The Big Shift to Renewables – How Quickly are Oil and Gas Companies Going Green?

With global demand for electricity continually growing, major oil and gas remain essential to fulfilling our power generation needs as renewable solutions scale up. However, since the adoption of renewables, particularly solar, is speeding up, this places a question mark over exactly how long hydrocarbons have left as a fuel source in the global energy mix. 

This is not a new reality, and it’s one that major oil and gas companies have been pondering for decades. Not only do they have to contend with the challenges of adapting to dramatically changing market conditions – spurred on by innovation breakthroughs and falling production prices for renewables – they are also feeling mounting pressure from governments, NGOs and ordinary citizens to create conditions for a more sustainable future for everyone. 

Together, these push-and-pull factors are prompting a more rapid transition towards sustainable operations from major oil and gas companies across the world. This is manifesting in three main ways: 

1: More ambitious ‘net zero carbon emissions’ targets emerging from O&G companies regarding their existing operations.  

2: Greater direct financing of wholly renewable energy projects, either within the O&G company itself or in partnership with a renewables company/solution provider. 

3: Replacement of board members with those more suited to combatting climate change and embracing renewables. 

BP’s US Solar Push: This month BP announced its $220 million deal with Texas-based solar energy firm 7X Energy to finance 12 separate projects across the US. Together, these will generate over 9 GW of clean energy, bringing BP’s global renewable portfolio up to 23GW.  This is a significant step forward in BP’s long-term plans to achieve net zero emissions by 2050.

Total rebrands as green energy major: 90% of Total’s board voted in favour of a wave of green energy moves planned by the company. These include investments in renewable projects of various scales, and a quicker move to reach carbon neutrality than originally planned – now the aim is to get there by 2050.

Schlumberger carbon-neutral goal: Similarly, this month Schlumberger announced its intention to achieve carbon neutrality by 2050. It plans to do this mainly through the extensive use of transition technologies – proprietary technologies that tackle emissions at source across their customers’ operations. Schlumberger will also be offsetting some of its emissions through carbon credits and the financing of renewables.

Exxon board shakeup: The last week of May saw dramatic votes, strategy changes and reshuffles of the boardrooms of several leading O&G companies. Exxon Mobil’s shareholders voted to replace board members with more sustainability-focused leaders. This is one development against a backdrop of mounting public and governmental pressure for oil and gas firms to act sustainably, notably the landmark legal verdict against Shell, made during the same week, that forces the company to reduce its emissions by 45% of 2019 levels before 2030.

Repsol green transition bonds: Spanish oil and gas firm Repsol is working on a financial framework that will enable it to issue sustainability-linked bonds, also known as ‘transition bonds’. This type of financing vehicle is gaining ground as a legitimate method to help O&G firms make a more rapid transition towards fully sustainable operations.

Eni sustainability investment plan: Eni recently released its ‘Strategic Plan for 2021-2024’, where it outlined its commitment of over $7 billion within the next three years in its efforts to achieve carbon neutrality by 2050.

Across the board, we are seeing a change in attitude and swifter commitments to action coming from international oil and gas companies. Perhaps one of the most telling signs that significant change is in the air is the heightened instance rate of board member changes within these companies. O&G firms know that such dramatic industry-wide pivoting towards sustainability will require decisive leadership, which is why we’re seeing more reshuffles at the top. 

Similarly, they know that while setting carbon-neutrality targets is a welcome development, it isn’t enough on its own to mollify climate activists and government regulators. This is why we’re seeing more concrete commitments to sustainability investments being announced. These are taking the form of direct financing of renewable projects, ‘transition bonds’ and transition technologies being deployed within existing O&G operations. It’s important to note that the industry isn’t abandoning its current hydrocarbon-based ops – that would be impossible and economically not viable – but is instead committing to cleaning them up alongside their investments in renewables. 

As 2021 rolls on, it’s hard not to get the feeling that momentum has swung decisively in the favour of embracing sustainability in the hearts and minds of O&G decisionmakers at the highest levels.

https://www.thomasnet.com/insights/bp-buys-220-million-in-u-s-solar-energy-projects/ 

https://www.bloomberg.com/news/audio/2021-06-21/bp-evp-strategy-and-sustainability-chierchia-on-net-zero-ambiti 

https://www.bbc.co.uk/news/business-57282008 

https://www.businesswire.com/news/home/20210622005610/en/Schlumberger-Announces-Commitment-to-Net-Zero-by-2050 

https://www.forbes.com/sites/jeroenkraaijenbrink/2021/05/28/sustainability-becomes-the-new-normal-with-week-21-of-21-as-tipping-point/?sh=6e83ea820cbc 

https://www.reuters.com/business/sustainable-business/repsol-present-new-green-transition-framework-investors-2021-06-14/ 

https://www.hellenicshippingnews.com/oil-majors-in-a-state-of-change/