Microsoft and Shell Launch Strategic Alliance to Share AI, Carbon Emissions Expertise
Microsoft Corp. has helped the Shell International Petroleum Co. Ltd. integrate the power of AI into a wide range of internal and consumer-facing applications and uses over the last three years, building on a three-decades-long business relationship. Now, the two companies are deepening that bond through the formation of a new strategic alliance which aims to reduce global carbon emissions to net-zero by 2050.
The stakes are high for both companies. Shell's ambition is to be a net-zero carbon emissions energy business by 2050, while Microsoft has publicly said it wants to be carbon negative by 2050. Under the alliance, Shell will supply renewable energy to Microsoft, while Microsoft will broaden its work with Shell in the field of AI and digital tools that will help Shell suppliers and customers reduce their carbon footprints as well. In addition, Microsoft’s Azure cloud will be engaged to help Shell improve operational safety for employees by improving risk analysis, prediction and prevention, the companies said.
"Microsoft and Shell both have rich histories of innovation and bold ambitions to decarbonize," Huibert Vigeveno, Shell’s downstream director, said in a statement. "We are proud of the work we have already done together. Our strategic alliance will enable us to push the boundaries of what can be achieved. We believe we can unlock tremendous progress for Shell, Microsoft, our customers and beyond."
The partners envision their strategic alliance as a model for how other companies can also work together to achieve their own net-zero ambitions.
Judson Althoff, the executive vice president of Microsoft's worldwide commercial business, said the deeper alliance between the companies will further accelerate innovation toward the goal of carbon emission reduction. "Cross-industry collaborations like this are fundamental to help society reach net-zero emissions by 2050, and digital transformation is key to tackling this important issue, within the energy sector and beyond," said Althoff.
Under the alliance, the renewable energy Microsoft receives from Shell will help Microsoft reach its commitment to having a 100% supply of renewable energy by 2025, the companies said. The companies will continue to work together on AI initiatives which are transforming Shell operations, including access to real-time data insights that are delivering bolstered worker and onsite safety and improved gas stations, as well as efficiencies that will help reduce Shell's carbon emissions.
Shell and Microsoft have worked together for the last three years on AI projects, including on 47 AI-powered proprietary applications deployed across Shell's businesses in 2020 alone. The AI technologies being used include Real-Time Production Optimization, which shows potential to reduce CO2 emissions in Shell's liquefied natural gas (LNG) operations. Another already-deployed AI tool is the Azure-powered Shell Autonomous Integrity Recognition (AIR) system, which uses image recognition algorithms to detect when equipment or parts of a Shell gas station or other facility are susceptible to corrosion.
Microsoft is On A Partnership Tear in 2020
The Shell-Microsoft alliance is not the only one involving Microsoft lately.
In July, Microsoft also entered a strategic partnership with energy industry powerhouse Halliburton and professional services vendor, Accenture. That five-year deal aims to advance Halliburton’s digital capabilities using Microsoft Azure, with Halliburton completing its move to cloud-based digital platforms that will help strengthen its customer offerings. Under the deal, all Halliburton physical data centers will be migrated to Azure using professional services from Accenture.
Earlier in September, Microsoft and BP announced a separate strategic partnership also aimed at carbon emissions reductions and other energy innovations for both companies. Under that deal, Microsoft is providing Azure cloud services to continue BP’s digital transformation, while BP is supplying Microsoft with renewable energy to help meet the company’s 2025 renewable energy goals.
Harshit Sharma, a digital transformation analyst at Lux Research, said both the Microsoft-Shell and Microsoft-BP renewable energy alliances will likely be replicated across the business world.
"Clients should view these partnerships as a sign of things to come from oil companies," said Sharma. "As the energy transition solidifies, more oil companies will transition to energy players, ramping up their low-carbon businesses.”
Earlier in 2020, Microsoft president Brad Smith wrote in a Microsoft blog that the company plans to be carbon negative by 2030, as the company dramatically reduce its carbon footprint.
"The world’s climate experts agree that the world must take urgent action to bring down emissions," wrote Smith. "Ultimately, we must reach 'net zero' emissions, meaning that humanity must remove as much carbon as it emits each year. This will take aggressive approaches, new technology that doesn’t exist today, and innovative public policy."
Reaching that goal will also mean that companies like Microsoft, "which can afford to move faster and go further, should do so," he wrote. "By 2030 Microsoft will be carbon negative, and by 2050 Microsoft will remove from the environment all the carbon the company has emitted either directly or by electrical consumption since it was founded in 1975.
AI is Influencing Such Partnerships, Say Analysts
Charles King, president and principal analyst of research firm, Pund-IT, told EnterpriseAI that the latest Microsoft-Shell announcement is an interesting example of how AI can impact the nature and results of strategic partnerships.
"Traditionally, those deals typically focused on organizations joining together to pursue commercial deals and markets," said King. "But in this case, Microsoft's AI expertise and investments and Shell's work in renewable energy promises to help both companies achieve carbon neutrality."
The efforts should also lead to new carbon neutral and sustainable energy tools, products and services that can be provided to the customers of both companies, said King. "If the deal achieves its desired results, it should be good for Microsoft, Shell and the planet."
James Kobielus, principal analyst at Franconia Research, called the Microsoft-Shell partnership a harbinger of the post-pandemic economy.
"If AI lets us do more work with only a fraction of the office space, meetings, and travel, the technology will be contributing mightily to the battle against global warming," said Kobielus. "Throughout the macroeconomy, many AI apps have the potential to generate downstream carbon offsets that counterbalance the emissions associated with electricity needed to train the underlying models."
The net carbon footprint of deployed AI apps "is far less than a lot of observers want us to believe," said Kobielus. "If an AI model delivers a steady stream of genuinely actionable inferences over an application’s life, it should generate beneficial, real-world outcomes. Many of these AI-driven benefits may be carbon-offsetting, such as reducing the need for people to get in their cars, take business trips, occupy expensive office space, and otherwise engage in activities that consume fossil fuels."
AI will be the fuel to make these transitions successful, he said. "As these trends converge during the next several years, we’re likely to see dramatic drops in the carbon footprint associated with AI. As that trend intensifies, AI pipelines will become the most environmentally sustainable platforms in the IT universe, helping to rollback global warming."