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Shell (SHEL) Exits China's Power Market, Focuses on Fossil Fuels
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British oil and gas major Shell plc (SHEL - Free Report) has pulled out of the China power markets, which includes power generation, trading and marketing businesses. The withdrawal is related to its strategic shift toward refocusing on its profitable businesses, including those associated with traditional fossil fuels, such as oil and natural gas. Apart from that, the withdrawal can also be linked with intense competition and challenges in achieving profitability within China's electricity retail market.
Management has stated that it is being selective when it comes to investing in power, emphasizing that its focus will be on delivering value from its power portfolio. However, this may, at times, require difficult decision making. Its decision to exit the China power markets has been effective since 2023-end. However, it will continue working with partners and customers to support China’s energy transition process.
SHEL provided the first update of its energy transition strategy in March 2024, since the launch of its ‘Empower Progress’ business strategy in 2021. The update included lowering its carbon emission targets and refining the approach to electricity business development. The updated strategy prioritizes specific markets and segments, with an emphasis on increasing electricity sales to commercial customers while decreasing sales to retail customers.
However, SHEL’s withdrawal from the power business does not include its electric vehicle charging business. The electric vehicle charging business remains a significant growth market for the company, per management.
It has implemented broader cost saving measures to save up to $3 billion in annual costs. It exited the retail power sector of Europe and divested several offshore wind and low-carbon projects. The British energy major is also in the talks to sell off its U.S. solar assets.
SHEL’s refining and petrochemical complex in Singapore is put under review. In the light of cost savings, it has also implemented company-wide staff reductions, including in its low-carbon solutions division.
Shell is slowing down on its energy transition journey and refocusing its attention on the oil and natural gas businesses. In particular, management expects the demand for natural gas to rise in the upcoming decades and plans to concentrate on this segment.
SM Energy is an upstream energy firm operating in the prolific Midland Basin region and the South Texas region. For 2024, SM expects its production to increase from the prior-year reported figure, signaling a bright production outlook.
Hess is a leading upstream energy company, with its operations focused on the prolific resources offshore Guyana. HES has made significant oil discoveries in the Stabroek Block, off the coast of Guyana. These discoveries have totaled more than 11 billion barrels of oil equivalent in gross recoverable resources, adding to Hess’ production potential.
Eni is a leading global integrated energy company with a prominent focus on liquefied natural gas businesses. As natural gas has a lesser carbon footprint compared with other fossil fuel, it will play an important role in the global energy transition process. Eni’s participation in the natural gas market will allow it capitalize on the mounting global demand in the future.
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Shell (SHEL) Exits China's Power Market, Focuses on Fossil Fuels
British oil and gas major Shell plc (SHEL - Free Report) has pulled out of the China power markets, which includes power generation, trading and marketing businesses. The withdrawal is related to its strategic shift toward refocusing on its profitable businesses, including those associated with traditional fossil fuels, such as oil and natural gas. Apart from that, the withdrawal can also be linked with intense competition and challenges in achieving profitability within China's electricity retail market.
Management has stated that it is being selective when it comes to investing in power, emphasizing that its focus will be on delivering value from its power portfolio. However, this may, at times, require difficult decision making. Its decision to exit the China power markets has been effective since 2023-end. However, it will continue working with partners and customers to support China’s energy transition process.
SHEL provided the first update of its energy transition strategy in March 2024, since the launch of its ‘Empower Progress’ business strategy in 2021. The update included lowering its carbon emission targets and refining the approach to electricity business development. The updated strategy prioritizes specific markets and segments, with an emphasis on increasing electricity sales to commercial customers while decreasing sales to retail customers.
However, SHEL’s withdrawal from the power business does not include its electric vehicle charging business. The electric vehicle charging business remains a significant growth market for the company, per management.
It has implemented broader cost saving measures to save up to $3 billion in annual costs. It exited the retail power sector of Europe and divested several offshore wind and low-carbon projects. The British energy major is also in the talks to sell off its U.S. solar assets.
SHEL’s refining and petrochemical complex in Singapore is put under review. In the light of cost savings, it has also implemented company-wide staff reductions, including in its low-carbon solutions division.
Shell is slowing down on its energy transition journey and refocusing its attention on the oil and natural gas businesses. In particular, management expects the demand for natural gas to rise in the upcoming decades and plans to concentrate on this segment.
Zacks Rank and Key Picks
Currently, SHEL has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Energy sector are SM Energy (SM - Free Report) , Hess Corporation (HES - Free Report) and Eni SpA (E - Free Report) . SM Energy and Hess presently sport a Zacks Rank #1 (Strong Buy) each, while Eni carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
SM Energy is an upstream energy firm operating in the prolific Midland Basin region and the South Texas region. For 2024, SM expects its production to increase from the prior-year reported figure, signaling a bright production outlook.
Hess is a leading upstream energy company, with its operations focused on the prolific resources offshore Guyana. HES has made significant oil discoveries in the Stabroek Block, off the coast of Guyana. These discoveries have totaled more than 11 billion barrels of oil equivalent in gross recoverable resources, adding to Hess’ production potential.
Eni is a leading global integrated energy company with a prominent focus on liquefied natural gas businesses. As natural gas has a lesser carbon footprint compared with other fossil fuel, it will play an important role in the global energy transition process. Eni’s participation in the natural gas market will allow it capitalize on the mounting global demand in the future.