BAKU, Azerbaijan, July 26
By Leman Zeynalova – Trend:
Capital spending on low-carbon projects by European majors is set to grow over the medium term, Trend reports with reference to Fitch Solutions research and consulting company.
“European majors are set to prioritize large-scale renewable developments in Europe and the US, while adding smaller-scale developments in other areas of the world that offer synergies with their upstream activities. Meanwhile, US majors will invest in smaller scale firms that focus on developing prototype technologies,” the company said in its latest report.
European majors continue to lead the energy transition effort among global (O&G) producers. A group of European majors including BP, Shell and TotalEnergies (formerly Total) as well as other large European IOCs including Eni, Repsol and Equinor - have all announced increasing measures to shift their long-term strategies, bringing energy transition to the fore. Starting with Repsol in 2019, a number of companies have set net-zero emission targets by 2050 or sooner, with other interim objectives that will allow them to mark milestones in the transition process.
O&G producers set objectives to lower various types of emissions spanning from direct emissions from operations (Scope 1 emissions according to Greenhouse Gas Protocol), to indirect emissions from electricity purchased by the organisation (Scope 2) to reducing so-called value chain emissions (Scope 3).
Although not all companies included renewable capacity targets, a number of key O&G majors based in Europe are pursuing investment in renewable capacity and electricity generation. Of those that are plotting a course to become integrated energy suppliers over O&G companies, this includes ventures into mobility, EV charging networks and wider consumer supply of energy. Efforts to address emissions across Scope 1 and 2 take the form of improved efficiency, power from shore, carbon offsets and investment in carbon capture and sequestration developments.
Addressing Scope 3 emissions will likely rely on the latter two efforts as the bulk of carbon emissions from oil and gas use come from combustion which will be harder to abate without the use of carbon capture. The shift toward lower-carbon investments of European O&G companies is supported by a variety of factors and has accelerated over the recent quarters. The favourable regulatory framework, investor pressure and relatively wide social acceptance of low carbon projects facilitates a more rapid transition of O&G majors in Western Europe.
Growing pressure from institutional investors is also fostering the transition to low-energy projects as a push to accelerate climate impact efforts begins to take hold. The climate pledges announced by a set of large investors, for example, Allianz Global Investors, Brookfield, Franklin Templeton, Lazard Asset Management, Schroders, Vanguard, BlackRock or Norges Bank Investment Management, which runs the assets of the Norwegian Government Pension Fund Global, put additional pressure on O&G producers to accelerate transition.
“We also recognise growing support for renewable projects and strengthening grassroots opposition for fossil-fuel production in a number of Western European societies. Lastly, the energy transition trend among European O&G companies is supported by their internal objectives which seek diversification of future cash flows in recognition of the slowing growth in oil demand. In light of the severe decline in fuel demand and weak oil prices over 2020, a number of companies have accelerated their transition, setting more ambitious goals than initially planned. Repsol now plans to cut its emissions by 12 percent by 2025 and 25 percent by 2030, as opposed to the initial target of 10 percent and 20 percent by those same years. Shell has also boosted its interim target from 20 percent to 30 percent cuts in emissions by 2030. In 2021, Shell was ordered by a Dutch court in to deepen its carbon cuts pledge to 45 percent by 2030 from 2019 levels in order to bring its efforts to curtail emissions in line with the Paris Agreement. BP is pursuing a transition to a so-called 'integrated energy company', targeting a 40 percent reduction of O&G production by 2030.”
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