The world's largest oil companies are under growing pressure from shareholders and society to reduce emissions and show efforts to fight the worst effects of climate change.
Everyone in the Big Oil club has announced various plans to cut emissions and invest in low-carbon energy over the past 18 months. Yet, there are stark differences in the ways the largest international oil companies are approaching the emissions problem.
Europe's top oil and gas firms have all committed to becoming net-zero energy businesses by 2050 or sooner. Most of them say their oil production has either peaked already or is about to peak by the middle of this decade. And all of them bet on investments in renewable electricity generation—along with hydrogen, carbon capture and storage, biofuels, and electric vehicle charging networks—to deserve being called 'energy companies' instead of oil companies.
Unlike their European peers, the two supermajors in the United States, ExxonMobil, and Chevron, are not touching solar and wind power. They are more focused on renewable fuels and carbon capture and storage (CCS), both to cut their own carbon footprint and to develop in partnership regional CCS hubs at heavily industrialized areas.
European Oil Majors Bet On Renewables
Together with the net-zero ambitions, all European oil and gas majors—BP, Shell, TotalEnergies, Equinor, Eni, and Repsol—vow increased investment in renewable power generation and low-carbon energy solutions such as hydrogen, CCS, and biofuels.
While hydrogen and CCS still need a lot of development, economies of scale, and major government support to become commercially viable solutions, investment in renewable electricity generation is immediately available for Big Oil.
If they want it, that is.
Europe's majors seem to want it, and almost weekly, they announce projects, investments, or joint ventures to bid in tenders.
Returns in renewables are not as high as in oil and gas, especially these days, with oil prices comfortably sitting at over $70 a barrel and gas prices surging to records for this time of the year.
However, European majors persevere and consider renewables as a key pillar of decarbonization of the global power sector and of reduction of their own emissions from operations.
For example, Equinor wants to be a big name in offshore wind, and Norway's major bid for offshore wind acreage in the major ScotWind leasing round earlier this year. So did BP and Shell.
BP's joint venture Lightsource bp, a solar power developer, announced just this week it would aim to develop 25 GW of solar power by 2025. Since its formation in 2010, Lightsource has developed 3.8 GW of solar projects globally.
"Lightsource bp has developed more than 30 projects, which today have consistently delivered 8 to 10% returns. So when people ask if we really have the capability to deliver the returns we talk about, the answer couldn't be clearer – yes, we can because we are," said Dev Sanyal, BP's executive vice president of gas and low carbon.
Exxon, Chevron Shun Solar And Wind
Across the Atlantic, U.S. supermajors Exxon and Chevron are betting on renewable fuels and CCS, but they are steering clear of investments in solar and wind power generation.
Chevron )NYSE:CVX) doesn't have any plans to reduce its oil and gas business to invest in solar or wind power, chief financial officer Pierre Breber said earlier this year.
Shareholder returns are more important for Chevron than investing in wind and solar energy, chief executive Mike Wirth told CNBC in an interview last week.
"These [wind and solar] are technologies that are relatively mature. There is plenty of capital that's available. The returns in wind and solar are actually being bid down, and we've concluded that management in our company can't create value for shareholders by going into wind and solar," Wirth told CNBC.
Chevron Triples Planned Low-Carbon Energy Investment
Days before the interview, Chevron said it would triple its planned capital investment in lower carbon businesses to $10 billion through 2028, including $2 billion to lower the carbon intensity of Chevron's operations.
Chevron's pillars of low carbon energy businesses are growing renewable natural gas production, raising renewable fuels production capacity, boosting hydrogen production, and increasing carbon capture and offsets to 25 million tons per year by developing regional hubs in partnership with others.
"With the anticipated strong cash generation of our base business, we expect to grow our dividend, buy back shares and invest in lower carbon businesses," CEO Wirth said.
ExxonMobil Low Carbon Solutions – Exxon's New Business
Exxon (NYSE:XOM), for its part, created earlier this year a new business, ExxonMobil Low Carbon Solutions, to commercialize its low-carbon technology portfolio, focusing first on CCS.
The new business is advancing plans for more than 20 new CCS opportunities globally to enable large-scale emission reductions. ExxonMobil plans to invest $3 billion on lower-emission energy solutions through 2025.
"We are focused on proprietary projects and commercial partnerships that will have a demonstrably positive impact on our own emissions as well as those from the industrial, power generation and commercial transportation sectors, which together account for 80 percent of global CO2 emissions," Exxon's CEO Darren Woods said in February this year.
Shareholder pressure on Exxon has increased tremendously since then, and so has on Chevron.
The U.S. supermajors have not pledged any net-zero emission targets, but they are likely to accelerate announcements about investments in lower-carbon energy, which, apparently, will not include solar or wind.
By Tsvetana Paraskova of Oilprice.com
