Shell is to close its power generation business in China amid a wider Western exodus from the country.
The company – which employed almost 2,000 people across the nation – is to close divisions that generate green power and trade in low-carbon electricity, although it will retain an electric vehicle charging operation.
Shell is following a raft of other European and US companies in reducing their presence in China.
The rush to exit is being driven by factors such as the China-US trade war, arguments over intellectual property theft and fears of reputational damage linked to China’s use of Uyghur slave labour in Xinjiang.
Shell is expected to tell investors that the decision was largely commercial, fuelled by chief executive Wael Sawan’s drive to drive up profits and share value. The company will report quarterly profits on Thursday.
A Shell spokesman said: “This decision is in line with the messages delivered on Shell’s Capital Markets Day 2023. We are selectively investing in power, focusing on delivering value from our power portfolio, which requires making difficult choices.”
The company’s reorganisation has included the replacement of executive chairman Lin Chen, appointed just nine months ago, with Sabrina Qu who took over this month.
Shell’s latest published tax contribution report, covering 2022, showed that it employed 1,928 people across 24 separate subsidiaries in China. It made a pre-tax profit of $277m (£222m) and paid the Chinese state $53.4m in corporate income tax.
Shell’s UK operations, by contrast, generated a far larger pre-tax profit of $1.8bn but paid the UK Government far less tax at $40.5m.
Shell still retains other Chinese businesses including five lubricant blending plants and one grease production plant, and remains one of the leading suppliers of liquid natural gas.
It also has a range of partnerships including with PetroChina and CNOOC, China’s state-controlled oil companies.
These include the Changbei onshore gas project, developed with PetroChina, and a petrochemical plant in Huizhou City, Guangdong Province, with CNOOC.
Shell also has joint ventures and wholly-owned businesses that operate a network of around 2,000 fuel stations, 800 standalone electric vehicle stations and an EV charging network of 25,000 public charge points.
As part of its drive to save up to $3bn in annual costs, Shell has in recent months pulled out of the European retail power business and several offshore wind and low-carbon projects. It has also put US solar assets up for sale and placed its giant refining and petrochemical complex in Singapore under review.
Ashley Kelty, director of oil and gas research at Panmure Morgan, an investment bank, said the cutbacks were “another step towards focusing on higher margin core oil and gas business … While it did offer access to the burgeoning carbon markets in China, Shell is sufficiently diverse that this will have no impact on their wider carbon offset plans”.
Shell said: “Shell’s commitment on operationalising our powering progress strategy in China remains unchanged. We will work with our partners and customers to contribute to China’s energy transition.”
