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Big Oil’s New Approach

The past few years have seen the oil Supermajors building interest in renewables as a driver of our energy future. Big Oil’s shifting focus has been derived from growing pressure from investors, environmentalists, and governments to shift away from fossil fuels towards green energy in order to combat climate change. The multinational oil and gas company, British Petroleum (BP) is one of the first large oil companies to reinvent itself as an environment-conscious energy corporation. One of BP’s biggest and immediate goals is to develop 50GW of renewable energy by 2030. Similarly, Norway’s Equinor has also set itself apart from traditional oil and energy companies with its efforts to turn its practices green and an ambitious mission to reduce carbon intensity by at least 50% by 2050. Additionally, Equinor plans to develop renewable sources tenfold within the next six years.

Guided by its vision, BP has recently doubled down its bet on renewables as it enters into the offshore wind market with a deal worth $1.1 Billion to buy 50% stakes in two U.S. developments from Equinor. Per Equinor’s Chief Executive Officer, Eldar Sætre, the two companies’ fundamentally similar approach towards renewables and the need of the hour have served as the inspiration for what is one of the biggest collaborations between energy companies as far as the green energy is concerned. The deal includes the Empire Wind project off New York and Beacon Wind off Massachusetts, which together boast a capacity to generate up to 4.4 GW which is a big leap forward in the attainment of energy transition goals. With the two projects, more than 2 million households can be powered in the United States. BP and Equinor will also go beyond these two developments. As detailed in the deal, the companies will execute and foresee the development of other large-scale offshore wind projects, both bottom-fixed and floating, in the US.

BP has been an important player in the onshore energy market in the US for a very long time has developed a capacity of about 1.7 GW so far, but this is the first time that the British Energy leader has pumped in investments in the offshore wind business. Since BP has bought non-operated interests in developments, Equinor will serve as the project operator, however, BP will still send its employees to participate in the construction and development processes.

Given that the 21st century has brought to light the enormous contribution of Big Oil to environmental degradation, other energy companies are also tending to follow the lead generated by the likes of BP. French multinational oil and gas company, Total SE has recently acquired ‘Blue Point London’ from the Bolloré Group. The acquisition will allow the company to take over the management and operation of Source London – which is London’s oldest and largest electric vehicle charging network boasting over 1600 charging spots. In place of traditional charging systems, Total plans to power the charging stations with its proprietary 100% renewables sources.  Besides Total, Italy’s Eni has taken one of the most ambitious climate pledges of reducing carbon footprint by over 80% in the next three decades.

Whilst the coming decades are expected to yield positive change in the energy industry, there are still some major concerns lurking in the background. Although the energy supermajors have got the ball rolling on renewables, it is still uncertain whether they can or will earn their stripes as a truly eco-friendly organizations. The prime reason being the substantial increase in oil and gas exploration and generation investment. According to a study by Rystad Energy, an independent energy research agency, against a current outlay of only $18 billion in green projects, Big Oil is predicted to pour in $166 billion into oil and gas ventures, which presents a big challenge to achieving carbon neutrality in the energy industry. In 2018, Big Oil shelled out only 1% of their entire combined budget on green energy projects such as solar and wind. That raises suspicions as to whether the companies are really making changes in accord with their pledges.  

The coming decade will be decisive. By the end of 2030, the world will have its answers as to how well the energy companies honour on their promises. The BP-Equinor deal is, undoubtedly, a good start in the direction of sustainable energy security. The supermajors have spent $5 billion on alternative investments since 2011 and if the organizations continue their green practices, the graph of green investment will keep moving upward. The trend is gradually getting set, taking inspiration, more companies may strike deals of this kind and level – which will be instrumental in subduing climate crisis.