A peculiar theme park in the Hague celebrates the history of the Netherlands through a series of miniature models. The Madurodam features little canals, old-fashioned windmills, tiny tulips and, amid it all, an homage to Royal Dutch Shell, the oil giant that is the biggest company in the country and, by revenue, the second largest publicly traded oil-and-gas company in the world. There’s a Shell drilling platform, a Shell gas station and a Shell natural-gas field, complete with a drilling rig. The display is at once oddenergy infrastructure in a children’s theme parkand entirely fitting: Shell has been, for decades, one of the most powerful players both in Dutch politics and on the global economic stage.
But that could soon change. As concerns grow over the existential challenges posed by climate change, Shell must grapple with its own existential crisis: How should a company that generates most of its profits by serving the world’s enormous appetite for oil navigate a long-term future in which shifting political and economic tides threaten to make fossil fuels obsolete?
The pressure to abandon oil and gas is already in force. In recent years, protesters have swarmed Shell’s headquarters; advocates representing 17,000 Dutch citizens have sued the company; and powerful investors successfully coerced executives to say they will reduce emissions. In 2015, countries around the world promised to aggressively tackle greenhouse-gas emissions, in order to meet the target laid out by the Paris Agreement: goals that require buying and burning significantly less oil and gas.
Shell CEO Ben van Beurden has a bird’s-eye view of the situation from his corner office at the company’s global headquarters in the Hague. We have to figure out what are the right bets to take in a world that is completely changing because of society’s concerns around climate change, he says.
Projections from energy companies show demand for oil could peak and fall in the coming decades; some outside analyses suggest demand for oil could plateau as soon as 2025. Markets are already jittery about the industry: energy was the worst-performing sector on the S&P 500 index in 2019. In 1980, the energy industry represented 28% of the index’s value, according to the Institute for Energy Economics and Financial Analysis (IEEFA). Last year, it represented less than 5%. The shift away from oil looms so large that Moody’s warned in 2018 that the energy transition represents significant business and credit risk for oil companies. The heads of the Banks of England and France said in an op-ed that any company that does not change strategically to the new energy reality will fail to exist. On Jan. 14, Larry Fink, founder and CEO of investment giant BlackRock, wrote in an open letter that climate change has become a defining factor in companies’ long-term prospects.
As oil flirts with the prospect of decline, energy executives are at odds over what to do. Some firms, like ExxonMobil, are positioning themselves to squeeze the last lucrative years from the oil economy while arguing to shareholders that they will be able to sell all their oil. Shell and a handful of others are beginning to adapt.
2019 TIME USA, LLC. All Rights Reserved