Shell plans power shift
Oil major working to diversify with deal for MP2, a retail electric company
Royal Dutch Shell said Thursday that it plans to acquire MP2 Energy, a power and retail electric company based in The Woodlands, as the oil major seeks to diversify its business.
The transaction, if approved by regulators, would expand Shell’s electricity business beyond the West Coast into Texas, the Midwest and the East Coast. MP2, which manages power plants and runs a retail electric business, serves mostly industrial and commercial customers. In Texas, however, it offers residential electric plans for customers, including a program with rooftop solar systems. The company also operates in Illinois, Ohio and Pennsylvania.
MP2 executives will stay in place, Shell said. Shell did not disclose how much it will pay for MP2; the company did not immediately respond to a request for comment.
The acquisition would be a small one for Shell, but it is indicative of a trend among the major integrated oil companies as they prepare for a future with less oil demand and greater need to diversify their businesses as efforts to slow climate change drive shifts to cleaner fuels, renewable technologies and electric vehicles, said Sandy Fielden, an analyst at Chicago’s Morningstar Commodities Research.
French oil giant Total has also
“It’s going to be challenging to watch all these companies transition to the different world that they will be in 10 to 15 years from now.” Brian Youngberg, senior energ y analyst, Edward Jones
made forays into electric utilities — the company owns a utility in Belgium and a 58 percent stake in SunPower Corp., a Californiabased solar panel company.
“Shell has been increasingly moving into gas. And if you’re into gas, power is a big deal, too,” Fielden said. “It’s the extent to which oil companies are moving away from oil and moving toward gas. That’s definitely a trend, and Shell led the way.”
The transition is being driven by aggressive predictions, set by Shell and others, for peak oil demand — when the world’s need for oil will flatline, and eventually drop.
In November, Shell’s chief financial officer said during a conference call that the company expects that global demand for oil will peak long before supply, possibly within five to 15 years. A month earlier, CEO Eldar Saetre of Norwegian Statoil said at a London energy conference that his company expects oil demand to peak sometime in the decade that begins in 2020.
In facing a future with less demand for oil, European companies in particular have led the way in exploring alternative fuels, said Brian Youngberg, a senior energy analyst for a Missouri-based investment firm Edward Jones. Shell, in particular, has been unafraid to embrace new trends, Youngberg said.
Once predominantly an oil producer, Shell now produces more natural gas than oil, particularly as electricity production around the world has shifted toward gas as a cleaner-burning source of electricity. Shell also produces biofuels; at one time, it was a shareholder in an algaebased biofuel company.
It would make sense, then, that Shell would be keen to invest in a company that could expand its industrial power business and get Shell into rooftop solar, Youngberg said. In Texas, MP2 Energy has partnered with California-based SolarCity to offer solar panels for sale or lease.
“It’s going to be challenging to watch all these companies transition to the different world that they will be in 10 to 15 years from now,” Youngberg said. “The world will still use a lot of oil, but it’s not going to be a growth business down the line.”