The fossil fuel giant has instead said it will aim to keep the amount of oil the company extracts at today's level until the end of the decade.
The news was announced as part of a strategic shift presented by Shell's new chief executive Wael Sawan in New York, that aims to "simplify" the energy major's business and increase investor confidence. Since taking the job in January, Sawan has been looking at ways of increasing performance in an attempt to close the valuation gap that separates the company from its US rivals.
As part of this effort, Shell said it would reduce capital spending in 2024 and 2025 to $22-$25bn (£17-20bn) a year, down from a planned $23bn-$27bn (£18-21bn) in 2023. To achieve this, the company plans to cut group-wide annual operating costs by $2bn-$3bn (£1.5-£2.3bn) by the end of 2025.
Despite the shift, Sawan has taken steps to appease investors by increasing shareholder dividends. In the new strategy, dividends will increase to 30-40 per cent of cash flow from operations, which would start with a 15 per cent rise in its dividend per share from the second quarter of 2023. Moreover, the company also offered to pay shareholders at least $5bn (£4bn) by buying back their shares in the second half of this year.
Shell's CEO has also gone back on his predecessor's pledge to reduce the company's oil production by 1-2 per cent per year until 2030, with a view towards reaching net-zero carbon emissions by 2050. Instead, Shell will now look to maintain 2023 levels of oil production over the next seven years.
The company has justified the change by arguing that its production has already dropped from 1.9 million barrels of oil per day in 2019 to 1.5 million in 2022, and therefore had already met the 2030 oil reduction target.
"Our target of a reduction in oil production by 2030 has not changed," a Shell spokesperson said. "We've just met it eight years early."
Shell has been able to achieve this by selling off oil fields to other companies, who continue to extract fossil fuels from them. In 2021, the company closed a $9.5bn (£7.5bn) sale later of its interest in an oil project in the Permian Basin, Texas, resulting in the offloading of a little under 0.2 million barrels of daily production.
"We are investing to provide the secure energy customers need today and for a long time to come, while transforming Shell to win in a low-carbon future," Sawan said. "Performance, discipline, and simplification will be our guiding principles as we allocate capital to enhance shareholder distributions, while enabling the energy transition.
"We need to continue to create profitable business models that can be scaled at pace to truly impact the decarbonisation of the global energy system. We will invest in the models that work – those with the highest returns that play to our strengths."
In 2021, Shell made a pledged to cut carbon emissions to net zero by 2050 and reduce its scope 1 and scope 2 emissions by 50 per cent by 2030. Nonetheless, the pledge was not considered "ambitious enough" by a Dutch court, which instructed the oil giant to cut all of its emissions by 45 per cent by 2030. Shell has appealed against the ruling.
During the update, the company also stressed it was still committed to meet its net zero target, and highlighted its plans to grow its gas business and invest about 20 per cent of its group spending in other clean energy technologies such as hydrogen, biofuels and vehicle charging.
The changes in Shell's plans have not been well received by environmental activists, which have criticised the company's lack of climate action for years.
Charlie Kronick, Senior Climate Advisor at Greenpeace UK, said: "Shell's production cut was always a joke, allowing oil production to fall more slowly than natural decline while boosting gas production at the same time - now they're showing their true colours. From wildfires in Canada to drought and flooding in East Africa, the effects of climate change are already devastating lives and livelihoods around the world. Yet Shell and their competitors remain determined to squeeze every last drop of profit from their dirty oil and gas operations.
"The writing is on the wall for oil and gas but Wael Sawan is refusing to read it. Fossil fuel greed is putting all of us at risk. We urgently need concerted global action to force the industry to stop drilling, and start paying for the damage they cause to our planet and the people who live on it."
The news has come only months after Shell revealed it had achieved a nearly $1.7bn (£1.4bn) profit increase in 2022, compared to expert's predictions, due to rising energy prices. Other companies in the sector also obtained record-breaking profits in 2023, with BP making around £500m more than originally predicted.
The enourmous profits made by fossil fuel companies has been criticised by activists. Last month, Just Stop Oil protesters clashed with drivers as they staged marches in central London bridges to demand further climate action from oil giants.
