Shell decided to simplify The dual share structure and shifting the tax base and top management from the Netherlands to the UK is a logically strategic move that looks a lot like a hoax.
The company’s current founding base, with two lines of shares, dates back to 2005. However, its Dutch character goes much further: the merger of the Royal Dutch Petroleum Company and the Company. Shell Transport and Trade in 1907.
However, only six months after it suffered a shock defeat In a Dutch court over its emissions-cutting scheme, the company is asking investors to back a move to London, despite one leaving trading its shares in Amsterdam.
Time, then, is in doubt. Shell said the motive and logic of the move had nothing to do with the outcome of the Milieudefensie affair, which directed the oil company to cut emissions by 45 percent by 2030 – a ruling effective immediately.
Yes, it adopted a target of cutting emissions directly, or ranges 1 and 2, in half within that timeframe. But it is disputing even a best-effort order to reduce Scope 3 emissions caused by customers burning its products by a similar amount.
The restructuring, if approved, will not affect this or other cases in progress. However, it may make it less likely that future cases will be heard in Dutch courts, after Milieudefensie and Emergency situation against the Dutch government is considered favorable jurisdiction for environmental campaigners.
Will that make a difference? Not much. Tessa Khan, a lawyer and founder of the climate advocacy group Uplift, notes: “There is a lot of innovative litigation being brought up in UK courts. This is now a global phenomenon. The cumulative number of climate change-related cases has more than doubled since 2015, according to analysis by the Grantham Institute, with the UK accounting for around 15% of the cases identified outside the US.
Furthermore, the UK has a government identified as being at the forefront of climate change that has blocked the approval of the Whitehaven coalfield and is under pressure to reject Shell’s Cambo oil project off the Shetland Islands. Business Secretary Kwasi Kwarteng could see the move by Shell as a “vote of confidence for the UK economy”, when he tweeted on Monday, but he will have to battle the emergence of a new oil and gas development advocate.
For all disappointed about COP26“Global finance is fitting for a 1.5C world – even as it’s still trying to figure out what that means,” said Tim Buckley, research director for energy finance at IEEFA. . Buckley said the flow of news from the COP, such as the methane settlement deals, leads to a tougher time for oil and gas professionals. “Investor pressure is just going to build.”
The lesson of this year is that existing investors in oil and gas companies can be kept – for now – provided the cash from fossil fuel assets is flowing well and being returned to them with large enough quantity. Shell’s restructuring marks that: it will double the company’s ability to buy back shares when it sells assets.
The company has also under pressure from the activist hedge fund Third Point to part ways. But the reality is that its cleaner energy operations – currently tiny and cash-negative – don’t currently deserve that treatment. A simple structure at least gives it more options for future splits, spins, trades or fundraising. The wise admission is perhaps that the shell will, one way or another, have to move much faster in its transition.
