Oil Industry Eyes Renewable Energy for Future Growth
Oil and gas majors may be committing up to a fifth of their total investment in green energy projects after 2030 as hydrocarbons production declines.
A growing number of key oil and gas players are starting to invest in renewable energy projects but analysis from Wood Mackenzie Limited (Edinburgh, Scotland) suggests that major energy companies like Royal Dutch Shell plc (NYSE:RDS-A) (The Hague, Netherlands), Total S.A. (NYSE:TOT) (Paris, France), BP plc (NYSE:BP) (London, England) and Statoil ASA (OSE:STL) (Stavangar, Norway) among others will invest hundreds of billions of dollars in wind, solar and energy storage projects in the coming decades.
"The momentum behind these renewable technologies is unstoppable now," said Valentina Kretzschmar, director of research at Wood Mackenzie, speaking to the media. "They [the oil and gas majors] are recognising it is a megatrend; it's not a fad, it's not going away. There is definitely a risk to their core business."
Wood Mackenzie has predicted that demand for renewables will grow significantly faster than oil over the next couple of decades. While oil is predicted to grow at 0.5%, annual growth rates for wind will be 6%, while solar will grow at 11%.
Wind and solar energy are poised to radically reshape the energy market over the coming decades, presenting a threat to legacy oil and gas operations, but also an opportunity to diversify and future-proof portfolios," Wood Mackenzie stated. "The Majors are starting to rethink their strategies. But how fast and to what extent will the shift to renewable energy unfold? The case for the Majors to build a renewables position is increasingly compelling. A niche energy market now, renewables will be much bigger by the middle of the next decade, as oil and gas demand growth slows."
The report said: "A potential tipping point for the shift into wind and solar could be an anticipated decline in the Majors' hydrocarbon production. With new resources needed to sustain volumes beyond 2025, wind and solar could step in to the breach if discovered resource commercialisation, M&A and exploration fail to deliver, or economics weigh against continued development."
Industrial Info has been tracking the first forays of oil and gas companies into the renewables sector. In March, Shell announced that it was planning to dramatically increase its investment in renewable energy to $1 billion a year by the end of the decade. For additional information, see March 31, 2017, article - <a href="article.jsp?newsitemID=257080"target="_blank">Shell Ups Renewables Spending to $1 Billion a Year.
In February last year, Statoil announced a $200 million renewables investment fund, which would be used to finance projects in Europe and the U.S. The company is also behind the world's first floating offshore wind project, the 30-megawatt (MW) Hywind Scotland project. For additional information, see February 24, 2016, article - <a href="article.jsp?newsitemID=251155"target="_blank">Statoil Launches $200 Million Renewable Energy Fund and November 10, 2015, article - <a href="article.jsp?newsitemID=249950"target="_blank">World's First Floating Windfarm Gets Funding.
For more information, please subscribe to the IIR blog.