Date: 2025-03-14 Page is: DBtxt003.php txt00017384
Energy
Low rate of new investment in renewables
European oil majors spending up to 7% on low carbon but wider industry needs to step up ... European Majors set the bar by investing the most in low carbon; however, sector lagging as a whole and investing only 1.3% of total 2018 capital expenditure;
Peter Burgess
Equinor, Total, Shell and Eni ranked top for leading low carbon transition while CNOOC, Rosneft and Marathon Oil lag behind.
November 12, 2018, London: European oil & gas majors including BP, Eni, Equinor, Total and Shell are investing the most in low carbon but the industry’s spend as a whole remains relatively low at only 1.3% of total capital expenditure (CAPEX) in 2018. The figure is revealed in a new report ‘Beyond the cycle’, from environmental non-profit and investment research provider CDP today. The report ranks 24 of the largest and highest-impact publicly listed oil & gas companies on business readiness for a low carbon transition.
Production and use of oil & gas accounts for over half of global greenhouse gas emissions associated with energy consumption, representing more than 17 billion tonnes of carbon dioxide equivalent per year1. The analysis reveals a regional split in the industry’s approach. Across the 24 companies, European Majors account for 70% of current renewable capacity and nearly all capacity under development. However, with less domestic pressure to diversify, US-based companies have not embraced renewables in the same way.
In Russia, state-owned oil companies Gazprom and Rosneft have less capital flexibility, which means they may be less agile and slower to mobilize in response to future disruption such as climate regulation. This is also a trend across Chinese national oil companies including Petrochina, while a lack of disclosure on emissions data remains a key issue for Chinese companies in our analysis.
The oil & gas sector is under increasing investor pressure, with votes for climate shareholder resolutions more than doubling from 2014 to 2018 at company AGMs. Following the findings of the recent report from the UN’s Intergovernmental Panel on Climate Change (IPCC), the urgency of the company response to climate change is more important now than ever before.
Despite the small total spend on low carbon assets by CAPEX, the last few years have seen a wave of new energy investments by oil & gas companies. Since the start of 2016, 148 deals have been made in alternative energy and Carbon Capture, Utilization, and Storage (CCUS), and US$22 billion invested in alternative energies since 2010.
Other highlights from the report include:
- Companies are pivoting towards less polluting gas and reducing exposure to oil sands. Across the 24 companies the share of production from gas has increased at an average rate of 1.4% p.a. since 2002. Five companies have also recently divested from oil sands assets.
- New analysis shows 15 of 24 oil & gas companies have now set climate targets with Repsol, Shell and Total the most ambitious.
- Ten companies are involved in CCUS projects and collectively account for 68% of current global capacity. Expertise in this technology may form part of the oil & gas industry’s social license to operate in coming years.
- Given 90% of the industry’s carbon footprint is from the end user (Scope 3) managing these emissions is key for the sector’s ability to be more sustainable. 18 companies disclosed Scope 3 emissions.
- Efficiency remains an issue in the industry and needs to be addressed. On average companies are losing 3.3% of their natural gas production through flaring, venting and methane leakages – worth almost US$5bn at the current gas price.
'With improved efficiency, lower costs and higher prices, free cash flow for the sector is at its highest level since the first quarter of 2012. However, companies are now facing increasing scrutiny from investors to look beyond the current cycle and deliver value in the long-term. As well as diversifying into clean energy assets, oil & gas companies are shifting focus to multi-staged developments and shorter-cycle opportunities to improve their capital flexibility and resilience for the changes ahead.'
Apache, BP, Chevron, CNOOC, ExxonMobil and Marathon Oil did not respond to CDP’s 2018 climate change questionnaire. We encourage investors to raise this lack of transparency in discussions with company management.
CDP’s League Table of leaders and laggards in the oil and gas sector:
The CDP report assesses companies across four key areas aligned with the recommendations from Mark Carney’s Task Force on Climate-related Financial Disclosures (TCFD). As the TCFD recommendations become mainstream, investors will increasingly expect oil & gas companies to disclose how they are adjusting their business models to manage transition risks, while taking advantage of the opportunity to generate revenue from the global transition to a low carbon economy.
You can view the executive summary of the report here. - ENDS - Notes to editor
For more information or for exclusive interviews with the CDP team, please contact:
- Caroline Barraclough, ESG Communications t: +44 (0)7503 771694 | e: carolineb@esgcomms.com
- Rojin Kiadeh, CDP t: +44 (0) 203 818 3973 | e: rojin.kiadeh@cdp.net
- Tess Harris, CDP t: +44 (0) 203 818 3973 | e: tess.harris@cdp.net
Scope and methodology: Full details of the scope of the report and methodology used are included in the full version of the report. For the full report please contact rojin.kiadeh@cdp.net
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