Shell plc (SHEL): 5 FORCES Analysis [Nov-2025 Updated]

You're looking to size up Shell plc's moat right now, heading into late 2025, and honestly, the picture is more complex than just oil prices. As someone who's mapped these dynamics for years, I see a firm navigating a massive pivot: the threat of substitutes, like EVs, is accelerating, pushing their renewable sales to over 12.6% in 2024, yet their core integrated gas leadership and massive capital needs-planning $20-22 billion in CAPEX annually-keep new entrants firmly locked out of the Upstream game. The rivalry among supermajors is still fierce, but the real story is how Shell balances defending its legacy business against the inevitable transition. Below, we break down exactly where the power lies across all five of Porter's forces so you can see the near-term risks and opportunities clearly.

Shell plc (SHEL) - Porter's Five Forces: Bargaining power of suppliers

When you look at Shell plc's supply side, the power dynamic is definitely not uniform. For the bulk of commodity inputs, the power is moderate. But for anything specialized, especially in the deep-water arena, the suppliers hold a much stronger hand.

The global oilfield service market, which supplies Shell with the critical equipment, expertise, and personnel for exploration and production, is concentrated. This concentration means fewer players can dictate terms, especially for complex jobs. The market size itself is substantial, projected to be valued at approximately \$204.53 billion in 2025, growing from \$191.86 billion in 2024.

The giants in this space are few. Major companies operating here include Schlumberger Limited, Baker Hughes GE, and Halliburton Company. This oligopolistic structure naturally tips the scales toward the supplier when specialized services are needed. For instance, Shell recently tapped SLB (Schlumberger) for a 'major' multi-region deepwater drilling contract spanning a three-year period.

Here's a look at the key market structure and Shell's recent capital deployment:

Switching suppliers for highly technical, long-term contracts in deep-water projects is incredibly difficult. You're not just swapping out a vendor; you're replacing integrated systems, proprietary data interfaces, and teams with years of specific project knowledge. The complexity of the technology, like the AI-enabled digital drilling tools mentioned in recent contracts, locks Shell in for the duration of the agreement.

To counter this, Shell actively engages in strategic partnerships. While the specific figure of \$3.4 billion for joint technology development deals wasn't confirmed in the latest reports, we do see Shell committing significant capital to technological leadership. For example, Shell has committed to investing up to \$1 billion annually in hydrogen and Carbon Capture and Storage (CCS) projects, and between 2023 and 2025, they are spending \$10-15 billion on low-carbon solutions. Furthermore, Shell boasts 45+ years of proprietary gas-to-liquids (GTL) technology, which gives them some leverage when co-developing next-generation solutions with partners.

Another critical factor is the control over the resource base itself. National Oil Companies (NOCs) control over 90% of proven oil and gas reserves. This concentration of resource ownership means that even the largest International Oil Companies like Shell must negotiate access and terms with these state-controlled entities, adding a layer of geopolitical and monopolistic power to the supplier/partner dynamic in many operating regions.

The supplier power profile for Shell looks like this:

• High Power: Specialized deep-water drilling and subsea services.
• Moderate Power: General services and commodity equipment supply.
• Mitigation Tactic: Strategic joint technology investment, such as the \$10-15 billion low-carbon spend through 2025.
• Contract Example: A \$70 million drilling contract with Noble for 180 days shows specific, project-based negotiations.

If onboarding a new deep-water service provider takes longer than expected, the risk to Shell's project timelines definitely rises.

Shell plc (SHEL) - Porter's Five Forces: Bargaining power of customers

You're analyzing the customer side of Shell plc's competitive landscape as of late 2025. The power customers wield over Shell varies significantly depending on whether you are looking at the massive B2B energy contracts or the fragmented retail fuel market. Honestly, it's a tale of two customer bases.

For large industrial and commercial customers, the bargaining power is definitely high. These entities-think major airlines, large utility companies, or global shipping lines-require massive, consistent volumes of commodity energy products like LNG or marine fuels. Their contracts are substantial, and their ability to switch suppliers, even with some integration costs, is a significant lever against Shell's pricing and terms.

The concentration of volume among these key accounts underscores their leverage. While I don't have the precise 2025 figure for the top ten, we know from 2024 data that Shell served around 1 million business customers across more than 70 countries. Given Shell's strategic focus on growing its Integrated Gas and LNG business, where large-volume contracts dominate, the power of the top few buyers in that segment remains a critical factor in contract negotiations.

The retail segment, however, presents a different dynamic. Here, the power of the individual consumer is low, primarily because switching costs for commodity fuels are negligible-you can pull into the next station down the road. Shell's Mobility division, which is one of the world's largest mobility retailers, connects with these consumers daily, but the sheer volume of transactions dilutes individual power.

We can see the scale of this retail base from 2024 figures, which show around 33 million customers visiting Shell-branded retail sites every day. To counter the low switching cost, Shell leans heavily on its brand and integrated offering. The Shell Go+ Rewards loyalty program, for instance, boasts 2.5 million users, which helps lock in repeat business. Furthermore, Shell is upgrading its network, operating over 44,000 Shell-branded mobility sites globally at the end of 2024, enhancing convenience.

The consumer segment is showing increasing price sensitivity, which translates to higher customer power when prices spike. While the exact 2024 price elasticity figure you mentioned isn't in the latest filings, the market reaction to price changes is always immediate for commodity fuels. Shell's Q1 2025 results, showing an Adjusted Earnings decline partly due to lower margins, reflects the constant pressure to balance input costs with what the market will bear at the pump.

Here's a snapshot of the customer base scale:

The overall power dynamic can be summarized by looking at the two ends of the spectrum:

• Large B2B buyers command high power due to volume.
• Retail customers have low individual power due to low switching costs.
• Shell's Mobility strategy uses brand and convenience to slightly reduce retail power.
• Price sensitivity in the consumer segment remains a constant check on margins.
• The focus on high-return Mobility and Lubricants businesses shows Shell is actively managing this retail power dynamic.

Finance: draft 13-week cash view by Friday.

Shell plc (SHEL) - Porter's Five Forces: Competitive rivalry

Rivalry is intense among supermajors like ExxonMobil, BP, Chevron, and TotalEnergies. The top 5 integrated oil and gas companies control approximately 45% of global oil production. The five supermajors-ExxonMobil Corp., Chevron Corp., Shell Plc, BP Plc, and TotalEnergies SE-are projected to expand output by 3.9% in 2025 and 4.7% in 2026, according to compiled analyst estimates.

Shell's Q1 2025 Adjusted Earnings of $5.577 billion show it outperforming key European rivals like BP, which reported a Q1 2025 profit of $1.38 billion. The five supermajors are estimated to generate combined profits of $21.76 billion for the third quarter, representing a 7% quarterly increase despite challenging market conditions.

Competition is escalating as rivals invest heavily in renewables. For instance, BP has a stated goal to reach a total renewable energy capacity of 50 GW by 2030, with an interim target of 20 GW by 2025. Shell's Q1 2025 outlook for Adjusted Earnings in Renewables and Energy Solutions ranged between -$0.3 billion and $0.3 billion.

Slow industry growth in mature markets forces competition to focus on market share. Shell's Q1 2025 Upstream production outlook was 1,790-1,890 kboe/d, compared to 1,859 kboe/d in Q4 2024. This focus on production volume is evident across the sector:

The rivalry is also playing out in capital allocation and shareholder returns:

• Shell commenced another $3.5 billion share buyback for the next 3 months in Q1 2025.
• This marked the 14th consecutive quarter of at least $3 billion in buybacks for Shell.
• Total shareholder distributions paid by Shell over the last 4 quarters were 45% of Cash Flow From Operations (CFFO).
• BP reduced its share buyback programme to $750 million in Q1 2025.

Shell plc (SHEL) - Porter's Five Forces: Threat of substitutes

You're looking at the competitive landscape for Shell plc right now, and the threat of substitutes is definitely high and accelerating. This isn't a slow creep; it's a structural shift driven by the global energy transition, which directly challenges the core business model of selling refined fuels and gas.

Electric vehicles (EVs) and heat pumps are the most visible substitutes chipping away at Shell's demand for gasoline, diesel, and natural gas for heating. The pace of electrification is significant. For instance, in the US, EV sales made up one-fifth of total car sales in 2024, continuing a decade-long rise in electrification technologies. Heat pumps are even further ahead in their segment, accounting for 57% of new space heating installations in the US in 2024. Globally, EV sales climbed 25% in 2024, with more than 16 million vehicles sold.

Here's a quick look at the scale of this substitution in the US market, based on Q3 2025 tracking data:

To be fair, Shell plc is investing in this space, but the scale remains relatively small compared to its legacy business. Shell's renewable energy portfolio represented 12.6% of total energy sales in 2024. This investment focus is clear, with Shell confirming it would invest $10-15 billion in low-carbon energy solutions between 2023 and the end of 2025. Still, in Q2 2024, earnings from Shell's renewable energy business were reported as -$0.4 billion.

The viability of renewable electricity as a substitute is cemented by rapid cost declines. New solar and wind farms are now undercutting new coal and gas plants on production cost in almost every market globally. The economics are compelling, so you have to watch these trends closely. For example, the global benchmark cost for a typical fixed-axis solar farm fell by 21% globally last year. Battery storage, crucial for grid stability against intermittent renewables, saw its global benchmark cost fall by one-third in 2024, reaching $104 per megawatt-hour (MWh). Batteries are expected to cross the $100/MWh watershed in 2025.

Here's how those cost projections look:

Biofuels and low-carbon hydrogen are also part of the substitution story, though their current impact varies. Biofuels are still only about 4% of the energy system, as you noted, though global use is projected to grow by 0.9% annually over the next decade [19, cite: 10].

• Biofuels avoided 4% of global road transport oil use on an energy basis in 2022.
• Sustainable Aviation Fuel (SAF) production tripled between 2023 and 2024, but still only accounted for 0.53% of global aviation fuel demand in 2024.
• Green hydrogen projects are facing significant headwinds, with many European projects cancelled or postponed due to persistent cost gaps with grey hydrogen.

Shell plc (SHEL) - Porter's Five Forces: Threat of new entrants

The threat of new entrants for Shell plc remains relatively low, particularly within its core Upstream and Integrated Gas segments. This is largely due to the sheer scale and capital requirements necessary to compete effectively in these areas. For a new player to even consider entering, they must be prepared for an investment scale that dwarfs most other industries.

Capital expenditure is a massive barrier, with Shell plc planning for a sustained annual cash CAPEX in the range of $20 billion to $22 billion for the period spanning 2025 through 2028. This level of committed investment acts as a significant deterrent. To put this into perspective regarding segment focus, Shell plc expects to allocate approximately $12 billion to $14 billion annually to its Integrated Gas and Upstream businesses, which are the most capital-intensive parts of the operation. You simply cannot start an exploration or major LNG project on a shoestring budget.

New entrants face extreme regulatory hurdles and the need for government concessions. Host governments in resource-rich areas often structure agreements to maximize their benefit, which can include demanding technology transfer, local job creation, and complex fiscal regimes involving royalties and corporate income tax. The historical concession model, which granted exclusive rights, has evolved, but securing the necessary exploration and production rights remains a high-stakes, capital-intensive negotiation process dependent on market forces and political will. Furthermore, compliance with stringent environmental regulations often requires significant upfront capital, effectively pushing smaller, less-resourced entrants out of the running before they even drill a well. This regulatory complexity is a non-replicable moat for established players like Shell plc.

Shell plc's economies of scale across the entire value chain are nearly impossible to replicate. Consider the Integrated Gas segment: Shell plc delivered a record 1.1 million tons of marine liquefied natural gas to power vessels in 2024, reinforcing its position as the world's largest LNG player. Global LNG trade reached 404 million tonnes in 2023, illustrating the massive infrastructure and trading network required to operate at this level. Replicating this integrated capability-from E&P to liquefaction, shipping, and global trading-is a multi-decade, multi-billion-dollar undertaking.

The threat is higher, however, in the less capital-intensive Renewables & Energy Solutions space. This segment requires a different type of investment profile, which is more accessible to new competitors. Shell plc has signaled a more measured approach here, planning to spend around $8 billion a year in this segment, significantly less than the $12 billion to $14 billion earmarked for Upstream and Integrated Gas. This lower capital hurdle, combined with evolving technologies and policy support, allows for more agile, smaller-scale entrants to establish beachheads in areas like EV charging or specific renewable power generation projects.

The barriers to entry in the core energy businesses are reinforced by existing infrastructure and market access:

• Securing land and drilling rights requires navigating complex national and sub-national jurisdictions.
• Proprietary technology and deep-water expertise provide an immediate operating advantage.
• Shell plc serves around 33 million customers daily at its retail sites globally.
• The company's LNG sales volumes were 16.5 Mt in Q1 2025, demonstrating market dominance.
• Regulatory environments often shift based on commodity prices, favoring incumbents who can absorb sudden fiscal changes.

Finance: draft 13-week cash view by Friday.