Shell buys into carbon offsets market, adding to solar and battery purchases

Shell has taken another major step in its expansion beyond the fossil fuel industry and will enter the global carbon offsets market with the acquisition of Australian carbon farming project developer Select Carbon.

Shell Australia said that it was the first global acquisition for its ‘nature based solutions’ business, which is seeking to invest in projects that achieve environmental improvements through the regeneration of forests, grasslands and wetland ecosystems, while also achieving reductions in greenhouse gas emissions.

In short, the purchase of Select Carbon will help Shell’s customers offset their emissions that cannot be avoided through the production and burning of oil and gas, and which cannot readily be replaced by direct investment in renewables and battery storage.

Shell has committed US$200 million (A$280 million) into its ‘nature based solutions’ business over the next two years, and has already started offering offsets for Shell fuels sold in the Netherlands and the UK, with plans to expand the offsets to fuels sold in other countries in the future.

Shell Australia chairman Tony Nunan told RenewEconomy that the company saw two key approaches that are necessary towards meeting its target of net zero emissions by 2050; the first being to reduce the emissions footprint of the energy the company sells to customers, and the second being the ability to offset or capture emissions from ongoing fossil fuel sales to industries that are harder to switch to zero emissions alternatives.

Since being founded in 2010, Select Carbon has established a portfolio of more than 70 offset projects across New South Wales, Queensland and Western Australia, including a large number of Human Induced Regeneration projects, which work to restore native forests and ecosystems.

Shell sees the acquisition as an opportunity to expand its presence in the Australian carbon offset market, as well as a chance to draw upon the expertise developed by Select Carbon that can be applied in further expansion into similar carbon offset developments overseas.

“Select Carbon has a team of highly skilled professionals with strong technical expertise and an established national landowner network. Together with Shell’s global resources, this combination will accelerate the growth of carbon farming in Australia,” Shell Australia chairman Tony Nunan said.

“The scale of Australia’s rangelands, ecological diversity and integrity of intact primary forests make this market a natural choice for Shell’s first acquisition globally for our Nature-Based Solutions business and to further scale Shell’s investment in this area here in Australia.”

Nunan added that the company would continue to assess opportunities in Australia and globally for further expansion. He said that any future acquisition must be consistent with the company’s zero emission strategy while also stacking up as a commercial investment, but added that the company was encouraged by the opportunities that exist in Australia and that by 2050 this could involve a push by Shell into green hydrogen.

As part of the acquisition, all of Select Carbon’s 24-strong workforce will be retained by the company, which work across Brisbane, Perth and Albury in New South Wales. Shell’s general manager for nature based solutions in the Asia Pacific region, Flora Ji, will take on responsibility for the company.

Select Carbon’s projects cover around 9 million hectares across a range of ecosystem and agricultural activities, with the company currently selling carbon offset permits into the federal government’s Emissions Reduction Fund.

“Select Carbon believes joining Shell will more thoroughly capture new opportunities in land management and carbon sequestration. Combined, we have the experience and resources for large-scale nature-based solutions that bring economic and community benefits to regional Australia,” CEO of Select Carbon Dean Revell said.

“It is a great opportunity to work alongside land managers to achieve multiple outcomes, including resilient regional businesses and landscape health. Our collective immediate actions, and those over the next few decades, will be critical to ensure liveable, productive and sustainable environments for generations to come.”

The acquisition of Select Carbon is the latest in a wider push by Shell Australia into the Australian market beyond the oil and gas sector and follows the acquisition of German battery manufacturer sonnen, including its manufacturing plant in South Australia, and electricity retailer ERM Power. It aims to be one of the biggest suppliers of electricity in Australia, and in the world.

Shell Australia has also invested a 49 per cent stake in solar farm developer ESCO Pacific, which is currently developing the 120MW Gangarri solar farm in central Queensland. The Gangarri solar farm will sell power to Shell’s QGC onshore natural gas project.

As part of a larger effort to diversify its business beyond the fossil fuel sector, Shell has set itself a target of investing $2 billion a year on new energy businesses, including a massive expansion into the electricity sector. The company has identified Australia as a high potential market, with opportunities in the renewables and carbon offset markets able to complement its existing presence in the gas industry.

The terms of the Select Carbon acquisition have not been disclosed by Shell, and the acquisition is pending regulatory approval, including clearance from the Foreign Investment Review Board.