Shell plc SHEL, the British energy major, has announced that it plans to increase the sales of liquefied natural gas (LNG). This decision has faced criticism from a group of major shareholders, who filed a resolution questioning whether the expansion of LNG sales aligns with the company’s commitment to reduce carbon emissions related to its operations.
Shell's LNG Expansion Plans Under Scrutiny
Being the largest trader of LNG globally, Shell is banking on the anticipated rise in demand for the commodity in the upcoming years. However, the company is facing scrutiny from a major group of shareholders, including the Brunel Pension Partnership, Greater Manchester Pension Fund and Merseyside Pension Fund, for its decision to increase sales as it may conflict with the company’s long-term climate targets.
The shareholders have asked for further clarification on how Shell’s LNG growth strategy will remain consistent with the change in energy demand globally and with the company’s plans to become a net zero energy firm by 2050. The pension funds that filed the resolution own combined assets, whose total value exceeds $86 billion.
Natural gas is a cleaner burning fuel than coal and other fossil fuels. However, LNG emits a significant amount of greenhouse gases during the extraction and transportation process. As such, increasing LNG sales may hinder the company’s ability to reach its net zero target by 2050.
Shell’s LNG Demand Forecasts Exceed IEA Scenarios
Per the investor group, Shell’s projected LNG demand exceeds all the demand scenarios reported by the International Energy Agency (“IEA”). However, despite the inconsistency and the changes that the global energy market has undergone, the company has not substantially revised its demand projections.
Shell stated that LNG is expected to comprise approximately 30% of its hydrocarbon production in 2030. However, its demand forecasts are 301% higher than the "Net Zero Emissions by 2050" scenario presented by IEA.
A representative of the Australasian Centre for Corporate Responsibility mentioned that the significantly high demand outlook presented by Shell raises governance questions regarding the implications of Shell’s strategy and poses major financial risks for investors.
Additionally, Brunel Pension Partnership has raised its concerns about the inconsistency between Shell’s climate goals and its LNG strategy. The spokesperson from Brunel Pension Partnership emphasized that Shell must provide greater transparency over the alignment toward its long-term climate commitments. The concerns regarding Shell’s alignment toward its climate goals were the result of the company’s recent decision to scrap carbon intensity from its operations by 2035.
Shell Defends LNG Strategy Amid Shareholder Concerns
In response to these questions, Shell stated that its shareholders strongly support its strategy of delivering more value with lower emissions, with LNG playing a central role in this strategy. Shell remains focused on the role of LNG in its overall strategy. The resolution filed was supported by another 100 independent shareholders. UK-based responsible investment NGO ShareAction represented the independent shareholders.
SHEL’s Zacks Rank and Key Picks
SHEL currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the energy sector are TechnipFMC plc FTI, Sunoco LP SUN and Oceaneering International OII. TechnipFMC and Sunoco currently sport a Zacks Rank #1 (Strong Buy) each, while Oceaneering International carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
TechnipFMC is a leading manufacturer and supplier of products, services and fully integrated technology solutions for the energy industry. The company’s total backlog witnessed a high of $14.7 million in the third quarter of 2024, indicating an 11.1% increase from the previous year’s level. This growing backlog ensures strong revenue growth for FTI.
Sunoco LP is one of the largest distributors of motor fuel in the United States. The partnership distributes fuel to independent dealers, commercial customers, convenience stores and distributors. Its current distribution yield is greater than that of the industry's composite stocks, providing unitholders with consistent returns.
Oceaneering International delivers integrated technology solutions across all stages of the offshore oilfield lifecycle. The company is a leading offshore equipment and technology solutions provider to the energy industry. Its proven ability to deliver innovative, integrated solutions supports ongoing client retention and new business opportunities, ensuring steady revenue growth.
7 Best Stocks for the Next 30 Days
Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."
Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.1% per year. So be sure to give these hand picked 7 your immediate attention.
See them now >>TechnipFMC plc (FTI) : Free Stock Analysis Report
Sunoco LP (SUN) : Free Stock Analysis Report
Oceaneering International, Inc. (OII) : Free Stock Analysis Report
Shell PLC Unsponsored ADR (SHEL) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
