Multinational oil and gas firm Royal Dutch Shell is looking to expand its marketing operations in the Asia region. With 43,000 fuel stations in 80 countries, the Anglo-Dutch company aims to expand in China and India, as well as Mexico, where it sees fossil fuel growth in the next decade, John Abbott, the head of refining, trading and marketing, said in an interview.
The company wants 20% of sales from its fuel stations worldwide to come from recharging electric vehicles and low carbon fuels by 2025, as the world shifts away from crude. Abbott said Shell remained focused on a future of where demand for alternatives to petrol and diesel cars would rise.
He said Shell, the world’s top roadside fuel station operator, was “working back from the customer, which is very relevant as we go through the energy transition.”
Britain and France have said they will ban sales of new petrol and diesel vehicles by 2040, while China and India are considering such a step, putting pressure on Shell and its peers to show investors how they can make profits in a world consuming less fossil fuel.
Electric and hybrid-engine vehicles represent only a fraction of the world’s 1 billion car fleet now, but Shell forecasts it will account for about a quarter in 2040.
Other fuels, such as hydrogen and natural gas, are also expected to become more popular as drivers seek lower polluting alternatives in the shift away from petrol and diesel.
Abbott said Shell wanted about 20% of fuels offered at its forecourts by 2025 to be low carbon intensity, including biofuels, battery recharging and liquefied natural gas (LNG), which can be used to power trucks. He did not say how much business was generated by such energy alternatives now.
Shell has launched pilot projects for vehicle recharging stations in Britain, the Netherlands and California. It is also part of a scheme to develop hydrogen fuel stations in Germany.
Shell, which is betting on marketing to secure its revenues, plans to expand retail operations in China, India, Indonesia and also Mexico, where it opened its first fuel station this month, Abbott said. He did not give a timeline.
Other oil majors are following a similar tack. Rival BP has increased its focus on retail, forming joint ventures with stores such as Marks and Spencer in Britain to attract customers to its fuel station forecourts.
A sharp drop in oil prices in the past three years, during which a barrel of crude tumbled from above US$100 to around US$54 now, allowed Shell’s downstream activities to shine, partly because lower oil prices also mean cheaper gasoline and diesel for drivers.
In the first half of 2017, Shell’s downstream activities – which covers everything from refining crude to delivering fuel at the roadside pump – generated more than US$5 billion in profit, about two thirds of Shell’s total.
This was helped by a restructuring of downstream operations in recent years. Shell sold about a fifth of its refineries in the past decade, and upgraded the ones it kept while integrating their activities with the trading and marketing operations.
Shell’s marketing business alone generated US$2 billion in profit in the first half of 2017.
Abbott said marketing gives the group resilience as it is not dependent on crude prices and refining margins. Through the strong marketing operations and their tight link with trading Shell aims to also limit fluctuations in refining margins, which typically decline when oil prices rise.