Euro Majors Diverge on Transition Plans

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Europe’s top majors have all declared "net-zero" decarbonization goals by midcentury, but they have very different plans on how to achieve this. Some still argue there will be a place for advantaged oil and gas, and even see themselves producing more hydrocarbons in a decade’s time, while BP plans to reduce its oil and gas production by approximately 40% between now and 2030 (PIW Oct.2'20). Meanwhile, their low-carbon strategies differ as well. BP intends to reduce its oil and gas production by 1 million barrels per day by 2030. Although Total’s recent strategy presentation showed it is tweaking its plans a little in the upstream so that oil makes up only 30% of energy sales by 2030, compared to the 45% it had previously envisaged, its overall oil and gas production is set to increase by 350,000 additional barrels of oil equivalent compared to 2019 levels. Meanwhile, Royal Dutch Shell has yet to deliver details on its strategy and it has not stated whether it intends to reduce its hydrocarbons production or continue to increase it. Like Total, Shell is very much invested in a future that relies heavily on LNG. When it comes to integrated gas strategies, Total looks to be further along in its thinking than Shell even though the Anglo-Dutch supermajor has the bigger LNG portfolio. BP, too, may not have an LNG portfolio to compete with either of its European peers but at least it has provided details of a plan that allows it to work around this lack of scale. Thanks to a queue of LNG projects it has lined up over the next few years, Total plans to boost its gas production by 800,000 barrels of oil equivalent per day by 2030. It reckons it can profitably get to LNG production of 70 million tons per year by the next decade. Meanwhile, BP also sees a bright future for LNG and it plans to double the LNG it makes to 30 million tons/yr by 2030, although it has an asset-light strategy to achieve this that relies on a mix of offtake agreements and equity capacity (PIW Aug.21'20). But other than a commitment to grow its integrated gas business “as the market grows,” Shell has not yet filled in the details about what its LNG and integrated gas-to-power plans will be. In renewables, BP and Total have now clear targets for growth. Shell, although a significant investor itself in low-carbon energies in recent times and keen to emphasize the role of gas in the energy transition, is more vague about its renewables goals. Before this year, Shell had been allocating a significant chunk of its annual capital spending budget, some $2 billion, to green energy investments, while BP had committed just $500 million annually to low-carbon investments. Now, BP has a definite target of 50 gigawatts of renewable generation capacity set for 2030. Meanwhile, Total has increased its power generation goal to 35 GW by 2025 from 25 GW previously. This target includes renewable power generating capacity, as well as a gas-to-power component, that will see the French company build upon and expand its multibillion-dollar investments in solar and offshore wind. By contrast, Shell gas not yet laid out its own gigawatt capacity targets, although CEO Ben van Beurden has acknowledged that it will accelerate its investment in low-carbon energy technologies. The one area where Shell does seem to have a clear plan developing is in its downstream. And while BP has sold off its petrochemicals business, Shell is keen to grow its petchem activities. Shell plans to reduce its refining footprint to fewer than 10 essential refineries, from 55 some just 15 years ago, with these refineries integrated with trading and chemicals operations that it intends to grow (PIW Aug.7'20). BP agreed in June to sell off the major part of its remaining petchems business to Ineos. Given that it plans to run down its oil and gas production significantly, it seems unlikely that the UK major will look for growth in this area.

Offshore Oil and Gas, Carbon Capture (CCS), Renewable Electricity , Refining
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