Climate change drives oil dinosaur to invest in a friendlier face

COVENTRY, ENGLAND: There seems to be little about the scrappy energy company in central England that would appeal to Royal Dutch Shell, the button-down oil giant.

The little company, First Utility, is an upstart challenger. It offers friendly customer service, and low prices on electricity and natural gas. But it does not own any power plants or gas pipelines; First Utility is a virtual energy company — the product of technological advancement and deregulation.

Its recent acquisition by Shell, a living dinosaur that continues to make its billions pumping fossil fuels out of the ground, illustrates one of the ways the energy companies that dominated the past are looking toward a future in which power is harnessed from the sun and the wind.

It is a future that the petroleum industry is increasingly trying to embrace, leveraging its financial and logistical resources as it puzzles out ways to deal with the climate change problem its companies helped create.

Leading Shell’s efforts is Ben van Beurden. Since taking over as Shell’s chief executive in 2014, he has had to balance the company’s mainstay oil and gas business with the regulatory, shareholder and societal pressures — not to mention familial guilt — that will perhaps inevitably push Shell and its competitors to leave those businesses behind.

Van Beurden recently recalled how his nine-year-old daughter had once come The Cabazon wind turbines, partly owned by Royal Dutch Shell, are seen near Palm Springs, California. home from school in tears. “She had heard that the Earth was warming up and being destroyed by people like Shell.”

Investors are concerned, too. Van Beurden faced shareholder resolutions demanding that Shell take steps to mitigate climate change.

To insulate itself, Shell has begun allocating up to $2 billion per year — out of a capital budget of up to $30 billion — to electric power and other alternative energy.

So far, it has bought First Utility and invested in operations as varied as a California solar energy business, an offshore wind farm in the Netherlands, a ridesharing app startup in London and even a company that provides charging outlets for electric vehicles.

First Utility is the kind of business that could thrive. It couples low prices with a warm approach. Sales agents, who work online and by phone, are trained to try to help customers through problems like the loss of a family member, rather than following a script.

That formula has won over some 850,000 customers in Britain’s bruising energy market and has impressed Shell, which had been supplying the company with power and natural gas.

Shell closed a deal to buy First Utility in March after it decided that the company could be an important part of the future energy business it wants to build.

“They give us a platform to grow from,” said Maarten Wetselaar, who heads Shell’s new energies business and its natural gas unit.

It is something of an evolution for Shell, which has long argued that it is helping mitigate climate change by investing tens of billions of dollars in cleaner-burning natural gas.

Shell even completed the purchase of BG for $54 billion in 2016 to bolster its position as a leader in liquefied natural gas.

But the public was not persuaded, van Beurden said. “People did not trust us. They thought that we were secretly advocating for the prolongation of oil and gas.’’

“If energy companies want to regain that trust and prevent public scepticism from leading to government mandates,’’ he said, “they have to change their tune.’’

Last autumn, at a country retreat near his home in the Netherlands, van Beurden worked out a new plan with his executive team. “Shell will start reducing the carbon footprint not only of its operations but, more important, of its products like gasoline and jet fuel.’’

As part of those efforts, Shell said its goal was a 50% reduction in the carbon dioxide produced by those products by 2050.

Shell does not plan to stop selling oil and gas anytime soon. So to reach its goals, it needs ways of delivering cleaner energy products that will dilute the overall emissions from those fossil fuels.

For a company as sprawling as Shell, which is Europe’s largest company, that can take many forms: having electric charging points and hydrogen, a clean fuel, available at its filling stations, and generating large amounts of green power from wind and solar installations to sell to industrial customers.

Still, some environmentalists and investors are sceptical about Shell’s intentions, noting that the $2 billion a year that it proposes to invest in new energies is still relatively small.

Mark van Baal, founder of Follow This, a Dutch shareholder activist group, said that accepting responsibility for the emissions of its products was “an industry-leading move” by Shell.

But he added that the plan that van Beurden had outlined, which would allow oil and gas production to grow, was “not enough” given the dangers of global warming.