Shell has delayed work on a flagship biofuels plant in a move that may stoke concern that oil and gas majors are cooling on low carbon projects as they look to maximise profits.

The London-based firm said it had paused on-site construction work on a giant facility in the Netherlands where it plans to produce sustainable aviation fuel and renewable diesel made from waste.

Shell indicated the move would result in job cuts and had been made in response to challenging market conditions.

“Contractor numbers will reduce on site and activity will slow down, helping to control costs and optimise project sequencing,” it told investors.

The decision provides the latest sign that firms such as Shell may be having second thoughts about switching investment from oil and gas to lower carbon energy sources and products in support of the drive to net zero.

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Shell and BP have moved to increase production of oil and gas to capitalise on the strong prices the commodities have been commanding.

Demand for oil and gas is expected to remain strong for years.

Meanwhile the costs of developing renewable energy facilities such as windfarms have increased amid the surge in inflation in recent years.

BP chief executive Murray Auchincloss was last week reported to have put new offshore wind projects and related hiring on hold. Reuters said Mr Auchincloss was placing renewed emphasis on oil and gas activity in response to investor pressure, citing unnamed sources.

BP bid enthusiastically for acreage thought suitable for windfarm development off the UK under Mr Auchincloss’s predecessor Bernard Looney.

The change in industry sentiment could have worrying implications for Scotland.

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The Scottish Government has held out the prospect of a boom in investment in a new generation of floating windfarms off the country that could provide a multi-billion pound boost to the economy.

Shell bid for licences it reckoned would be suitable for floating windfarms in the ScotWind round in 2022.

However, Shell chief executive Wael Sawan last year said the company was not sure it could make the economics of floating wind projects work.

Shell and BP have significant North Sea oil and gas production operations.

Shell approved plans for the Rotterdam biofuels facility in 2021, when it said production was expected to start this year. Shell suggested the plant’s annual renewable diesel output could help to secure a reduction in emissions equivalent to taking more than a million European cars off the roads.

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In its latest announcement Shell said: “Temporarily pausing on-site construction now will allow us to assess the most commercial way forward for the project.”

Downstream, Renewables and Energy Solutions Director Huibert Vigeveno said Shell was committed to the target of achieving net-zero emissions by 2050, with low-carbon fuels as a key part of its strategy. He noted: “We will continue to use shareholder capital in a measured and disciplined way.”