Shell shareholders demand more clarity on the company's long-term LNG (liquefied natural gas) plans
In a recent development, Shell's ambitious growth strategy for its liquefied natural gas (LNG) business, aiming for a 20-30% expansion by 2030, has come under scrutiny. The International Energy Agency's (IEA) latest predictions contradict this strategy, suggesting a global supply glut of LNG from 2026, with oversupply and declining LNG prices for the next decade.
The IEA's report also raises questions about the role of LNG as a transition fuel. Some argue that it may be a dangerous misstep, while others see it as a pragmatic, lower-carbon alternative to coal, especially in emerging markets.
Vaishnavi Ravishankar, head of stewardship at Brunel Pension Partnership, has expressed concern about the disconnect between Shell's LNG growth strategy and its stated climate targets. This concern is shared by other pension providers and shareholders, including the Merseyside Pension Fund, Greater Manchester Pension Fund, and the Australasian Centre for Corporate Responsibility (ACCR).
These pension providers collectively manage assets totalling $86bn. They have filed a shareholder resolution with Shell, calling on the company to justify the assumptions behind its LNG growth strategy and explain how it aligns with the company's climate commitments.
The resolution is prompted by Shell's significant financial exposure to LNG. The company holds more uncontracted LNG than any other independent oil and gas firm. Owen Thorne, responsible investment manager at Merseyside Pension Fund, has expressed the need for enhanced disclosure from Shell regarding the high demand forecasts for LNG. These demand forecasts have not been updated in response to shifts in the global energy market.
The investors question Shell's demand outlook for LNG, suggesting that its growth strategy is based on demand forecasts higher than any scenario predicted by the IEA. The IEA's latest Annual Report suggests that global oil demand will peak before 2030.
Shell justifies its LNG expansion as part of its Energy Transition Strategy. The company plans to grow its LNG business by 4–5% annually through 2030, with LNG expected to account for nearly a third of the company's upstream hydrocarbon production by the end of the decade. The company also uses LNG profits to fund low-carbon initiatives, and plans to increase renewable capacity 50% in the next five years, focusing on solar, offshore wind, and hydrogen infrastructure.
However, critics argue that Shell's focus on fossil fuels within its overall capital expenditure undermines global climate goals. In 2024, the company allocated £14 billion to oil and gas operations compared to just £2 billion to renewables and energy solutions, a roughly 7:1 ratio. Renewables represented only 8% of total capital spending, down 5% from the prior year.
Environmental groups remain skeptical about Shell's incremental investments in carbon capture and hydrogen projects, viewing these efforts as insufficient compared to continued LNG and oil & gas expansion. The current debate around Shell's LNG growth strategy centers on whether its aggressive expansion aligns with global climate commitments.
ACCR co-filed the resolution, with the non-governmental organisation ShareAction lending support, alongside 100 individual shareholders. The resolution will be voted on at Shell's annual general meeting in May 2023. The outcome could influence Shell's future investment strategies and its commitment to a sustainable energy transition.
Investors who collectively manage assets worth $86bn have raised questions about Shell's LNG expansion strategy, particularly its demand outlook for LNG, as they believe Shell's growth strategy is based on demand forecasts higher than any scenario predicted by the International Energy Agency (IEA). This resolution, filed by pension providers and shareholders, calls for Shell to justify the assumptions behind its LNG growth strategy and explain how it aligns with the company's climate commitments, as concerns persist about the company's significant financial exposure to LNG and its strategic focus on fossil fuels in the finance and energy industry.
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