Present in more than 30 countries worldwide, energy major Equinor is becoming a growing force in renewables. Investing strongly in renewables such as solar power and offshore wind, the company aims for 12 to 16 GW of net production capacity from renewables by 2030. Two-thirds of this capacity is expected to come from offshore wind with the company already building offshore wind clusters in the UK, the US East Coast and in the Baltic Sea, and is positioned for future floating wind options in the UK, Norway and Asia. To further help in reducing carbon emissions, the company is making significant efforts in developing low-carbon technologies such as carbon capture and storage as well as hydrogen.
Anders Opedal, President and CEO, Equinor reiterates the company’ commitments towards renewable energy deployment and carbon emission reduction in his speech at Equinor ASA Capital Markets Day held on June 15, 2021. REGlobal presents an edited extract from his address…
This is a plan to accelerate our transition while growing cash flow and returns. Today is about the future, a future that will be very different from the past and where the change from past will be faster than ever. But our legacy is our starting point. And ever since Equinor was founded in 1972, we have been pioneering the field of energy.
Our history is about competent people with a drive to make a difference, about setting ambitions backed by actions, about innovation and technology development. Again and again, we have worked with our partners and suppliers and done what was said to be impossible. Together, we have developed technology, unlocking new resources and achieving world-leading recovery factors and record-low emissions. We have developed from partner and apprentice to operate and a leader, from a Norwegian oil company to a global offshore energy major. This is the basis when we, today, present our strategy, focusing on opportunities where we can utilize our technology and offshore competence.
In times of change, the early mover has the advantage. 25 years ago, we developed our first CCS project at Sleipner, safely storing CO2 under the seabed. The same pioneering approach was behind our entry into renewables. The value creation we have demonstrated through our recent farm-downs in offshore wind is based on more than 10 years’ experience as an offshore wind operator.
On my first day in office, we announced our net zero ambition. Today, we go further, and we demonstrate how this ambition is backed by actions. I’m confident the energy transition will offer unique opportunities for Equinor, opportunities to grow the company, opportunities to generate additional sources of revenue, opportunities to make the company relevant for the future.
We are in the biggest transition our energy systems have ever seen. Renewables are growing rapidly, and over time, oil and gas will play a smaller role. The plan we present today is a strategy to take advantage of the opportunities in the transition. This is not a new direction, but we are accelerating our transition, bringing forward our ambitions while growing cash flow and returns.
In oil and gas, we can capitalize on our strong portfolio. This portfolio is robust also towards lower prices and a strong cash engine that supports our transition. Gross CapEx to renewables and low-carbon solutions is set to grow from below 5% in 2020 to about 50% in 2030. This is based on our strong pipeline of attractive projects and opportunities, and this is significant. With the plans we are outlining today, we expect to invest well above $50 billion gross in renewables and low-carbon solutions towards 2030. We are on our way towards net zero and aim to reduce Scope 1, 2 and 3 net carbon intensity by 40% by 2035.
Offshore wind is where we have demonstrated our competitive advantage, and it will remain our main growth area.
Let me then turn to how we are accelerating profitable growth within renewables. This is an area where our early-mover advantage already is paying off. So far, we have realized capital gains of $1.7 billion from farm-downs. In a fast-growing industry, we see opportunities for competitive, low risk returns. We intend to take a disciplined approach, focusing on the projects where our ability to add value is the greatest. Offshore wind is where we have demonstrated our competitive advantage, and it will remain our main growth area.
Based on recent success in securing low-cost access at scale in Poland and in South Korea, we are expecting now to reach installed capacity of 12 to 16 gigawatts already in 2030, five years earlier. To realize these opportunities, we expect gross investments of $23 billion from 2021 to 2026. Reflecting the current level in the industry, we are adjusting our base return range to 4% to 8% real. But we remain committed to delivering significantly higher equity returns, capturing value through project optimization, farm-downs and project financing.
Our development projects both in the U.K. and U.S. demonstrate the strength of this approach, showing nominal equity returns in the range of 12% to 16%. We have demonstrated that we can create value from renewables as an integrated part of Equinor. Access to project execution capabilities, our unique offshore experience, strong balance sheet and trading activity help us to do more, faster and better.
Without CCS and hydrogen, there is no viable path to net zero and realizing the goals from Paris.
Without CCS and hydrogen, there is no viable path to net zero and realizing the goals from Paris. This needs to be a part of the solution at scale. There will be business opportunities within CCS and hydrogen, and I believe that Equinor is uniquely well positioned. We have industrial experience, having already stored more than 25 million tonnes of CO2. We know the NCS like the back of our hand. And here, we can create value and remove emissions by storing CO2 from other industries in the very same reservoirs that have delivered so much energy and prosperity. And here, we can develop emission-free hydrogen from natural gas to support decarbonization globally and create value at the same time.
Now it is time to set an ambition. We aim to develop the capacity to store 15 million to 30 million tonnes CO2 per year by 2035, Equinor share. And working with partners and customers, our ambition is to provide hydrogen and climate solutions from three to five industrial clusters by 2035. We are already involved in several projects in the U.K., and together with partners and authorities, we are developing Northern Lights in Norway, the world’s first offshore storage of per year, 10% of the total emissions in Norway.
Equinor’s ambition to become a net zero company by 2050, including emissions from production and final consumptions, sets a clear strategic direction. For us, this is about value creation. It’s a sound business strategy to ensure long-term competitiveness during a period of profound changes in the energy systems as society moves towards net zero. We have a strong starting point, having already reduced our emissions significantly, producing with record-low emissions. The strategy we are outlining today shows how we will deliver cash flow growth and competitive returns while progressing on the net zero ambition.
Towards 2030, we are expecting to reduce the net carbon intensity by 20%. And from then, the pace of progress will increase as we are growing within renewables and low-carbon solutions. By 2035, we aim to realize a 40% reduction from a strong starting point, with 68 grams per megajoule down to 40, on our way to net zero by 2050.
We have several levers to achieve this. Scale, product mix, operational efficiency and electrification within oil and gas will be important. Growth within renewables and hydrogen will increase energy production without emissions. Storage of CO2 and high-quality carbon sinks will contribute to further reductions in net carbon intensity. All this provides flexibility in how to achieve the ambition while creating value.
Climate change is a shared challenge. The combined efforts of governments, industries, investors and consumers are crucial to reach net zero emissions for Equinor and for society. Pace of change in society will be important also for us. The interim ambitions we are outlining today will significantly change our company, making it better and stronger. And if we can help society move faster, we can achieve even more.
Last year, we reduced our dividend from $0.27 per share in fourth quarter 2019 to $0.09 per share for the first quarter 2020. And we suspended our $5 billion share buyback program as a part of our forceful response to protect our financial resilience during the pandemic. But our commitment to capital distribution remained strong. And over the last year, we have balanced capital discipline with investing in a profitable portfolio and a gradual increase of the quarterly cash dividend.
Today, we are outlining our strategy to accelerate our transition while growing cash flow and returns, enabling us to increase capital distribution further. With an increase of the cash dividend and the introduction of our new share buyback program, we are providing predictability in capital distribution. The Board has decided on a dividend for second quarter of $0.18 per share, an increase of $0.03 from first quarter. This is 33% below the pre-COVID level of $0.27. And in accordance with our dividend policy, it’s still our ambition to grow the annual cash dividend in line with long-term underlying earnings. Typically, this has been an annual increase of 1 cent in the quarterly dividend announced together with our fourth quarter results.
The Board had also decided to introduce a new share buyback program. Under this program, we expect a yearly buyback of shares for around $1.2 billion from 2022. This is a level which can be expected going forward, assuming an oil price in or above a range of $50 to $60 per barrel and an expected net debt ratio below 30% and commodity prices. In periods with sustained higher price levels and low net debt ratio, share buybacks can be used more extensively. During second half of 2021, we also expect to buy back shares for around $600 million in total in two equal tranches, around $200 million will be in the market and around $400 million from the Norwegian state, who will participate on a proportionate basis to maintain its current ownership share. With a lower number of shares, we are strengthening our position to maintain a competitive dividend per share also in a future, where renewables will be a larger part of our company.
With a cash dividend of $0.18 and a new share buyback program, we are providing visibility and predictability but also establishing a capital distribution structure with more flexibility and a lower base than before the pandemic. This is a balanced approach, enabling quality investment to accelerate Equinor’s transition while delivering attractive returns to shareholders.
So let me conclude with our main messages. First, we are accelerating our transition. By 2030, 50% of our gross investments will be towards renewables and low-carbon solutions. And we are doing this while growing cash flow and returns, delivering competitive capital distribution to our shareholders.
