Global energy producers developing new technologies in the Shell Catalysts & Technologies lab.

How Global Energy Producers Can Emerge Stronger from Market Challenges

By Andy Gosse on May 26, 2020

At the start of the COVID-19 pandemic, our customers focused on responding to the immediate threats to their employees. We saw rapid responses within organisations to ensure the safety of their colleagues and coworkers. This concern then evolved to focus on external market challenges, around consumer demand for goods and services and the impacts this was having on their businesses.

Shell is working to assist in the global response to the virus. We continue to deliver essentials such as fuel for delivery trucks and emergency vehicles, electricity for homes and businesses or natural gas for cooking and heating — while protecting the health and safety of our staff and customers.

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In the petrochemical space, some of our customers involved in healthcare and medical supplies have seen upticks in demand. The majority of the industry, however, has slowed down, with less manufacturing overall of petrochemical products. Many companies have implemented a short-term focus to conserve cash and to slow down operations, making decisions day-by-day as the situation unfolds.

Concurrently, our customers are assessing the pandemic’s long-term impact on their businesses. They are analysing the future and wondering how their individual decisions will aggregate to re-shape the industry.

That focus on the future must inspire us to strategise our way forward. Our actions will shape our new reality: we will have to remain resilient, repurpose our operations, and learn to innovate through the challenging period ahead.

The Critical Capacity to Adapt

At Shell Catalysts & Technologies, our objective is to help customers make the right choices given the rapidly evolving world we are now facing. We have always taken pride in our ability to create value for our customers by tailoring services and solutions to their unique challenges — which continue to change dramatically. Now, more than ever, we must delve into their demanding situations, understand their choices, and be their trusted advisor when decisions are made.

This is not easy. Customers face daily challenges within a context of great unpredictability and fluidity. They are adjusting shutdowns schedules, determining how long they can keep running catalysts, and in some cases, deciding whether they’ll be able to restart operations after a shutdown.

Shell Catalysts & Technologies is committed to our customers’ long-term success. Our experts empower them to make globally informed decisions suited to their circumstances.

We have experts and employees all over the world who are knowledgeable about their customers’ operations and local markets. When customers make decisions with our experts, they are supported by Shell Catalysts & Technologies’ global network of companies.

We advise our customers on how to make logical, thoughtful, and prudent decisions. This requires the ability to adapt and pivot. With so much uncertainty ahead, companies that remain fixed on short-term decisions and don’t directly respond to change will struggle to remain competitive. The capacity to adapt is critical to future success.

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An Acceleration Towards the Energy Transition

The truth is the world may never return to what it was before the pandemic. People and companies are behaving differently and will probably continue to do so. Energy. Travel. Education. Healthcare. Finance. Everything has changed, and change inherently brings opportunity. This is an ideal time for transition in our industry by considering:

1. Net-Zero Emissions

In tackling climate change, the focus is increasingly on limiting the global temperature rise to 1.5° Celsius. Shell supports this ambition.

For society to achieve a 1.5° Celsius future, the world is likely to need to stop adding to the stock of greenhouse gases in the atmosphere — a state known as net-zero emissions — by around 2060. Advanced parts of the world are likely to need to reach that point by 2050.

That is why Shell has set itself an ambition to become, by 2050 or sooner, a net-zero emissions energy business.

2. Alternative Fuels

Many of our customers want to know how the pandemic’s impact will accelerate the energy transition, and what that acceleration means for them. As evidence of this, their perspectives on alternative fuels and alternative fuel-based economies are more progressive today than they were two or three months ago.Their own studies indicate a new level of intensity and vigour that suggests the industry is gearing up to make changes more quickly than it was demonstrating last year.

Alternative fuels, including biofuels, were already gaining significant momentum in replacing a portion of conventional transport fuels in companies’ energy production portfolios. The economics associated with regulations continue to drive those trends; we’re seeing interest in biofuels increase dramatically.2 Alternative fuels, in the form of hydrogen, continue to be discussed in the industry as another possible alternative to road transport fuel.

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3. Low Carbon Replacements for Energy in Steel Making

Recently, there has been more research examining low-carbon replacements for energy in steel making.3 These studies do not necessarily reflect investments in new hydrogen production that would be supplied to a particular steel mill, but reveal how people are contemplating the concept of industrial clusters.4 Companies are starting to explore innovative pathways such as access sharing as they anticipate greater government interest and backing of new energies.

4. E.U. Government Funding

Industry analysis suggests that E.U. government funding — aimed at helping companies recover from the pandemic’s economic fallout — may have a significant focus on innovations that governments have already considered necessary in the future.5

A green and ambitious COVID-19 economic recovery plan could mean that government funding, subsidies, and incentives may prioritise the energy transition in ways we could not have imagined a few months ago.

Government-backed stimulus in some regions, combined with the continued global efforts to combat climate change, has the potential to create new levels of interest and action towards the energy transition. In fact, we’re currently seeing a significant number of companies exploring the concept around industrial clusters in Europe.

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A New Way of Working Together

At the start of the pandemic, I saw the concerted effort the industry made to keep people safe and ensure the global supply chain continued to function. The industry held up remarkably.

Teams from raw materials suppliers to freight forwarders to our own operations enacted sensible measures, helped colleagues and employees understand what was happening, and acted quickly to isolate the virus when there were outbreaks.

For example, during the first wave of the virus, our team in China quickly learned how to interact with customers virtually. This pivot marked the first time we’d ever started a new licensed unit remotely with our customers. I still have the screenshot of nine faces featuring people in Amsterdam talking through a translator to the customers’ operators in China.

We’d never dreamt of this as an option, and yet our team adapted and successfully executed the initiative. It is this dedication to innovation, collaboration, and maintaining high-quality work that makes me hopeful for how our company and partners will grow in the coming years.

Companies that embrace a cohesive short, medium, and long-term view of the decades ahead will truly drive change and create their own success. These companies will become a key part of the energy transition, as opposed to the companies that simply react to change.

For our industry to evolve, it’s critical that we do not simply speculate on what the future will be, but to develop strategies that will allow us to emerge robustly from this pandemic and power progress together by providing more and cleaner energy solutions.

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1https://www.sciencedirect.com/science/article/pii/S136403211930872X

2https://ec.europa.eu/jrc/en/jec/renewable-energy-recast-2030-red-ii

3https://hydrogencouncil.com/wp-content/uploads/2020/01/Path-to-Hydrogen-Competitiveness_Full-Study-1.pdf

4https://www.sciencedirect.com/science/article/pii/S1364032119306975

5https://www.europarl.europa.eu/news/en/press-room/20200419IPR77407/eu-covid-19-recovery-plan-must-be-green-and-ambitious-say-meps