Four months after announcing a controversial strategy pivot in New York, Shell CEO Wael Sawan continues to deal with the fallout of the move — both externally and within the company itself. In an interview with Energy Intelligence at the Energy Intelligence Forum this week, Sawan spoke about the challenges facing the UK supermajor as it tries to balance demands for energy security with those for an accelerated low carbon transition. An edited transcript follows.

Q: You said at the Capital Markets Day in June that Shell, operationally, had found it had to be the “master of many.” For the average layperson, what is Shell to them? What is your transition story to them, and how do they understand the change that they should see from you going forward?

A: If I was to define what Shell is, it actually is what we have said it was for the last three years, which is a company aiming to deliver more and cleaner energy solutions on a pathway towards net-zero by 2050 or earlier.

What does that mean? I’d say we’re trying to do two things. We’re trying to provide energy security. Energy security today is critical and continues to be very much foundational on oil and gas production, which we enjoy and which we continue to do. Secondly, we want to be a player in the energy transition. And how do we do that? We are investing some $10 billion-$15 billion over the next three years to ensure that we develop the options, low-carbon options that could potentially be a future growth trajectory for us as a company. These are nascent business models that we are developing, but we see running room in some of them like in biofuels at the moment, and EV [electric vehicle] charging. And so that’s where we’re looking to double down while we continue to explore other opportunities like green hydrogen and others.

Q:  At the end of this decade, your liquids production will be down roughly 23% versus the 2019 baseline, but that nuance has been lost. What we have seen come out around your messaging is that you’re doubling down on oil and have abandoned decline promises. How do you begin to move forward through that? How do you engage with stakeholders? How do you rebuild that credibility?

A: At the end of the day, there are some who will advocate for stopping oil and gas and others who will advocate the other way — double down on oil and gas. What we’re trying to do is trying to weave what we think is a pragmatic solution that allows us to continue to deliver the energy the world needs, while at the same time looking to make the moves in the transition.

But the transition we can’t do alone. The transition will require a collective effort from governments around the world, from our customers. But I also recognize they have their own challenges. Governments are having to choose whether that incremental dollar of support goes to energy transition subsidies, goes into health or goes into education. Those are not easy choices that they need to make.

Similarly, our customers need to ensure that they have viable business models. And today, the hard reality is that for many companies, in particular in the hard-to-abate sectors, the alternatives for lower-carbon energy are very expensive and will put them out of business. And so we just all need to continue to lean in and not fall into the polarized discussion that sometimes emerges from this debate. We continue to be convinced that a balanced energy transition that sees us in oil and gas as well as in low-carbon solutions is the one for this company. And it’s one we’re committed to continue to pursue.

Q: There have been a lot of questions around the valuation gap that currently sits between European and US majors. What has been the feedback from investors on the strategy that you put forward? And how has that differed between European and US investors?

A: I think almost universally from the shareholders that we have met, which is almost the entire register between [Shell CFO] Sinead [Gorman] and myself, the feedback has been very, very positive. I think people like the direction we are taking; they like the balance. They have heard that in 2020-21, when we announced Powering Progress, we said that we will pivot, prove and then pivot again once we see value pools emerge. We pivoted, we’ve proven a few concepts, we’ve pivoted further in the areas where we want to go, and that’s where our $10 billion-$15 billion is going. It was never ‘pivot, prove and then go blind into everything that comes after that.’ That was never our strategy. So, they appreciate the fact that we have been consistent in the way that we have applied that. They’ve also appreciated the fact that we have really focused on the areas where we see those value pools and that we have demonstrated value there.

We also get, of course, the right questions from investors. And I wouldn’t generalize to say one side of the pond is giving us a different perspective. Both sides of the pond are saying, ‘We want to be convinced that you have a long-term future in addition to generating short-term value.’ So, they do want to see our energy transition strategy. But they rightly are insisting that it is a strategy that is focused, that is measured and that has a performance track record that earns us the right to attract more capital. If there is a metric one wants to use, it’s share price performance. While yesterday’s (Oct. 16) milestone of achieving an all-time-high share price in the UK is something that we can celebrate for a moment, my conviction is that we are just at the start of the journey. We have a long way to go, and we would hope that over the coming years we move from just promises we have made to actually beating the promises that we have put out there.

Q: Are you finding that there is patience to see that through?

A: I think there is patience. I think over the last particular year, year and a half, with the tragic events taking place in Ukraine, I think the dialogue has found a bit more balance. And the dialogue is one indeed that is smack in the middle of where we are trying to position this company — a balance between energy security and energy transition. I haven’t heard one of our investors say, ‘triple down on one and forget about the other, or go for the other.’ In general, it is much more a question of, ‘Fine, we like what you have put out there. It’s sensible. Now demonstrate the execution excellence.’ That’s the question that we’re being asked and rightly demanded of.

Q: What about within Shell? I know you’re in between a couple of Town Halls with global Shell staff to field their questions, comments, concerns about the strategic direction. What have you been hearing so far? How does Shell move forward culturally? Is there a divide that needs to be to be bridged?

A: We have just been able to announce our Shell People Survey, which in essence is our annual testing across the different dimensions with our staff of where things are. A couple of things I’d report. Firstly, we have had the highest-ever response rate at 88%. So, [I’m] really proud of an organization that wants to make its voice heard. Secondly, we have managed to hold on to the all-time-high in our employee engagement scores and in our team leadership scores. So, we have a foundation that is very, very strong.

But it’s also true to say that there are some pockets, in particular, the pockets that have been heavily impacted by the choices we made. When we talk about focus, it means that somebody is going to have something that they want not happening.

That’s unfortunately the reality of change, unfortunately the reality of life. We’ve had to make some tough choices, for example, making a choice around our asset base in Singapore, making a choice around Pakistan, making some choices around which renewable projects we will pursue and which ones we will not. And rightly people sometimes who are impacted by those choices feel hurt and in particular feel like they do not want to leave Shell and would like to continue to be here. So we want to listen. We also have some, for example, in particular in northwest Europe, who are asking the question, ‘Should we not be moving faster into the energy transition?’ Those are exactly the sorts of discussions we need to be challenging ourselves on. And I’m pleased to say we have a very, very strong contingent of folks across Shell who are doing what this company needs us to do, which is to deliver day in and day out in line with the strategy that we have put out there.

Q: We saw the International Energy Agency [IEA] recently update its Net Zero by 2050 roadmap. And while it’s not a trajectory the world is on currently, what stood out to you as the most applicable things to informing Shell’s path moving forward?

A: I think it very much reiterated some of our own thoughts and convictions of what it would take — and the enormity and the Herculean challenge that I think the world has ahead of it if we are to achieve those ambitions.

But it also pointed out some low-hanging fruits in my opinion. Number one on that list is methane emissions. We absolutely have to make sure that we drive methane emissions close to zero. We as a company have committed to do that by 2030. We are well on track to do that. But we are also looking at how we can support others on that journey. Methane emissions, if we can address that in the next seven years, that takes us half of the way to where we need to be by 2030. And that is within our control — the technologies are available. And actually, it is lucrative for those companies who are having those emissions to capture them and to be able to monetize them. So, I think that’s a low-hanging fruit, and I think the IEA did well by again magnifying that message.

Other parts of the storyline are the need for the right policy, the right regulation, the high-grading and the upgrading of, for example, electricity grids, if we are to truly use or get the full benefits of renewable generation.

They talk about, for example, the role of gas, in particular the role of LNG. So, none of the conclusions, I think, are new. It’s just we need to continue to see the collective — the government, regulatory environment, companies and customers — move in that direction.

Q: One area of your strategy that saw one of the biggest changes was carbon capture and sequestration [CCS] and nature-based solutions [NBS]. Shell had put forward some of the most ambitious targets through 2035 in these areas. And yet those have been among the targets that have been scrapped. Are offsets still core elements of your strategy, including this decade, or have you found the viability of them to have changed?

A: For avoidance of doubt, what hasn’t changed is the destination that we have set for ourselves — what we call operationalizing Powering Progress. And that, by the way, will change and change and continue to change, because our customers’ energy demands are evolving every single day. The realities of the world around us are evolving, and we will need to be agile to those changes.

Now, specifically to your question around NBS and carbon capture and sequestration.

As an executive committee, when we sat down ahead of Capital Markets Day to take stock of what we wanted to put out there, and in the spirit of performance discipline and simplification, which we espoused as a group, we recognized that we have over 75 business and financial targets out there. And so we decided to really trim them down to four key targets, which would then unite the organization end to end, and therefore created the clarity and the sharpness that the organization required.

That does not mean we gave up on different things, contrary to what some in the media have reported, including my personal distaste for NBS, which, by the way, is totally unfounded.

I think NBS and CCS are critical for the future decarbonization journey. We start, however, with trying to eliminate emissions. We then move to reducing the emissions where we can, and only then do we mitigate them with some of the offsets that we’re talking about. But the focus for us is to continue to drive for NBS, for carbon credits, and to continue to drive CCS in the opportunities where we think we can bring value and where we have competitive strengths.

Q: We have COP28 just around the corner. What are your biggest hopes and expectations from the conference?

A: Firstly, hats off to [COP28 President] His Excellency Sultan al-Jaber. I think he has really been driving the agenda hard to actually have a meaningful global stocktake and real delivery out of COP28. What we hope to be able to see there is continued acceleration of the ambitions that many countries have put in through the nationally determined contributions. Of course, those nationally determined contributions right now do not get us to 1.5 C°. And if we are to have line of sight towards that, we need those ambitions to grow. But even more importantly, we need the legislation that ensures that those ambitions are actually realized.

A couple of things that we have been talking about well before my time as CEO and well before Ben’s time as CEO: We have been firm believers in the role of carbon pricing. To actually treat carbon like an externality, to actually have a cost for carbon. It’s something we’ve talked about for over 20 years. And to this day, only a quarter of the world has carbon pricing schemes. That needs to happen.

The second key thing — something we hope will get some real focus at COP28 — is beginning to build that global carbon market. That global market is key — what’s known as Article 6. We need to be able to see global credits and that global market created so that we can actually focus efforts and capital into the right areas to unlock as much of the emissions reductions as we can.

Q: If we meet again one year from now, what should we expect to have seen from Shell in the interim 12 months?

A: In one word, it’s delivery. I hope we are accused in the next year or so of being boring because we have delivered — and hopefully over-delivered — on everything we said. That’s where my executive committee team is. That’s what I’m pushing into the organization. The critical task of day in and day out delivering on the promises we make is the best bet we have as a company to play the outsized role that we hope to play in the energy transition.