questioning whether low-carbon businesses can ultimately offset lower earnings and cash flow from the upstream business.