A growing appetite for RES investments from oil and gas giants could be the signal to an energy transition with unexpected players
Hydrocarbon giants have recently been showing a growing appetite for RES, especially through investments in EVs and offshore wind. The oil and gas industry also appears to be healing financially and, while some announced a major refocusing of their businesses, others are aiming for a gradual increase in their “green investments”.
In October 2017, after divesting all of its oil and gas assets, DONG Energy (also known as Danish Oil and Natural Gas) changed its name to Ørsted. The name change is symbolic of the energy giant honouring the man who discovered electromagnetism, Hans Christian Ørsted, and is an illustration of the revolutionary transformations in the energy industry that is currently underway.
In late November 2017 during the inauguration of the €1,4 billion 402 MW Dudgeon offshore wind farm, off the coast of Norfolk, UK, another Nordic hydrocarbon giant, Statoil, announced a major refocusing of its business. The CEO of the Norwegian petroleum corporation, Eldar Sætre, stated that “as part of [its] strategy to develop from an oil and gas company to a broad energy major, Statoil will grow significantly in profitable renewable energy, with an ambition to invest around NOK 100 billion (€10 billion) towards 2030”.
Even more recently, oil giant Royal Dutch Shell restored its all-cash dividend and started a $25 billion (€21 billion) share buyback, hinting at the company’s enhanced financial strength after a few years of financial difficulties for the oil industry. Shell’s CEO, Ben van Beurden, announced that the Anglo-Dutch corporation would slightly reduce its investments in conventional oil and gas projects, while the budget earmarked for “new energy” and RES projects would be increased to up to $2 billion (€1,7 billion) per year by 2020.
Mr. van Beurden also announced new targets regarding reducing the company’s energy products’ net carbon footprint by 20% by 2035 and by 50% by 20501. The new targets and a decision to address climate change follow increased shareholder pressure to boost the company’s ambitions in green energy. The commitment fits in with a number of initiatives to which the oil giant subscribes, such as the ‘Joint Statement to further the deployment of offshore energy in Europe’ (see Hot Topic of 09 June 2017: ‘Northern European States reassert their offshore wind leadership, create new collaborations and a specialised offshore wind hub‘) and more importantly the international Paris Agreement on carbon emissions reduction.
In the same spirit, the Shell Group’s investment focus has been shifting towards natural gas projects, RES, and charging stations for EVs. Regarding EVs, Shell is collaborating with a number of automotive concerns like BMW, Daimler AG, Ford Motor Co. and Volkswagen to roll-out fast-charging EV infrastructure on the major European highways. Furthermore, in October 2017, Shell announced that its intention to acquire NewMotion, Europe’s biggest EV charging point operator with a network of more than 80.000 stations. According to Shell’s CFO, Jessica Uhl, the company’s New Energies division is expected to be one of its main growth engines post-2020, with estimated returns of 8-9% per year.
Although Shell’s ventures into green energy and EV infrastructure might seem counterintuitive, one should not lose track of the fact that oil and gas corporations have extensive know-how and experience with offshore platforms (for extracting hydrocarbons) and close ties to the automotive industry’s needs. Offshore wind projects and EV infrastructure thus appear to be natural playground where these companies can leverage their strengths and well-established networks.
The transformation of the energy sector is an opportunity for many stakeholders, yet it also represents a challenge for traditional energy companies, which must adapt their business model to keep up with changing market needs. Even though both aforementioned Norwegian and Anglo-Dutch oil corporations are increasing their investments in RES and alternative energy, one can still expect that the majority of their investments until 2030 will still be in oil and gas. Nevertheless, many of the oil majors are not only paying lip service to the RES industry, they are also considering more seriously major investments in the sector. It follows that, although Statoil and Shell’s approaches remain somewhat cautious, their respective strategy shows that at least some players in the oil industry are not only recovering from the drop in oil prices but are also swiftly adapting to the changing energy landscape.
 Measured in grams of carbon dioxide per megajoule consumed (g of CO2/MJ).