Shell plc (SHEL) Earnings Call Transcript

Go ahead, sir.

Thank you very much, Molly, and good morning to all of you, and thank you for joining virtually today. These are, of course, extraordinary times and we're very grateful for your understanding and also for the fact that you are with us on this call. And a special thanks, of course, to those of you who are calling in from another time zone, especially those whom it's late at night or early in the morning. A very warm welcome to all of you, our guests, on the line today. Of course, before I go any further, let me highlight the disclaimer statement for a second. And I appreciate that many of you will be in a lockdown because of COVID-19, the coronavirus. And I appreciate that you, like many of others around the world, will be having to manage in the face of very challenging circumstances. I am personally very proud of the way Shell's staff and contractors and suppliers have all come together in those circumstances to ensure that essential supplies continue to flow. I can assure you Shell is doing all it can to assist the global response to COVID-19. That is work would start with taking care of our staff and our contractors, the people that are essential to ensure the world gets the energy and the other products that it needs. Whether that is through new, deeper and more frequent cleaning schedules, through providing the IT support to ensure that up to 70,000 people can work from home each day, or through worker screening programs, PERSPEX screens for till operators or new shift patterns to ensure social distancing, Shell is going to great lengths to protect our staff. And of course, we are doing all we can to take care of our customers too, whether that is through enhanced health and safety measures at all our retail sites globally or working with business customers to ensure the best possible ways to meet demand for essential hand and surface cleaning products. It's worth remembering that Shell's Geismar site in Louisiana is the largest producer in the world of the base chemicals that are used to make household detergents. And of course, our chemical plants are diverting resources to produce isopropyl alcohol as fast as they can. IPA makes up about half the content of the hand sanitizing liquids that are being used to keep the virus down around the world. And finally, Shell is doing everything we can to support the communities we work within. It can be small gestures just to make lives easier like the free food and drink that we are offering at more than 15,000 retail sites across 30 countries for healthcare professionals, such as nurses and doctors as well as truck drivers and delivery people. It can be working with our business partners to divert resources to make the products that are needed most like, for instance, the lubricants blending plant in Kenya owned by Shell and Vivo Lubricants. Together, we have converted that plant to now produce hand sanitizer. And helping communities can also sometimes be game changing, like Shell's donation of 125,000 liters of isopropyl alcohol to the Canadian government for the next 3 months for use in healthcare facilities. That is enough for almost 1 million bottles of hand sanitizer. And Shell has also donated 2.5 million liters of isopropyl alcohol to the Dutch healthcare sector. So as I said, Shell is doing what it can. And I'm sure you've seen similar commitments from others. I am certain we have all benefited from the hard work being put in by so many people, far beyond Shell to keep things going. This is urgent action. This is critical action. Yet, even at a time of immediate challenge, it is important to also keep an eye on the long term as well. And much of the rest of what I'm going to say today will be focused on the long term because abandoning that focus in the face of urgent short-term need will make the long-term challenges all the harder to tackle when COVID-19 is no longer with us. Shell is dealing with the challenges at the present, and I'm going to outline how we plan to deal with the longer-term challenges that will be with us for some time to come. As you can see from this agenda, we've made some changes to the event. In fact, today is a very unconventional responsible Investor Day because I will not be touching on many of the areas that you have grown accustomed to in our equivalent events from previous years. Made progress in many ways since the last time we held one of these events, but I must ask you to explore our Sustainability Report for the detail on any area that I do not touch upon on these remarks. The Sustainability Report is available to read or to download from shell.com, and the Investor Relations ESG team also remains available, of course, to you to answer any questions that you may have. And while it's COVID-19 that has forced us all to connect virtually today, it is not the health crisis which has determined this change to our usual selection of topics to be covered. It is something else entirely. Instead, today's agenda determined by the fact that I have something significant to speak to you about in relation to Shell and its plans to respond to climate change. Now you will recall that Shell has 3 strategic ambitions: to be a world-class investment case, thrive in the energy transition to a lower carbon future, and to maintain a strong societal license to operate. And all of them are of equal importance to the future of Shell. And everything I say today, as significant as it is for the future of this business, fits within that framework. Being a world-class investment case means being financially robust and resilient, and the importance of that resilience has never been more clear than today with the twin challenges of COVID-19, the current very low oil prices putting pressure on even the strongest of balance sheets. It can be reassured we continue to focus tightly on that resilience and financial strength, pulling the levers we need to pull as hard as necessary and at the times that it is necessary to pull them. And you will have noticed the action that we have taken already. And that resilience is critical because it is the solid foundation on which we can build. And we wish to build a company that will thrive in the energy transition. This strategic ambition is all about remaining relevant and resilient in a changing global energy system. It is about finding the business value in the energy transition. It is about being a world-class investment case far into the future. And our third strategic ambition is maintaining a strong societal license to operate. Having the support of society for what we do is essential. Without it, we can't be a world-class investment case. And without it, we will also not be able to thrive in the energy transition. To have the support of society, we must be in step with that society. Being in step with society requires actions on many areas: safety to ethics and compliance, from responsible supply chains to respecting indigenous communities, transparency to taxes. Shell is active in all those areas. But it is undoubtedly the case that the biggest long-term question for an oil and gas business like Shell is the question raised by climate change. And that is the question I will be addressing today. Now I have already mentioned the importance of being in step with society. Well when it comes to climate change, society's attitude is shifting fast. And this is a good thing because the world must move fast if it is to tackle climate change, and it is not moving fast enough right now. It was only 5 years ago in Paris that the world was focused on an ambition to restrict the global average temperature increase to well below 2 degrees Celsius. Shell produced a scenario detailing how the world could achieve that ambition. The scenario, which we call Sky, laid out a set of measures which could transform the energy system and restrict the temperature increase to around 1.75 degrees Celsius or even to 1.5 degrees Celsius with major reforestation. It was a challenging set of measures, but it was technically possible. Yet in those 5 short years, society has raised its expectations further. Today, in many parts of the world, the goal is now the tougher Paris aim of no more than 1.5 degrees Celsius. And we have been listening and we have taken a deeper look at the actions that the world could take to achieve such a goal. And of course, these actions are inevitably more challenging. Time available has shortened, scale of the action needed is even larger, and the extent of global collaboration required is certainly unprecedented. With this pathway, 1.5 degrees Celsius is still just about technically and economically possible. Our scenario modeling shows this global pathway to 1.5 degrees Celsius requires the whole of society to have achieved net 0 emissions by around 2060. I That's not the same thing as saying that all parts of society have that much time, those wealthier and more developed countries and regions that can move faster must move faster. If they do not, then those countries and regions which cannot move so quickly, will not have the time they need. So the European Union, for example, should achieve net 0 emissions by no later than 2050 if the world is to succeed in restricting warming to 1.5 degrees Celsius. That is indeed the EU's aim. And Shell has built a specific scenario. Looking at what Europe might need to do to decarbonize energy in the next 30 years. So let me give you a quick rundown of the conclusions to give you some insight and appreciation to the scale of change that would be involved. So the EU scenario identified 9 areas for action. And each of them, each of these 9, will come with challenges and with opportunities. And these are the same areas that every part of the world must act in, even if the figures that I give you now are specific for the EU alone. And before I go into these 9 areas, I want to emphasize there are challenges and opportunities, opportunities for our sector and for many others. Now the task for the EU, all happening at the same time, starts with a doubling of the use of electricity. Second, we must ensure that renewables like wind and solar produce around 3/4 of that electricity and that burning coal produces none of it. Third, an effective economy-wide carbon price, rising to more than EUR 200 per tonne in 2050. Next, the EU needs to improve its energy efficiency by 45% compared to today. The fifth step is to ensure hydrogen is well used as a fuel for heating and for heavy-duty transport and it needs to reach about 10% of energy. And sixth, you have to triple the use of biofuels. Seventh, is to bring about significant change in consumer and business choices. For instance, a clear shift away from short-haul flights and road freight towards rail. And the eighth, clean up emissions at source from industry by building an average of 2 carbon capture utilization storage facilities a month between 2025 and 2050, capture, store away carbon dioxide. And each of these would need to be as large as the Shell-operated Quest facility in Canada, which captures and stores away more than 1 million tonnes of CO2 [ each year ]. And then the final measure is to deal with the 300 million tonnes of CO2 emissions that remain, even after taking all the action I have already mentioned. And to do that, the EU could reforest an area of around 85,000 square miles or 220,000 square kilometers. That is a land mass about the size of Great Britain. Now obviously, if less action is taken in one area it means more in another. So if we can only think of 1 carbon capture facility a month instead of 2 over the next 25 years, that would translate in the need for another forest the size of Great Britain. If we were to have no carbon capture facilities, that would translate to forests covering the equivalent of Germany and Italy or almost all of Texas. And just to be clear, all that action is to decarbonize energy. Agriculture needs further action, emissions caused by industries like cement needs further action again. So I hope you can easily see that the scale of action required of society, if it is to restrict global warming to under 1.5 degrees Celsius, is huge. Now it's clear to us that the rapid shift in society's attitude of climate change, the tougher goal at setting itself and the scale of the task in front of us all of course also has consequences for Shell. It means that an approach which was considered groundbreaking less than 2.5 years ago is already appearing to lag behind. And so it is with Shell's ambitions in relation to climate change. So in November 9, 2017 you will remember Shell announced its net carbon footprint ambition. We said we would aim to reduce the carbon intensity of the energy products we sell by around 50% by 2050. Now this ambition was calibrated to keep Shell in step with society, a society working to meet the Paris Agreement and, ultimately, that society achieving the Paris goal of restricting warming to well below 2 degrees Celsius. That moment was the first time any oil and gas company had announced an ambition that included not only its operational emissions but also the emissions of its customers when they use its energy products. And then we follow this up by introducing short-term targets for our net carbon footprint and by linking those targets to the pay of executives. And we are already on the way to achieving our first short-term target. You remember, we said we would reduce our net carbon footprint by 2% to 3% by 2021. And in 2019, Shell's energy products had a net carbon footprint of 78 grams of CO2 equivalent a megajoule of energy consumed, and that compares to 79 grams previously. So that's a reduction of more than 1% already. And in addition, from 2020 on, from this year on, some 16,500 staff at Shell will have their remuneration linked to these short-term targets. Other action has included setting a methane emissions intensity target, implementing the recommendations of the task force on climate-related financial disclosures. We have also provided increased transparency on our climate-related lobbying by publishing the Shell Industry Associations Climate Review. So we are taking action, and we are making progress. Yet, as I have already mentioned, Shell intends to lead, thrive through this transition to a low-carbon energy future. And Shell has always said that its ambition was to be that, with society, to be in step with our customers. That is why today, we are announcing significantly raised ambitions. We announced this today because large parts of society have now set their sights on limiting the global temperature rise to 1.5 degrees Celsius. And because those that can move fast must move fast. The EU push to reach net 0 emissions by 2050 is right. The U.K.'s push to reach net 0 emissions by 2050 is right. And Shell's new ambition is to be net 0 emissions energy business by 2050, sooner if that's possible, and that is right too. Global society overall may have until around 2060 to reach net 0 emissions. But Shell recognizes that it stands within a section of society that needs to move faster. So that is what we intend to do. So let me repeat his ambition. By 2050, we intend to be a net 0 emissions energy business, and we will be net 0 emissions before 2050 if that is possible. That is a huge task, a task at least as big as that faced by wider society. And we will work towards it, towards net 0 emissions 3 ways. The first step is to significantly raise the level of ambition that we stated 2.5 years ago. So at the end of 2017, our net carbon footprint ambition was designed to be in step with a society leading -- heading to a world of well below 2 degrees Celsius. It meant Shell selling more and more products with lower carbon intensities such as renewable power, biofuels and hydrogen also meant finding ways to deal with emissions that could not be avoided through nature and technology. So in short, our 2017 ambition already meant seeking to radically transform Shell to establish new business opportunities. It meant finding new ways of running a financially sustainable business. Our new ambition still means all of this, but it means moving much faster because we have now recalibrated our net carbon footprint ambition so that it is in step with the large sections of society that want to achieve 1.5 degrees Celsius. So from today, Shell's medium-term ambition is to reduce the net carbon footprint of our energy products by 30% by 2035. That's instead of the 20% of our previous ambition. And this means that our long-term ambition is now to reduce the net carbon footprint of our energy products by 65% by 2050, instead of 50%. Now for those of you wondering why being in step with a 1.5 degrees Celsius future doesn't mean reducing the net carbon footprint of our energy products by 100%, I'll come back to that in a moment. I also want to be clear: this ambition is about emitting fewer greenhouse gases on average with each unit of energy that we sell. So we calculate the emissions created during the life cycle of our energy products. Then we subtract the effect of the actions that we as Shell take to mitigate those emissions, whether that's through nature or capture CO2 from the atmosphere or technology to capture and store it away. That gives us then the net emissions associated with our energy products. And then we divide that emissions figure by the amount of energy in megajoules contained in the products that we sell. But our original ambition did not include the emissions from the production of our nonenergy products like chemicals and lubricants. These were excluded at the time because they are not products that are burned when they are being consumed. But now if you want to be a net 0 emissions energy business, that basically means that we have to address all emissions from all our operations. That is why today, we are saying that by 2050, at the latest, we aim to be net 0 on all the emissions from the manufacture of all our products, including our nonenergy products. That includes our operational emissions. That includes the emissions associated with the energy that we consume through those emission -- through those operations. So for those who would like the terminology piece, it means net 0 emissions on Scope 1 and Scope 2. And if we can do this sooner than 2050, we will. So that is the second step on our way to being a net 0 emissions energy business by 2050. But you'll recall, I just said, Shell's new net carbon footprint ambition is a reduction of 65% by 2050. Now that's not enough for Shell to become a net 0 emissions energy business overall because it only deals with the majority of the emissions caused by our customers' use of our products. So to explain it a little more and to explain, as I promised, why being in step with a 1.5 degrees Celsius future does not mean reducing the net carbon footprint of our energy products by 100% but the net carbon footprint ambition covers the carbon intensity of the products that we sell in society. Today, most of these products that we sell create emissions when they are being used by being burned by our customers. But over time, we aim to sell fewer of these products that create emissions and more products that are low or no carbon. But in all credible scenarios, including the IPCC 1.5-degree C report, all credible scenarios show that society will continue to need some products that create emissions for the foreseeable future because no other option is available yet. And that means that for the foreseeable future, Shell will continue to sell products, which create emissions when they are being used. And that is why it's not possible for Shell to set an ambition to reduce the net carbon footprint of our energy products by 100% because even in a net 0 emissions world, people will still need to use some carbon-based fuels for some uses, which create emissions. But it doesn't mean that we can't be a net 0 emissions energy business because our customers can and will themselves take action on the emissions created by their use of our energy products. Any actions by our customers to mitigate their own emissions or increase their energy efficiency, of course, will not count toward the net carbon footprint of our products. That will not count because we do not claim credit for the actions of others. As society moves towards its lower carbon future however, our customers will also need to act to mitigate emissions caused by their energy use because they will need to reduce their Scope 1 and 2 emissions themselves. But their Scope 1 and 2 emissions are the same emissions that count as Shell's Scope 3 emission. And that is why such actions by our customers can help Shell become a net 0 emissions energy business itself. And that is why we have to make a third step if we are to become a net 0 energy business. And that step is working with our customers to address the emissions which are produced when they use the fuels they buy from Shell. That requires action from both sides. Indeed, we can only achieve our ambition to be a net 0 emissions energy business as part of a society that is also working to be a net zero-emission society. But it's not enough to wait. Indeed, we are determined to help society move faster. We will work with our customers to help them find ways to decarbonize. That effort includes working with broad coalitions of businesses, governments, other parties, sector by sector to identify and enable decarbonization pathways for each sector. Each sector will need to find its own way to achieving net 0 emissions. Each sector is different, and some sectors are highly fragmented. So the actual action needed in any particular sector will vary. But all sectors, however, share the same 3 basic ways to make progress: first, by being more energy efficient; secondly, by using lower carbon energy products; and thirdly, by storing away emissions that cannot be avoided either through nature or using the technology that already exists to capture and store away CO2. And we can help push progress in all those areas. Now in addition to that, of course, consumption patterns within society must shift towards lower carbon choices as well, encouraged by policies such as government-led carbon pricing mechanisms, et cetera. Now action in all these areas will help address the emissions that fall outside the action Shell can take towards the net carbon footprint of our energy products. It still counts towards Shell's progress towards being a net zero-emission energy business. And there will need to be a substantial amount of such action in some sectors if they are themselves to reach net 0 emissions. The need for that action means Shell intends to be active in this area. Shell's work with sectors on decarbonization pathways is therefore part of the answer. But as we get closer to 2050, we will work ever more intensely with customers who still have emissions that they have not fully mitigated. We will work with them to find ways to help them do so. That may be through actions they take themselves or we may agree to find a way to mitigate those emissions on the customer's behalf. So to recap. Our ambition is to be a net 0 emissions energy business by 2050 or sooner. To achieve that, we have firstly significantly raised our net carbon footprint ambition. Secondly, also have a new ambition to be net 0 emissions on all the emissions from the manufacturer of all our products, including nonenergy products. Finally, we, as a business that supplies energy, will work within sectors which use energy, establish pathways for them to follow towards net 0 emissions. For those customers still have emissions as they near 2050, we will work with those customers to find a way to mitigate those emissions. That is what a net 0 emissions ambition means in terms of the Shell approach. But then what does it mean in practice? I'll give you an example. I will walk you through how Shell's progress to net 0 emissions might look in the aviation sector. Now I appreciate that right now, aviation is experiencing massive challenges as a sector due to COVID-19. But what I'm going to outline covers a 30-year period. More than that, aviation is one of the most challenging sectors to decarbonize, which means it is 1 of the sectors where Shell's ambition will be tested most strongly. But it's only right that I choose an example which will place Shell's ambition under the greatest stress. So with the sincerest apologies for those in the aviation sector who are fighting to just deal with the day-to-day issues in front of them, let me continue nevertheless with this as an example. With today's technology, passenger planes need jet fuel to fly. Today, Shell creates emissions during the production of that jet fuel. Using the technical terminology, these are our Scope 1 emissions. But then we have also emissions from the energy we buy which we use when we produce that jet fuel, these are our Scope 2 emissions. And finally, aviation companies create emissions when they use the jet fuel to fly people to their destination. These, the bulk of the emissions associated with our products, are our Scope 3 emissions. Now there are 3 ways to deal with the Scope 1 and 2 emissions we create when we make jet fuel, and they are the same 3 courses of action any business can take to reduce their Scope 1 and 2 emissions. First, use jet fuel more efficiently in less energy, secondly using cleaner energy to produce jet fuel such as much 0 carbon electricity as the processes in force will allow and third, to mitigate the emissions that are left, either through nature or by using technology to capture and store away the emissions. Shell's ambition to be a net 0 energy business means combining those 3 options until there are no Scope 1 or 2 emissions left that are not removed through nature or stored away. But the job of dealing with the Scope 3 emissions from our aviation business will be huge. It starts with reducing the net carbon footprint of the energy that we sell to the aviation industry that will mean selling increasing amounts of lower carbon fuels over time. But at the moment, the only real alternative to jet fuels for large planes is biofuels. And advanced biofuels can indeed lower the carbon intensity of the fuel being used. And then in time, hydrogen could power commercial flights and selling hydrogen produced using 0 carbon electricity to split water, known as green hydrogen, could lower the carbon intensity of the fuel that Shell provides to planes to almost 0. By providing products like advanced biofuels and hydrogen can allow Shell to significantly reduce its Scope 3 emissions. To maximize this reduction, Shell will work with all the players in and around the aviation sector to find ways to enable the greater use of these fuels. For example, working with jet engine manufacturers to ensure the chemical properties of the fuels we produce will get the greatest trust possible. And in terms of hydrogen, we can seek to work with the entire aviation sector ecosystem, from airport operators to logistics companies and jet plane manufacturers to help make hydrogen-powered planes a reality. But selling products like biofuels and hydrogen will not reduce the Scope 3 emissions of the entire sector to net 0. That is partly because by 2050, it is unlikely that the world will be able to produce enough biofuel and enough hydrogen to meet the fuel needs of the entire aviation industry. This means that even in 2050, some large planes will still need to use conventional jet fuel. And that is why if Shell is to be a net 0 emissions energy business, there is a final piece of work to do. We must work with the aviation industry to help them deal with the emissions that are left over. And because it appears to be impossible to capture these emissions directly from a jet engine, the answer is likely to be balancing those emissions through nature or technology. Now either Shell could do that or the individual. Plane operators could do it, depending on who is best positioned to do so. That would deal with the remaining issues associated with Shell's products in the aviation industry, the remaining Scope 3 emissions. So that, in short, would make shell a net 0 emission supplier of energy to the aviation sector. And by 2050 we aim to do only net 0 business in that sector. Now of course, it's easy to state an ambition. But it's much harder to achieve it. We're talking here about a fundamental shift for Shell over the next 30 years. So we aim to give you an update on what it all means in the second half with some first steps being laid out. But I can say this for certain today, to achieve our ambition, we must pivot towards serving the businesses and the sectors by 2050 a net 0 emissions themselves. We must pivot to serve the businesses and the customers of the future to make Shell a business of the future. Because a society that succeeds being net 0 emissions by 2050 is a society in which there will be no business that is not net 0. This is going to take a lot of work. It won't be easy. Some of the necessary technologies like hydrogen-powered planes or 0 emission ships don't exist yet. Today, Shell's business plan will not get us where we want to be. That means that our business plans will have to change over time as society and our customers will have to change over time. Ultimately, succeeding in our ambition will mean that by 2050, all Shell's own operations and the customers that we serve will, in combination, be net 0 emissions. And this would be in line with society's ambition to achieve a 1.5-degree C outcome. It would be in step with society and it would be in line with our own strategic ambition. Being in step with society is key. It's key to maintaining a strong societal license to operate. And by staying in step with society as it shifts towards a net 0 emissions future, we are also setting ourselves up to thrive through the energy transition. By thriving through the energy transition, we are doing the work we need to do to be a world-class investment case many decades to come. If Shell can succeed in this ambition, if we can succeed in becoming net 0 emissions energy business by 2050, we will truly have succeeded in being an integral part of that net 0 world. There is no more ambition we can have than this, to be a core part of the future, a future that society wants, a future that society needs. That is what being a net 0 emissions energy business means to Shell. That is what Shell now intends to do, and we will work with our customers that we can achieve it together. Thank you. Now with that, let's go for your questions. On the line also is Harry Brekelmans. Harry is Shell's Projects & Technology Director well-known. He is the Executive Committee member that's accountable for matters of climate change. And he will, together with me, address some of your questions. Harry, welcome to the call as well.

Thank you, Ben.

I think you already heard the instructions. Type your questions in the Q&A box. And then we have on the line also our Investor Relations EVP, Tjerk Huysinga, and he will help facilitate the Q&A session. So Tjerk, it's over to you.

Great. Thank you, Ben. Good morning, good afternoon to everyone. Indeed, this is Tjerk Huysinga. And I'd like to facilitate this for you. So let me pose the first question. It's actually from Oswald Clint from Bernstein. Thank you, Oswald. So he has 2 questions, Ben. First one, impressive to see the confirmation and extension today of your net carbon footprint targets, and you have outlined many ways to get there. Within that, I want to get a sense of the success you are having in changing the mix of products you supply and the customer uptake for those. That's the first question. Second question is: secondly, given the price environment we have today, which none of us have really imagined, but it's adversely affecting everything you currently sell, do you see any constraints on funding these low carbon ambitions and ultimately pivoting your business to a net 0 sectors and businesses especially given the other demands you have on your cash flows? A lot of calls on Shell's cash flow, so does anything have to give? So Ben, over to you.

Okay. Thank you very much, and I also see the question in front of me. If you please leave it up Tjerk, just as a bit of logistics. Yes, thanks, Oswald. Thank you for the confirmation. It -- yes, I think we are changing, and we are seeing the initial successes. But of course, we are very early on in the change process. So I talked about the net carbon footprint of our energy products. That has come down. It's, I believe, 1.25% to be precise. Now I can say that's not an awful lot, but it's, of course, a massive amount of products that we are selling. And bear in mind, we sell 6x as much ore products as we take oil out of the ground. So it is quite a change. Sorry, can we just go back to Oswald's question, please, sorry for the -- because I see another piece of text in front of me now. So it is indeed quite a change. It's a -- it happens in areas that are easiest to do. So yes, we are of course selling more power, more low carbon power. We are selling increasingly more fuels with nature-based solutions attached to it, so they are compensated. And as a result of this, we see these initial changes happening. But it needs to go, of course, much further. It needs to go much faster. So we need to have much larger scale, low carbon power sales. We need to have of course, much larger scale biofuels. Hydrogen needs to become a larger part of the mix. And all these things do, indeed, take time. So you will see that we have taken investment decisions on some of these facilities, like offshore wind farms. That will then start to contribute to us having access to the cleaner fuels or lower carbon energy carriers that will help us progressively on this journey. So yes, there is uptake. It's surprisingly strong. It's surprisingly innovative; in some cases as well, we also have been selling 0 carbon LNG cargoes, for instance. But of course, it is a start. It needs to accelerate. It needs to go much faster and much further. Yes, the price environment today is not helping. I would be -- I don't think I would be honest if I said, "No, no, don't worry, the price environment doesn't matter." But then again, we're talking about a 30-year change that we are working on. And the other thing you have to bear in mind, it is not only heavily investing in assets. But because it's very important to recognize also what we are talking about here is changing the mix of products that we sell. And yes, that will mean that we have to invest in the value chains that produce these products as well. But it's not just a matter of changing a lot of our assets. That will come and that will change over time, but it's not necessarily the main driver. You can also recycle capital. So getting into a renewable power facility, selling it down, holding on to the electrons, using the freed up cash to another renewable power project is another way of accelerating the process without necessarily using new cash all the time. So yes, I recognize the challenges, I recognize that we have a long way to go. But we are moving the supertanker. Can we go to the next question, please?

Yes. Thanks, Ben. The next question is from Adam Matthews from the Church of England. And his question and statement is as follows. On behalf of Climate Action 100+, we have welcomed the increased ambitions and commitments announced today. We also welcome the manner of the engagement that continues between Shell and the Climate Action 100+, which is focused on our collective objective to achieve a net 0 transition in line with the Paris Agreement. The point about it pivoting towards those companies and sectors that support net 0 is hugely significant. Can you please offer some insights into the role you believe investors can play in supporting this approach? Ben, over to you.

Yes, thanks very much. Thank you very much, Adam, not only for the question, but indeed for the -- a very, very constructive and successful engagement that we've had. I think it's a great example of our companies and investors can and should work together to address these challenges. I think to your question of the pivot, yes, as we have discussed so many times, I said before we can only succeed, of course, if we can pivot to the sectors of the future, the sectors that themselves need and want to be net 0. And we're not going to wait for those sectors to figure it out by themselves. We're going to really help them in areas where we have expertise and where we have a role to play. That's why we are so actively engaged in this sectorial approach because it will only be through a complete change in all the sectors that we serve that we can also be successful in our pivot. There needs to be something to pivot to, of course. And I think that's also where I believe you can help. It is hugely important that in all these sectors that we talk about, there's about 15-odd sectors to consider that we have all the players in these sectors together. So not just with the aviation example, the airlines, but everybody that is involved in the aviation ecosystem. The airport operators, the turbine manufacturers, the plane manufacturers, the fuel providers, et cetera, et cetera. But then also, it will be great if there was also a strong drive and support from investors to just say, yes, we need to have energy use also decarbonized. So we need to actively participate in these sectors to encourage, to reward, to challenge even, if that is going to be needed, much in the same way as you have challenged us to make that progress and to collaborate. So yes, I do think you have a role to play as we have a role to play in making these sectors, sectors that we can pivot to when we approach 2050. Thank you.

Thanks, Ben. The next question is from Peter Low from Redburn. And his question is how will Shell become net 0 by 2050 if there's only 65% reduction in the net carbon footprint of the products sold. Can you please walk through the scope of the net 0 target?

Yes. Okay. That's -- I think that is probably indeed one of the challenges to really address. And I hope if you sort of reflect on what I've said, it will make sense. But ultimately, of course, what we need to get to as a society is that as a society, we have net 0 emissions in the energy system that we adopt in society. That doesn't need to mean -- that doesn't mean that all the energy products need to be net 0. As a matter of fact, it's probably impossible. And that's not because we like it to be like that. That is what every credible expert also believes. By 2050, when society is at net 0, there will still be energy products being consumed, sold and consumed that, in principle, are carbon-based. It will be a minority. It will be a small fraction, but it will still be there because there will still be certain uses of energy, like the aviation example that I mentioned, that can only be serviced with carbon-based energy products. But that then means that these customers of these energy products will have to have ways and means to deal with it. So whether there is a plane that needs to offset its carbon emissions because they still have to use a certain portion of their fuel as petroleum-based jet fuel or whether it is a gas-fired power plant that still may exist in 2050, believe it or not, that will have to burn gas and do something with the CO2, something will have to be done about it if those players also want to be net 0. So they will have to resort to carbon capture and storage. They will have to resort to other ways and means to mitigate those emissions. We will help them with that, and we will only service those segments of society that will mitigate, whether we will do it for them or they will do it themselves. So every business that we will engage in will have, from cradle to grave, net 0 emissions. It doesn't mean that we will only sell net 0 products, but it does mean that whatever product we sell that still has carbon in it will ultimately be mitigated either because our customer will do it or because we will do it on their behalf. And again, that will be the only business we will be engaged in.

Thanks, Ben. The next question -- we have quite a few questions coming in here, so bear with us. We're trying to give you all the time possible. The next question here is from Lydia from Barclays. Two questions from Lydia for you, Ben. Thanks, Ben. And the COVID-19 response examples have been uplifting and inspiring. Can you talk about whether the recent movements in the oil price has changed the way Shell thinks about the risk/reward profile of the investments in renewables or low carbon businesses compared to the upstream business? That's the first question, Ben. Let me read the second question for you as well. The second one is how does the acceleration of the reduction in carbon ambition change -- carbon ambition changes Shell's capital allocation process. Can you just talk through the economics of hydrogen and what you need for commerciality?

Yes. Thank you, Lydia. Thanks, first of all, for the acknowledgment and 2 really good questions. It -- of course, if you look at what is happening in oil markets, it is, of course, an overused word, but it is unprecedented. And of course, we have to understand what's going to happen next. Very hard, by the way because nobody, of course, has ever dealt with situation like this in living memory and it's, therefore, quite a challenge to predict how oil markets will play out. A lot of scenario testing, a lot of resilience testing, et cetera, is going to be needed at this point in time. Some people say, well, this is what's going to happen when we finally do the energy transition. I think that is probably a little bit overdone. I do not think the energy and certainly do not hope the energy transition will be as disruptive as this COVID-19 crisis is. But it does indeed show that -- well, first of all, that even a reduction of 20% in energy use comes with a massive change in how society looks like and what it is we can and can't do. So in a way, it does show how difficult it is to make this energy transition, but yes, I think it's fair enough. We will see probably changed attitudes, changed ways of working, maybe a certain economic downturn following from this that will all have their effects on energy markets. And with it, of course, in oil and gas markets. You could argue that what keeps a lot of things going today is electricity. And therefore, power is perhaps also a more interesting opportunity to look into. But yes, I think it -- it's probably too simple to say. Well, this is the dress rehearsal for the energy transition so therefore, we may as well step out of it. We are thinking very hard, of course, on the back of all of this, what this means for our ongoing investment plans. And what you will see, Lydia, is a continued focus on pivoting away as we had been doing, pivoting away from the more traditional energy markets into the energy markets of the future and the customers of the future. So you will have seen in our strategy updates and also basically what we are saying now. We -- it will be serving more the customers of the future with the energy of the future. So with that, indeed, we will change our investment profiles. The capital allocation will change over time. That is not a matter of next month or next quarter, but it will change over time. And indeed, in areas like hydrogen, in areas like biofuels, we need to invest a whole lot more than what we are doing at the moment. At the moment, I think we are probably one of the largest hydrogen investors other than the industrial gas companies in the world. But it doesn't show up in our capital allocation because it is so nascent. Now we have to push that. You heard me talk about hydrogen for planes. That's not going to happen next year, but it will happen over time. And when we see it happen, we want to be part of that emerging market, and we want to be a major innovative player in it. So yes, we are finding ways and means to accelerate it, hydrogen biofuels, renewable power as well, also, of course, other technologies that will help. But the scale up, unfortunately, from a relatively modest number, but it will have to grow significantly over time, Lydia.

Thanks, Ben. The next question is from Bruce from Hermes Investment. His question is when Shell helps its customers to reduce its own emissions, which makes the gap between 65% and 100%, is this likely to be further natural carbon sinks? If so, this is really feasible in terms of land areas?

Yes. Thanks, Bruce. Very good question. Yes. Well, I think natural carbon sinks will be part of it. But the philosophy that we have adopted, also for our own issues for that matter, is to use natural carbon sinks as much as possible for those emissions that cannot be treated or dealt with in any other way. So -- and to, again, give obvious examples, cars that still run on fossil fuels, the only way to deal with it is to offset the CO2 emissions with some sort of natural sink. Of course, you can say, "No, we shouldn't do that. We should just change them all out to electrical cars." But -- and I don't disagree with it. It's just not going to happen tomorrow. It will take time. And in this time that society migrates away from the internal combustion engine for personal mobility to electrical and hydrogen, in that intervening decades, we will have to do something else. And offering natural sinks is a sensible thing that can be done today and for which we have business models that work, that we do at the moment have the opportunity, channel contributions of our customers into really high-quality nature-based products to offset it. And the same is true indeed for those emissions, for instance, from airplanes that I mentioned early on. But as much as possible, it will need to be other technologies as well, like direct air capture or carbon capture and storage. So the natural gas that we will probably still be selling to industrial consumers around the world increasingly will have to be mitigated by CCS facilities on those industrial facilities. In some cases, that is not going to be easy, so some natural sinks may be needed. And at some cases, it's not needed because they will find other technologies to avoid using fossil fuel-based energy, for instance, hydrogen or electricity or something else. So it will be a mix of things. Natural sinks will be part of the solution. And we believe if you do it well -- I gave you the European example, but if you apply that to the world and you look into our Sky scenarios, yes, it will be a lot of landscape projects. And we always simplistically put it a forest the size of Brazil, but that's not inconceivable. As a matter of fact, that is actually also probably quite welcome. So I think, yes, it is feasible in land terms. It doesn't bite land use for other purposes. And I think many others who are much closer to this issue will agree with us.

Ben, it's Harry. Would you mind if I just add to -- a few comments to that?

Yes. Sorry. Yes, please.

Yes. Because I think, Bruce -- thanks for the question. And I think you raised a point that we see often made around is this viable first and foremost and is it desirable. I think in most of the respected scenario work that we see by credible parties, first and foremost, of course, the IPCC, we do see the use of natural climate solutions entertained significantly as inevitable and indispensable part of the solution to get to net 0 by 2050. The Nature Conservancy recently did a piece of work you may have seen, that they claim there to be something like 11 gigatonnes of natural climate solutions potential by 2030 at a cost of below $100 a tonne and another 12.5 gigatonne at above $100 per tonne, and that took a decade thereafter. And that fits well with the overall projections in the number of the IPCC 1.5 scenarios. And in all the projections we do, we -- first of all, we acknowledge that, that piece of work shows that those are not significantly in competition with food or otherwise, the important use of land. In fact, there are many cobenefits that are beneficial in every possible aspect of biodiversity and livelihoods. And in our own projections with respect to our net carbon footprint and our net-zero business ambition, we don't take any disproportionate view on how much of that we could claim or we are entitled to. So yes, it's possible and we don't make any disproportionate use of it. And if you were to -- want to know any more about it, I'm happy to connect off-line and give you a bit more insight into the work we're doing also with others. Back to you, Tjerk.

Yes. Thanks, Harry. We've got a next question here from [ Colette ] from [ Axiom ]. It's a bit the same theme, again, Harry and Ben. But her question is "Great to hear the increased ambitions. However, I still would like to ask why you do not set an ambition to 100% in 2050? And though this is a huge leap given that not all the technologies and products are available yet for a zero carbon footprint. This would incentivize Shell, its customers and society to collaborate together on all those alternatives."

Yes. Thank you, [ Colette ]. Let me say a few things about them. And then maybe, Harry, just step in with any further adds. It's a bit more difficult if you have to do this all virtually, and you can't, say, use body language signal. Yes, indeed. It is one way of looking at it. But you have to bear in mind, of course, in a way, we do set a 100% target or a 0% target or whatever it is that you want to look at because it is 100% net-zero emissions, but it is across the entire chain of products that we are associated with. Now admittedly, indeed, that some of the products that will leave our company and enter into our customer premises will still have carbon in it. But then indeed, that carbon will be either used or mitigated or dealt with in a way that it doesn't create emissions. And that's how we get to this net zero-emission outcome. If we were to say, well, why can't we get to 100%? That is, I think, simply the techno-economical reality of the world we will be living in by 2050. I do not think anybody in this world, including the experts, including the very deep scientists in the IPCC. Nobody believes that we will live in a world by 2050 where all the energy products will have no carbon in them. So the reality is that we have to deal with that. And therefore, the reality is that if you want to be in the energy business, you may as well be in that part of the energy business that still has a carbon component, provided that carbon component doesn't result in emissions. And to be part of that, to also be part of that part of the solution is, I think, helpful. If you say, well, we will limit ourselves to only selling those products that don't have carbon in it anymore because that then can be done by somebody else. Not entirely sure, but that is a better outcome of the company that will have a lot of solutions at hand to work with customers to deal with carbon-based energy. Harry, anything you want to add?

A couple of points perhaps, Ben. Indeed, I think it's important that the NCF, of course, as you have laid out, relates to our energy products. And so it's very distinct around our own responsibilities. And of course, what we're linking to that now is the net-zero business ambition, which very much, of course, highlights interdependency with our customers and in some ways then connects us very tightly, making it very clear that we have to do something together here to get to 100%. And I'm even a little worried that we would say 100%, that it then becomes somebody else's problem in some ways from the vantage point of our customers. And so I think the distinction between the 2 approaches of a net carbon footprint with relation to -- or in relation to energy products within what we think is possible and yet challenging as well as and in addition to the net-zero -- 100% net-zero ambition with respect to our customers, I think is the appropriate combination. I think it also brings about the importance of entertaining all solutions, up to and including natural climate solutions, which we know are contested, but we also very much feel that we can't do without. And even creating the impression that we could do without may actually put us on a path that we may regret later. So I actually think it's quite important to position it in that regard in the way we have done.