According to an analysis by Rystad Energy, investments in solar and wind energy projects by the world’s oil majors over the next five years are expected to reach $17.5 billion. But a closer look at the numbers reveals that some $10 billion, or 57 per cent of the amount, is expected to be invested by a single company, Equinor, the only investor whose majority of greenfield capex will be towards renewable energy.
Equinor, the Norwegian state-controlled energy giant, will drive renewable investment, spending $6.5 billion in the next three years to build its capital-intensive offshore wind portfolio. The forecast, however, will be affected by the fluctuating oil price or capex cuts, as much of the company’s renewable portfolio is already committed, such as the massive Dogger Bank offshore wind project in the UK.
Apart from Equinor, the renewable investments from major oil and gas companies will decline over the next three years. This fall does not even factor in any of the recent capex cuts announced by the majors.
Rystad Energy’s analysis finds that almost all of the renewable investments by oil and gas players will come from just 10 oil majors, which are collectively poised to spend about $17.5 billion on renewable energy projects over the next five years. This tally, however, pales in comparison to the $166 billion they are forecast to spend on greenfield oil and gas projects during the same period.
With the notable exceptions of Equinor and GALP, the investments in renewables by the other oil giants will not even match the typical capex requirements of a single oil and gas field in their respective portfolios.
According to the analysis, if needed due to the Covid-19 pandemic, a 20 per cent capex cut across overall investment portfolios could be achieved while easily avoiding any cuts to renewable projects. GALP and Shell look the most exposed to potential renewable spending cuts, but these companies are not expected to make significant renewable investments in the near term (not before 2024 for GALP and even later for Shell) by which time it is expected the oil price will have recovered, thus creating a better environment for investment.
But Covid-19 could also be the catalyst for oil majors to pump more capital into renewables, acquiring assets, developing skills and nurturing the capacity to transition beyond petroleum.
Investments in solar and wind energy projects by the world’s oil majors over the next five years are expected to reach $17.5 billion.