Shell said it is gradually ceasing its operations related to the electricity power value chain in China, but the UK petrochemical titan will continue to run its local electric vehicle charging business.
Shell decided to start its exit from China's power market at the end of last year, the London-based firm told Yicai yesterday. The move includes its power generation, trading, and marketing businesses in the country, it added.
Fierce competition and thin profit margins in China's electricity retail market may be some of the significant reasons for Shell's decision, according to analysts. In 2015, the country launched a new round of power sector reforms, allowing the participation of social capital in the electricity retail sector.
Shell's Chinese unit Shell Energy China became one of the first registered foreign companies to enter the country's electricity trading market. However, amid intensifying competition and homogenized business models in the domestic power market, the firm failed to achieve significant results.
In addition, Shell's move is believed to be a business adjustment in response to its new Chief Executive Wael Sawan prioritizing projects with higher profit margins, analysts pointed out.
Shell is also accelerating the development of its EV charging business. Last September, it opened its largest EV charging station in Shenzhen, with the company planning to run more than 500,000 EV charging stands worldwide by next year.
On the same day, Shell announced it has agreed to sell Shell Energy and its refinery and petrochemical assets in Singapore to a joint venture between Indonesian chemicals giant Chandra Asri Group and Swiss miner and commodities trader Glencore.
On January 16, Shell said it will sell its Nigerian onshore subsidiary the Shell Petroleum Development for USD1.3 billion to Renaissance, a consortium of five companies comprising four exploration and production firms in Nigeria and an international energy group.
Shell's strategic shift reflects the dilemma and choices it faces between energy security and transition.
While Shell is still undergoing a transformation, its focus is shifting to some extent toward return on investment, Zhu Kunfeng, energy research director of S&P Global Commodity Insights, said at an industry forum. Energy transition needs to be aligned with the growth of new alternative energy sources, he added.
