Shell has sights on Australian power market as green shift accelerates
European oil and gas giant Shell is mapping out its next moves to expand its Australian power business and aims to develop more renewables and zero-emissions hydrogen projects locally to capitalise on the accelerating clean energy revolution.
“We haven’t built Shell Energy Australia to remain the size it is,” the company’s outgoing global head of gas and renewable energy Maarten Wetselaar said. “We will want to expand our reach to the customer – geographically and to different types of customers.”
Dutch-based Shell, already one of Australia’s biggest producers of liquefied natural gas (LNG), is seeking to use its global scale in oil and gas to build up its power businesses in America, Europe and Australia, and has committed up to $US3 billion ($4 billion) in the coming years to pursue the strategy.
Shell bought into the Australian power market in 2019 by acquiring ERM, a top retailer to commercial and industrial customers.
It has been speculated that Shell may now be assessing other takeover opportunities including for New Zealand power supplier Meridian Energy’s Australian retail business Powershop.
The company has also been suggested as a potential buyer of the soon-to-be demerged retailing arm of Australia’s largest power supplier, AGL.
UBS analyst Tom Allen said AGL’s retailing business with 3.8 million customers accounts “could be attractive for a large new entrant in the Australian energy market looking to acquire scale”.
However, AGL’s long-term supply contracts for continued coal-fired power generation may reduce its appeal, he said.
Mr Wetselaar did not comment on specific merger-and-acquisition talks. He said Shell recognised the shift away from fossil fuels towards renewable energy was changing the long-standing business model of centralised energy production and consumption, while solar panels, batteries and electric cars would offer greater flexibility and control to big energy users and individual households alike.
“To make money out of clean energy is a lot more about serving the customer better than anybody else and making the most of the flexibility the customer has,” he said.
“I will be able to sell you cheaper electricity if you allow me to decide when does your car charge, when does your home cool depending on electricity prices and on supply … you’re going to have to build very intimate relationships with customers in order to make any money in this business.”
Mr Wetselaar, who announced on Friday he would be leaving Shell after 25 years, said the company is seeking to expand its power business and also intended to search for opportunities to develop clean hydrogen in Australia, describing the country as an attractive location for manufacturing the fuel due to its abundance of land, renewable energy resources and proximity to the biggest likely hydrogen buyers in Asia.
Australia’s long-haul transport sector also offered the prospect of significant local hydrogen demand, as more fleets turned to hydrogen fuel-cells to reduce emissions, he said.
“Fundamentally, Australia has almost all the ticks in the box,” he said. “Eventually, I’m pretty sure we will have a significant hydrogen business in Australia.”
Shell Australia chairman Tony Nunan said the company would continue investing significantly in its “world-class” local LNG business that includes Queensland’s QCLNG plant, the Prelude floating LNG project and its stakes in the giant North West Shelf, Gorgon and Browse joint ventures. While Shell believes its global oil output has peaked and is beginning to decline, it forecasts LNG production has a “long way to go” and its Australian assets would remain essential.
But its expansion into other parts of the energy industry has been gathering pace. Along with its foray into Australia’s power market, Shell is also developing the Gangarri solar farm in Queensland and has acquired carbon farming company Select Carbon.
“We’ve got a portfolio that’s diversifying quite quickly,” Mr Nunan said.
“If we demonstrate … in Australia that we can be credible, reliable and turn a profit, then absolutely we’ve got a huge opportunity here.”
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Source: Thanks smh.com