Shell ups CO2 reduction targets as profits fall below $4.1bn

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Shell ups CO2 reduction targets as profits fall below $4.1bn
Shell's Q3 results were a mixed bag following Hurricaine Ida and soaring oil and gas prices. Photo: Mike Kemp/In Pictures via Getty

As pressure mounts on Royal Dutch Shell (RDSA.L) to revamp its business in the face of climate change, the oil major reported third quarter profits that fell shy of expectations.

Despite being lifted by rising oil prices, profit slid 25% to just below $4.1bn (£3bn) in the third quarter, while shareholders lost out following a bumper pay day. Profit was up from $955m a year earlier, but well below analyst estimates of $5.4bn

Shareholders had received $3.4bn in the previous quarter, slipping to a $477m loss in Q3. 

Cash flow from operations jumped to $16bn, compared with $10.4bn a year earlier.

Shares were knocked 1.4% off course in early trade in London on Thursday. 

Shell shares were trading 1.4% lower on Thursday morning in London. Chart: Yahoo Finance UK
Shell shares were trading 1.4% lower on Thursday morning in London. Chart: Yahoo Finance UK

The company said the earnings dive was a result of “adverse one-off tax impacts” as well as the hit of Hurricane Ida which struck the US over the summer, pushing down production volumes.

Meanwhile, Shell set targets to halve the absolute emissions from its operations compared with 2016. 

"This quarter we've generated record cash flow, maintained capital discipline and announced our intention to distribute $7pbn to our shareholders from the sale of our Permian assets," said Royal Dutch Shell CEO, Ben van Beurden.

Combined with the carbon reduction target, "this is clear evidence of how we are accelerating our Powering Progress strategy, purposefully and profitably," he added. 

Read more: UK food prices likely to rise as Christmas approaches

The new goal covers Scope 1 and Scope 2 emissions, which are directly under Shell’s operational control. 

It leaves out the bulk of greenhouse emissions from the business, however, which are released when customers burn fuel. 

Analysts told Bloomberg that the cut would have a limited impact as Scope 1 and 2 only represent a small part of its overall footprint. 

A 50% decrease will only amount to a 2.5% reduction in Shell’s total emissions, including Scope 3, said Shu Ling Liauw, lead analyst at Global Climate Insights.

“The recent spike in oil and gas prices will have reminded Shell’s board of the appeal of owning fossil fuel assets when commodity prices are high. However, the company has pledged to transition to a green world so we’re unlikely to see new investments in oil and gas assets despite the favourable price environment," said Russ Mould, investment director at AJ Bell.

“One would have thought Shell will fight any opposition now to do the splits, but it is a decision that may have to be made at some point in the future.”

Watch: COP26: What to expect at the upcoming UN climate summit

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