Euro Majors Steadily Advance Low-Carbon Plans

Bumper second-quarter profits are turning 2021 into a good year for Europe's oil majors. While much of the cash generated from higher oil and gas prices is going to reduce debt, dividend payments and share buybacks, capital expenditure has largely been left unchanged from previous guidance. The direction of travel in the energy transition remains unchanged and while there is progress on the low-carbon front, it is a steady advancement rather than aggressive acceleration. Here is a snapshot of what the majors are concentrating on in the green space this year. BP BP has spent the second quarter building up its renewable pipeline to 21 gigawatts and expanding its electric vehicle charging network to roughly 11,000 points. First forays have been seen in green and blue hydrogen, with the UK a particular focus for blue hydrogen use in industrial clusters. BP expects competition in this space, especially in Europe, to increase but be manageable. Besides expanding its solar photovoltaic (PV) pipeline with BP Lightsource, offshore wind has been a priority with a bid for a major development area in Scottish waters (NE Jun.17'21). Scotland could become its “center of excellence” for a broader push into offshore wind globally. Again, competition for premium projects is heating up but BP says this is also manageable. Eni Eni outlined plans in April to assess the possibility of selling a minority stake or conduct an initial public offering of its amalgamated retail and renewables business unit, sometime in 2022 (NE May6'21). It expects to make an announcement “in the coming months.” Eni says the new unit has a “robust” cash-flow outlook and offers a “natural hedge between generation and retail sales. It will be financially independent with its own investment-grade rating, drawing full benefits from lower interest rates and higher leverage flexibility.” Eni has increased its short-term renewable target, hoping to add another 1 GW over the period 2023-25 to reach 5 GW operational capacity by 2025 and “have an equity stake target of more than 15 GW in 2030. Equinor Equinor has reaffirmed its stance on renewables, with CFO Ulrica Fearn stating during second-quarter results that Equinor is focused on "high-value growth, not volume targets," despite a “rapid buildup” of renewable projects this year (NE May13'21). Fearn says Equinor is “quite ambitious” in this space as demonstrated by its push into new offshore wind markets including the US, the UK, Norway and Poland. Fearn said it was too early to comprehensively evaluate the renewables business unit but noted that “as we mature multiple projects, we clearly expect value recognition to increase.” Repsol Repsol has set higher targets for renewable capacity and hydrogen production. Buoyed by “greater visibility” on pipeline projects, especially in the US but also in Spain and Chile, a target for renewable capacity has been increased from 5.2 GW in 2025 to 6 GW (NE Aug.5'21). Including gas-fired and co-generation units, this number increases to 8.3 GW. A bigger green hydrogen target of 550 megawatts by 2025 and 1.9 GW by 2030 has been set, with Repsol targeting market leader status in Spain. Royal Dutch Shell Shell says expansion in the renewable sector will be “disciplined,” and "measured." CEO Ben van Beurden said, too, that even though Shell was contesting a Dutch court decision to increase greenhouse gas reduction efforts near term, it is a “challenge we will step up to" (NE Jun.3'21). As with BP, Van Beurden said Shell would not outrun society in the energy transition. He said Scope 1 and 2 emission cuts would be achieved through a “combination of some closures, disposals of refineries, right-sizing, efficiency improvement, carbon capture and storage and electrification,” but this is a small portion of overall emissions, which are mainly Scope 3. Van Beurden said that to meaningfully reduce Scope 3 emissions you need to dispose of oil and gas assets and customers. “Obviously, that is not a meaningful strategy,” he said, adding that Shell will over time change its product portfolio and therefore its business model. TotalEnergies TotalEnergies’ CEO Patrick Pouyanne said the company was “progressing well” with its energy transition plans in the second quarter with sizable forays into offshore wind in Taiwan, a huge solar PV portfolio gained in India and a raft of corporate power purchase agreements inked with some of the biggest companies in the world. After adding 500 MW of renewable capacity during the quarter, CFO Jean-Pierre Sbraire said “we have more than 8 GW of gross installed power generation already on line and more than 40 GW in the portfolio. So, we're on track to achieve our objective of 35 GW on line by 2025” (NE Jan.21'21). Jay Eden, London