Despite being responsible for many of the greenhouse gases that have been emitted into the atmosphere over the last century, European oil companies appear to be repenting. New research from GlobalData suggests that the top six oil companies in Europe are helping lead the transition to renewable energy.
The top six European firms have over 28GW of renewables capacity in the pipeline, with BP, Total and Equinor making up over 70% of this. However, the scale of these companies’ developments still lags behind major power sector incumbents, says GlobalData.
Will Scargill, managing oil and gas analyst at GlobalData, commented, ‘‘IOCs’ current development portfolios are still significantly smaller in scale than those of incumbents in the power sector. However, long-term targets suggest an ambition to make up this ground – with BP’s 2030 target of 50GW significantly exceeding Orsted’s target of 30GW.
“The rapid build-out of European IOCs’ renewable portfolios is encouraging as they look to position themselves for the energy transition. However, lofty ambitions do come with significant risk – particularly as they will still look to their oil and gas businesses to be the major cash generators through the medium term. A weak oil and gas market could leave companies unable to fully fund their renewables growth plans, leaving them with a diminished position in the overall energy market.’’
Oil and gas companies looking to transition into the renewables are making significant moves in the mergers and acquisitions (M&A) space to support their growth ambitions. Recent months have seen Total announce a flurry of deals in the wind and solar sectors, while BP announced its entry into offshore wind with a $1.1bn deal to partner with Equinor in US developments.
Scargill concluded, ‘‘Solar PV and offshore wind developments account for most of IOCs’ renewables development pipelines. Solar has the benefit of low costs and a short investment cycle, supporting rapid capacity build-out, while offshore wind is expected to see the fastest growth within renewables over the next decade and has the benefit of exploiting oil companies’ experience in offshore development.’’
Electric vehicle market also big business
Oil companies aren’t just concentrating their investment on renewable energy, with the firms also uniquely positioned to take advantage of the transition to electric vehicles. BP, Shell and Total have been amongst the most bullish firms in the EV space, pressuring the UK Government to accelerate the ban on diesel and petrol vehicles to 2030, despite it impacting their networks of petrol stations.
The reason the companies are so bullish in the space is because they’ve all invested in creating their own EV charging networks. BP has Chargemaster, Shell has Recharge, and recently Total announced the acquisition of London’s largest EV charging network, Source London.
What’s clear from European oil giants is that they realise the writing is on the wall for their fossil fuel-fuelled business model. That’s why they’re diversifying their portfolio and cleaning up their image – quite literally.