Taking stock of our capital projects

“The Global PMO’s opportunity statement for 2022 is to drive better outcomes by improving capital planning. This report is one of the key steps we are introducing to support Shell RE teams to deliver.”

Nadia de Klerk, Central PMO Lead, London

Our global team of experts has analysed detailed construction cost and sentiment data and mapped it to the funnel of Shell RE projects coming through the past years Operating Plan and recent Offline LE. This provides a concise view of the costs and challenges that we are seeing relevant to the investments that Shell RE is making.

Emerging from the pandemic

Now as the post-pandemic recovery gets underway, world leaders are calling for the coming years to be more than just a period of growth – but of renewal and positive change too.

G7 leaders meeting in the UK in June 2021 launched ‘Build Back Better World’, a global partnership to improve infrastructure in low- and middle-income countries.

Meanwhile, governments around the globe have called on the construction sector to step up and serve as an engine of wider economic growth. The timeline to a full global economic recovery remains uncertain, as new COVID-19 variants result in major outbreaks and cause cases once again to surge.

Advanced economies (green) with high healthcare and welfare provision, robust inoculation programmes and strong fiscal and monetary stimulus — therefore keeping employment stable and business’ afloat — are finding ways to accelerate forward amid the uncertainty.

In stark contrast, many emerging economies (orange) are struggling to keep up with COVID-19’s immense medical and fiscal burden, having fewer safety nets for the unemployed and have suﬀered severely due to a loss of tourism business.

Figure 1: Timeframes of recovery, in quarters, by sustained increase in real GDP per capita above 2019 Q4 levels – G20 countries relevant to Shell

Strong pipeline of investments for Shell RE

The recently published 2021 quarter four results for Shell Group have been very encouraging. The strong commitment to transforming the business into a provider of net-zero emissions energy products and services is clear. Real Estate’s contribution as a key global function is a key enabler for success in this journey.

These are exciting times and indications of these are beginning to come through in the planning of project and programmes. We have organised these in the key locations and markets in the next section.

Figure 2: Key cities and markets heat-map

“This report will enable teams to kick off their projects in the right way and report more accurate forecasts from the outset.”

Priya Patel, Central PMO Assurance and Reporting Lead, London

Roads bumps still ahead

The impact of the COVID-19 pandemic on construction has been widespread and significant. Lockdown measures have closed construction sites, caused severe disruptions to global supply chains, and triggered project delays. Loss of labour resources have occurred due to redundancies and border closures, and capital expenditure into new projects has reduced.

Despite this, as economies emerge from the COVID-19 pandemic and the roll-out of the vaccine continues, capital expenditure and construction activity are increasing in most markets. With private sector confidence still bruised from the pandemic, many governments have responded with bold monetary and fiscal policy, which for many markets is the fundamental driver of their recovery.

Looking forward, the landscape may have changed permanently. Unlimited international travel could take years to recover. Privacy may suﬀer as travellers will be more closely monitored for vaccine compliance. Globalisation and international trade could slow down in favour of more domestic, and sustainable, production.

With working from home arguably an irreversible trend, regional centres, small towns and villages should benefit from more local spending and localisation agendas. By contrast, central business districts (CBDs) in many cities may struggle. Internet shopping, data centres, infotainment and communications should continue to thrive.

Corporate and socio-cultural change have been accelerated significantly due to COVID-19. The result is a reinvention of the global economy, a revaluation at scale of the way business is done, and why it is done, which should ultimately have a positive impact on future generations.

Fundamentally, there remains a lot of uncertainty as to when some regions will fully emerge from the crisis. For those markets that are more advanced in their recovery, a clearer picture is starting to emerge of what kind of upturn is possible for construction markets and the key factors driving this.