Shell has revised its capital expenditure plans, trimming its annual investment budget to a range of $20 billion to $22 billion through 2028, down from the previous range of $22 billion to $25 billion.
In 2023, Shell spent $21.1 billion, aligning with its ongoing strategy to optimize spending while maintaining profitability. The company continues to allocate capital strategically, prioritizing LNG, oil, and gas while reducing exposure to lower-margin renewable energy investments.
Investment in low-carbon solutions remains part of Shell’s broader strategy, though with a measured approach. Out of its $10 billion to $15 billion budget for low-carbon investments from 2023 to 2025, the company had already spent around $8 billion by the end of 2024.
By the end of the decade, Shell expects up to 10 percent of its capital employed to be in lower-carbon platforms, reflecting a cautious but steady commitment to energy transition efforts. Over the next three years, the company plans to allocate $2 billion to $3 billion annually to its renewables and energy solutions segment.
Despite reducing its overall capital expenditure, Shell remains committed to growth in its core businesses. The company has set a target of a 4-5 percent annual increase in LNG sales over the next five years, driven by rising global demand, particularly in Asia.
It produced 29 million metric tons of LNG and sold 66 million tons in 2024, reinforcing its position as the world’s largest LNG trader. Meanwhile, Shell intends to maintain steady oil production through 2030 while sustaining material output beyond that period.
As part of its ongoing capital optimization, Shell is considering divesting or closing some of its chemical assets, particularly in Europe, and is exploring strategic partnerships in the United States. The company aims to cut between $5 billion and $7 billion in cumulative costs from 2022 to the end of 2028, further supporting its profitability goals.
Shell’s capital strategy is also geared toward maximizing shareholder returns. The company has raised its shareholder distribution target to 40 percent-50 percent of cash flow from operations, up from the previous range of 30 percent-40 percent. This includes a $3.5 billion share buyback plan for the current quarter, marking the 13th consecutive quarter of at least $3 billion in share repurchases.
The market responded positively to Shell’s updated capital expenditure guidance, with shares rising 2.2 percent and outperforming a broader index of energy companies. Analysts have viewed the cost reductions, lower capex guidance, and enhanced shareholder returns as positive developments, reinforcing the company’s disciplined approach to capital allocation while focusing on its most profitable sectors—oil, gas, and biofuels.
GreentechLead.com News Desk