Analyses
13 avr 22

Can Big Oil go green by 2050? 

While oil prices soar, the cost of renewable energy continues to go down, thanks to technological progress and growing investment. This is drastically accelerating the move towards renewables – and affecting the core business of oil companies. Can Big Oil go green by 2050? 

According to a 2020 report by Irena, renewable energy capacity increased 3.7-fold over the preceding decade, to 2,799 GW. Meanwhile, Bloomberg predicts that if EV sales continue to rise at an average of 60% per year, oil demand will decrease by 2 million barrels per day as early as 2023. 

In other words: remaining ‘hooked’ on fossil fuels is not just counter to global climate goals, it’s also economically unfeasible. If you’re an oil company, that’s a major challenge. So, we’re seeing major oil companies adapting their future energy strategies – moving away from oil and turning towards low-emission and renewable energy sources. 

Shell: carbon-neutral by 2050

Shell has committed itself to help tackle the climate change problem and keep global temperature rises below the +2°C threshold. To do so, the company has outlined comprehensive net-zero emissions strategy, stretching to 2050: 
The company wants to reduce its CO2 emissions by up to 20% by 2030 compared to 2016 levels, by 45% by 2035 and by 100% by 2050. 

Shell is currently developing three carbon capture and storage (CCS) projects in Canada, Norway and the Netherlands, and wants to increase their capacity by 25 million tonnes a year by 2035. By 2030, Shell aims to: 

  • Provide enough renewable electricity for 50 million households.
  • Instal more than 2.5 million charging points for electric vehicles. 
  • Produce eight times more low-carbon fuels.
  • Increase the share of biofuels and hydrogen in transport fuels to 10%. 

Shell aims to become a net-zero emissions energy business by 2050, aligned with the goals of the UN’s Paris Agreement. In this regard, the strategy and expectations of Shell include: 

  • Gradually reducing oil production by 1-2% per year until 2030.
  • Investing around $1 billion per year in new energies, including electric vehicles, hydrogen, biofuels and renewable energies. 

In the coming years, Shell aims to focus on forming partnerships under the right commercial opportunities and boost investment in low-energy fuels to $2 billion per year in the coming years.

BP: big investment in renewable energy

In 2020, BP spent $220 million on buying several solar energy projects in the US to provide energy to 1.7 million homes and reach its 20GW green energy output goal by 2025. By 2030, BP plans to increase renewable energy output to 50GW. 

Lightsource BP, a joint venture formed in 2017, entered the Portuguese and Greek solar energy market in 2021, aiming to produce 1.35 GW in the coming five years in Portugal while signing a 640 MW co-development agreement in Greece.

In another significant step in its green strategy, BP and its German partner EnBW bought two offshore wind farm licenses in the Irish Sea at the beginning of 2021. With the addition of six new offshore wind farms in the coming ten years, BP is planning to produce energy to power 7 million homes. Last year, the company had also invested $1.1 billion in two projects that are being developed by Norwegian state oil company Equinor. 

BP wants to solidify its green transformation by grabbing a distinctive position in the hydrogen market by gaining a 10% share of hydrogen in core markets. According to BP Energy Outlook, hydrogen could account for around 16% of all the world’s energy needs. 

In the 2021 Sustainability report, low carbon investments increased from $750 million in 2020 to $2.2 billion in 2021. In the report, the company outlined five steps to achieve by 2050 or sooner:

  1. Becoming net zero across its entire operations on an absolute basis
  2. Becoming net-zero on a fundamental basis across the carbon in its upstream oil and gas production
  3. Reducing to net-zero the carbon intensity of the energy products it sells 
  4. Reducing to net-zero the carbon intensity of the energy products sold by 2050 or sooner.
  5. Increasing the proportion of investment into non-oil and gas businesses.

According to the report, BP’s net-zero operations increased to 35%, and net-zero production increased to 16% in 2021.

Total: going for renewable energy

Total quit the American Petroleum Institute, the main US oil and gas lobby, over disagreements on climate policies at the beginning of 2021. After this development, Total purchased 20% of the Indian renewable energy company AGEL and acquired 50% of the Indian company’s solar power assets. 

Solar investments continued in Spain and the UK, agreeing to produce 3.3 GW of power in Spain and a lease to start developing 1.5 GW of electricity off the East Anglian coast in the UK through a joint venture. 

In terms of wind power, Total acquired a 23% interest in Yunlin Holding of Taiwan in April for an offshore wind farm project to be completed in 2022. Energy output will be 640 MW, enough to power 605,000 households. 

Total wants to reach 35 GW green energy output by 2025 and 100 GW green energy capacity by 2030. By 2050, Total expects renewables and electricity to represent 40% of global sales. 

In its Sustainability & Climate – 2022 Progress Report, Total says its delivery of energy to customers with a more carbon-intense lifecycle has reduced by more than 10% compared to 2015, thanks to several developments achieved in 2021:

  • Investments in renewables and electricity accounted for 25% of total investments, exceeding the initial target of 20% planned in 2020.
  • Liquefied natural gas (LNG) sales increased by 10% and reached 42 million tons, 99% of which went to countries with a net-zero pledge.
  • The share of petroleum products in the sales mix reduced to 44% (from 65% in 2015),
  • Greenhouse gas (GHG) emissions related to petroleum products used by customers were reduced by 19%

In its latest annual report, Total provided a detailed roadmap towards the 2050 zero-emission goal: 

  • It will reduce emissions related to sales of petroleum products by more than 30% from the 2015 level by 2030. 
  • Total will also reduce methane emissions by 50% from 2020 levels by 2025 and 80% from 2020 levels by 2030.
  • Between 2022-and 2025, 50% of Total’s investments will be allocated to new energy supplies; decarbonised energies (30%), renewables and electricity (25%) and decarbonised molecules (5%).  

The vision of a net-zero TotalEnergies is described in the report as a company that produces 50% of renewable electricity, 25% of new decarbonised molecules from biomass (biofuels, biogas) or renewable electricity (hydrogen, e-fuels) and 25% of hydrocarbons (oil and gas). 

ExxonMobil: reacting to heavy pressure

After coming under fire for lagging behind its European rivals in green strategy in recent years, ExxonMobil announced in mid-2021 that it would spend $3 billion over the next five years to form a new low-carbon business unit. The oil giant aims to fulfil the International Energy Agency’s (IEA) zero-emission goal of 2050. 

In its 2021 report, ExxonMobil focused on cutting CO2 emissions in commercial transportation, power generation and industrial processes. The company’s Advancing Climate Solutions - 2022 Progress Report provides a solidified approach to zero-emission goals. The report underlines ExxonMobil’s 2030 emission-reduction plans and extends carbon reduction goals in business operations. According to the report, Exxon Mobil is working on a detailed roadmap to reach the zero-emission goal by 2050:

  • More than 150 potential steps and modifications have been identified to reduce CO2 emissions in upstream, downstream and chemical operations.
  • ExxonMobil will complete a detailed roadmap to address 100% of operations-related greenhouse gas emissions by 2023. 
  • The company will reduce absolute greenhouse gas emissions by 30% for its upstream business and 20% for the entire corporation by 2030. 
  • It will decrease absolute flaring and methane emissions by 60% and 70%, respectively, by 2030. 
  • ExxonMobil has adopted a net-zero emission target for its Permian Basin operations by 2030.
  • The company will invest in lower-emission solutions, including carbon capture and storage, hydrogen and biofuels.

According to the company, all these steps and specific targets are aligned with international agreements, including the Paris Agreement.

Image: Shutterstock

Authored by: Mufit Yilmaz Gokmen