In February 2021, Shell announced Powering Progress, its strategy to become a net-zero emissions energy company. Powering Progress details how the business will transition from an oil and gas producer to a generator of environmentally sustainable energy, necessitating some major business model changes. CIO for Global Functions and Group CISO Allan Cockriel spoke to diginomica in The Hague, Netherlands, about the central role technology has, and will continue to play, in the Powering Progress strategy.
The strategy will result in Shell completely refactoring its technology operating model and technology infrastructure to meet the needs of a completely new business model. Cockriel says:
The transformation of the energy ecosystem is going to be very difficult. For the last 120/130 years, the energy ecosystem has been built on molecules, and we need to transition to electrons. Changing an energy system, you won't do that with pencil and paper.
Shell says this has to be done with an eye on three key issues, energy reliability, affordability, and sustainability, often called the energy trilemma. Cockriel adds:
To become a net-zero emissions producer, while keeping people safe and delivering our shareholders value, is a balance we need to manage as a company. Technology plays an important part in that.
Cockriel's role indicates the depth of structural and, therefore, technology change Shell is undergoing. As CIO for Global Functions, Cockriel is responsible for technology in the horizontal lines of the business, including human resources (HR), finance, legal, internal and external relationships. He says of these:
They are the key enabling functions that support Shell to produce upstream assets, trade our downstream services and operate our renewable energy businesses. There are digital transformation strategies for each of these functions. My role is to be a unifying technologist and to refine each of these strategies with the function senior leaders to ensure we use the right technology and work at the right speed and scale.
Cockriel adds that this is leading to a globally consistent delivery and usage of technology.
From vertical to volatile
One of the concerns and challenges of transitioning from carbon-based fossil fuels to environmentally sustainable energy is a return to power production volatility. Debates about clean energy regularly feature fears about the impact of low winds or cloudy days. For energy companies, this has to be factored into how they develop their sustainable energy services, how they manage the distribution of energy and the relationship with the customer. In a sustainable ecosystem, the energy firm and the customer will have to become closer together, a significant cultural and operating change, but also for society as well.
At Shell, and at their peers, this means moving from being a vertically integrated manufacturer and seller of products and services to a business that is more akin to a utility firm. However, as Cockriel points out, Shell's vertically integrated heritage can be beneficial:
We are extending a key capability of the company. For the last 100 years, we have been great at vertically integrating around a molecule in terms of finding it, producing, transporting and trading it. That organizational strength is being applied to the electron. How do you get the electron from a turning turbine or photovoltaic cell, through an ecosystem at the right price point for our customers? That is leveraging that experience of vertical integration.
Getting that right, Cockriel says, is vital to ensuring energy companies and society deal with the energy trilemma. He adds that warning signs have already been seen, and the shortage of specialist heavy goods vehicle (HGV) drivers in the UK following Brexit led to one of the trilemma issues becoming very evident - energy reliability. Cockriel says of this incident:
A year and a half ago, the spectre of a fuel shortage led to abnormal behaviour, and you saw people hoarding and panic buying as they perceived that energy is not secure.
Shell has been active in changing what Cockriel describes as its energy footprint. There have been a number of renewable energy acquisitions, investments in energy parks (sites created for a mix of clean energy) and the construction of a hydrogen electrolyser in Rotterdam, just down the canal from where Cockriel and I meet. Shell also continues to invest in petroleum products.
This mix of new energy sources has led to digital twin technology being adopted to measure and experiment with managing changes in energy demands and production methods. Cockriel says:
Our virtual power plant is a derivative of the digital twin and is the way we think about distributed renewable energy and local power generation. It also allows us to identify the opportunity to harvest energy and how and when we feed into the grid.
Will this change the relationship with the customer, particularly on the forecourt? Cockriel says it will but says this is a change that is already taking place:
We have customers from a broad ecosystem, and that is everyone from an EV driver to industrial road transport, shipping or aviation. We sit with each one of those customers and work back through their challenges, including decarbonization.
We will always have products and services, and in the case of the forecourt, the Shell customers expect a clean, well-lit service with a choice of energy options and with an app that knows who the customer is and offers a customized promotion. That is the merging of the forecourt with the technology to incentivize the customer, so there will always be a link.
All of this will lead to an enhanced role for technology at Shell, particularly the changing relationship with the customer in a new energy landscape. Returning to the virtual power plant, Cockriel says:
That capability is incredibly important to the demand management, so that we can incentivize customers to change behaviour and charge their EV at the right point of the day.
Unsurprisingly the new technologies are being embraced by Shell as part of this transformation. Cockriel says Shell is analyzing how EV charging algorithms, combined with artificial intelligence (AI) will help the firm generate energy to meet peaks in demand, and data is becoming increasingly important; he says:
You need to harvest data, and you need to leverage AI and machine learning as well as computer vision. We are using AI to optimize the existing supply chains and reduce waste in our lubricants business.
Blockchain is being used in a number of pilot projects to demonstrate proof of origin for products in South East Asia and as part of Shell's involvement in a consortium developing sustainable aviation fuel.
Global tech foundations
Shell has major business hubs in Bangalore, Poland, Houston, London and the Netherlands. The hub in Poland heads up business partnering, while Bangalore is the technology centre of the Shell global business. Cockriel is among a growing number of CIOs deploying business partnering teams to increase the pace and success of digitization. He says:
The business interface roles work in partnership with the teams to define strategy and work with our partners, and that relationship is the secret sauce of a successful organization.
Demand for digital methods is placing pressure on the CIO and all of the key operating centres, he says:
We have the same talent challenges that a lot of big companies have. This means it's important to have an attractive employee value proposition to get great talent to join the company and want to stick around. So we create a sense of community in the hubs and capitalize on the talent pools that are out there.
Cockriel says the Global Function role benefits him as a CIO and the organization in being able to tackle these common CIO challenges but also connect these challenges to the needs of the business functions he works with. He says:
As a technologist and as CISO I have the ability to be in front of any leader in the company, boards of directors and teams in regions and to have a dialogue about how we run a company of our size and scale. We can discuss that in terms of operating securely and at pace as the Functions digitally transform.
Turning an oil tanker around is a common refrain in the CIO community when it comes to digital transformation. In the case of Cockriel's role, that is literally the case. Businesses are more focused on the climate emergency than at any other time I can recall. As Cockriel reveals, becoming a sustainable business impacts every aspect of the organization.
Transforming the legal and internal relationship functions of a business may not immediately spring to mind in the quest to be environmentally sustainable, but an organization is a sum of its parts. All functions have to be part of the change, and technology is key to sustainability.