Oilpatch hopes Shell’s new Canadian CEO can persuade Trudeau to bet on LNG

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A Canadian has been tapped to lead one of the world’s most important energy companies, and some of his fellow citizens in Alberta’s oilpatch hope he’ll be able to get the Canadian government to overcome its skepticism about the viability of exporting liquified natural gas to Europe.

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Shell PLC, the London-based supermajor that ranks among the world’s biggest oil and gas companies in terms of market capitalization, said on Sept. 16 that Wael Sawan, a Lebanese and Canadian national who studied at McGill University in Montreal, will replace longtime chief executive Ben van Beurden on Jan. 1.

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“We will be disciplined and value focused, as we work with our customers and partners to deliver the reliable, affordable and cleaner energy the world needs,” Sawan, 48, said in a press release.

The announcement comes at a critical moment for the company, as it attempts to position itself for a net-zero carbon emissions future amid a worsening energy crisis in Europe. Shell is fighting a Dutch court ruling last year that ordered the company to accelerate its efforts to meet the Paris climate goals, and earlier this week European Commission President Ursula von der Leyen said she intends to seek a windfall tax on the profits of energy producers.

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But the toughest challenge for Shell’s new chief executive could be balancing the company’s ambitious decarbonization goals while keeping shareholders happy by maintaining profitability. Analysts said they doubted that Sawan, who currently runs the integrated gas, renewables and energy solutions division, would alter the course set by van Beurden.

Credit Suisse analysts told their clients in a note that Sawan is well known to investors and expected his appointment to have limited impact on Shell’s strategy. “The shift is likely to be more of a continuation than revolution,” RBC Capital analysts said in a note of their own.

However, at least one fund manager said he hopes Sawan will take advantage of his Canadian roots to coax Prime Minister Justin Trudeau to get over his skepticism about Canada’s potential to supply Europe with liquified natural gas, since Shell is leading the LNG Canada joint venture in British Columbia that is set to become the country’s first LNG export terminal when it opens in 2025.

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Sawan “needs to demonstrate that Trudeau is wrong in what he said,” Rafi Tahmazian, senior portfolio manager and director at Canoe Financial LP, referring to Trudeau’s admission during German Chancellor Olaf Scholz’s visit to Canada last month that he’s skeptical that expanding LNG infrastructure to supply Europe makes economic sense.

“Canada needs to build out its LNG market, Shell should be a big part of that,” Tahmazian said. “Shell really is all about deep gas and big resource plays. They’re about transportation of these big resource plays all over the world. And (Sawan) is right smack dab in the middle of it.”

Under van Beurden, Shell said it would aim to increasingly provide low-carbon fuel and power to customers, targeting net-zero carbon emissions by 2050 — though the bulk of the firm’s current capital spending remains focused on oil and gas.

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Part of the difficulty for the oil majors has been public anger over the sector’s outsize profits — Shell posted $11.47 billion in adjusted earnings last quarter — at a time when consumers are feeling squeezed by energy prices.

Sawan “has to remain profitable while maintaining some degree of this massive push that Shell and the other supermajors got put into, to try and be responsible for the new age of energy,” Tahmazian said. “His first year is going to show us whether he’s got good balance.”

In his public comments to date, Sawan has been diplomatic on climate affairs, speaking encouragingly of the Canadian federal government’s climate targets, which would require the oil and gas sector to deliver a 42-per-cent reduction in emissions from 2019 levels by 2030.

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But Sawan was also bullish on Canadian natural gas in an interview last March, arguing for its potential to aid in the shift away from coal use in countries like China and the attendant reduction in carbon emissions.

“I think Canada is incredibly well placed,” said Sawan, adding that Shell was “excited by the potential” of the LNG Canada project. “There’s potential for more and so Canada can play a very, very good role and it’s not only the supply of LNG, it’s arguably going to be amongst the most carbon efficient LNG plants anywhere in the world,” he said.

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