Shell to shut down Chinese clean energy business

Shell Chief Executive Wael Sawan plans to increase profits and share price. Photo: AMR ALFIKY/REUTERS

Shell is set to exit its power generation business in China amid a wider Western exodus from the country.

The company, which employed almost 2,000 people across the country, intends to close its green energy and low-carbon electricity trading divisions, although it will retain its electric vehicle charging business.

Shell follows a number of other European and US companies in reducing its presence in China.

The hasty exit is due to factors including the trade war between China and the United States, disputes over the theft of intellectual property and fears of reputational damage related to China's use of Uyghur slave labor in Xinjiang.

Shell is expected to tell investors the decision was largely a commercial one driven by chief executive Wael Sawan's desire to boost profits and share price. The company will report quarterly earnings on Thursday.

A Shell spokesman said: “This decision is consistent with announcements made at Shell Capital Markets Day 2023. our energy portfolio, which requires difficult decisions to be made.”

The company's reorganization included replacing executive chairman Lin Chen, appointed just nine months ago, with Sabrina Qu, who took over this month.

Shell's latest published tax report for 2022 showed the company employs 1,928 people. people in 24 separate subsidiaries in China. Pre-tax profits were $277 million (£222 million) and paid $53.4 million in corporate income tax to the Chinese state.

Shell's UK operations, by contrast, generated a much higher pre-tax profit of $1.8. billion, but paid much lower taxes to the UK government — $40.5 million.

Shell still retains other Chinese operations, including five lubricants plants and one lubricants production plant , and remains one of the leading suppliers of liquefied natural gas.

It also has a number of partnerships, including with PetroChina and China's CNOOC. state-controlled oil companies.

These include the Changbei onshore gas project, developed jointly with PetroChina, and a petrochemical plant in Huizhou, Guangdong province, jointly with CNOOC.

Shell also has joint ventures and wholly owned entities that operate the network of approximately 2,000 gas stations, 800 stand-alone stations for electric vehicles and an electric vehicle charging network of 25,000 public charging stations.

As part of its drive to save money, the company has annual costs of up to $3 billion. In recent months, Shell has exited its European retail energy business and several offshore wind and low-carbon projects. The company has also put solar assets in the US up for sale and put its giant oil refining and petrochemical complex in Singapore on review.

Ashley Kelty, director of oil and gas research at investment bank Panmure Morgan, announced the cuts. were «another step towards focusing on the higher-margin core oil and gas business… While Shell did offer access to growing carbon markets in China, Shell is diversified enough that this will not impact their broader carbon offset plans.»

Shell said: “Shell’s commitment to delivering on our energy strategy in China remains unchanged. We will work with our partners and customers to contribute to China's energy transition.»