Do you have low self esteem? Feelings of doubt? A fear of failure? I implore you to carry yourself with the confidence of an energy producer that says the path to net zero is boosting investment in liquefied natural gas.

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The long read

Investors question Shell’s net zero goals amid LNG push

Like most energy giants, Shell has a net zero plan. The company says it will become carbon neutral before 2050 by increasing its investment in clean energy.

Some investors are questioning that ambition. At its recent capital markets day, Shell said it would maintain current levels of oil output. Importantly, Shell also committed to ramping up its production of liquified natural gas (LNG), which it called a “top priority”. The company will invest $4 billion a year in LNG projects until 2025.

Is a focus on LNG compatible with the company’s environmental goals, or are we all being greenwashed?

On one hand, doubling down on LNG is pragmatic. Europe is trying to reduce its reliance on Russian gas, while Asia is looking for alternatives to coal. You could argue that LNG is a sensible stepping stone to wean nations off other fossil fuels and onto renewables. LNG produces half as much carbon dioxide as coal, and 30% less than oil, and Shell is developing a synthetic version of the gas with lower emissions.

Shell also says that betting on LNG has allowed it to sell off parts of its oil portfolio, such as the Canadian oil sands business and its Arctic exploration, which had sparked criticism from environmental campaigners.

On the other hand, LNG is lucrative. Shell is the world’s largest private LNG supplier. Last year it moved 16.5% of the global total. More broadly, gas accounted for more than 50% of Shell’s earnings in the first half of the year. One Shell exec told the FT that CEO Wael Sawan believes LNG produces better returns than renewables.

Shell’s commitment to LNG is longstanding. It shipped the first ever commercial cargo of the fuel in 1964. Before that, the gas – which is a byproduct of oil production – was simply burnt as a way of getting rid of it. Today, the market is worth $450 billion. Shell is a major player largely because of its 2016 acquisition of BG Group, a significant LNG producer. Now other companies are following its lead. Equinor, ExxonMobil, and Chevron have all signed agreements with LNG producers.

One major shareholder told the FT that Shell would likely soften its environmental goals because of its increased investment in LNG. But whatever your view on that, investors are happy. The stock has risen about 6% this year, outpacing its rival BP which is up less than 3%.

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The bottom line