Shell expects to have produced 75 percent of its current proved oil and gas reserves by 2030, and only around 3 percent after 2040, the supermajor said in its Energy Transition Strategy that it will put to a non-binding shareholder vote next month.
Discussing the risk of stranded assets in the energy transition, Shell said that every year it tests its oil and gas portfolio under different scenarios, including prolonged low oil prices, and cross-references assets with break-even prices to assess if they would still be viable in case of low oil and gas prices.
At December 31, 2020, Shell estimated that around 70 percent of its proved plus probable oil and gas reserves, known as 2P, will be produced by 2030, and only 5 percent after 2040.
Shell’s proved oil and gas reserves have been declining in recent years, shrinking the reserves life to below eight years of production.
In 2020, Shell’s proved reserves—taking production into account—decreased by 1.972 billion barrels of oil equivalent (boe) to 9.124 billion boe at December 31, 2020, the firm’s annual report showed.
That’s reserves for just seven years of production, lower than most peers.
The declining reserves life is not unique for Shell. The largest international oil companies have seen their average crude reserves drop by 25 percent over the past five years, which could be a challenge for Big Oil’s production and earnings in the coming years, Citi said earlier this month.
The supermajors reported lower reserves in their most recent reports, also due to the 2020 oil price and oil demand collapse, which forced all of them to write off billions of U.S. dollars off the value of assets.
In Shell’s case, the declining reserves life is not in contradiction to its assessment from earlier this year that its oil production peaked in 2019 and is set for a continual decline over the next three decades.