The days of oil and gas are numbered. Although we may still be reliant on gas and oil for the next 30 years, renewable energy is being championed by governments, and the general public and the oil and gas industry is listening.
In 2018, ExxonMobil and Chevron joined the Oil & Gas Climate Initiative, a consortium of global companies that have allocated over $1 billion to invest in solutions to tackle climate change. Even though a billion is a drop in the ocean to what the big oil and gas companies make, it is a clear acknowledgment that they can play a big role in global environmental and climate issues.
After decades of taking advantage of the world’s dependence on fossil fuels, oil and gas giants are making a long-term strategic move to shift towards renewables
The major oil firms have amassed trillions of dollars, a stellar roster of diverse talent across the globe, and several operational insights. It could be argued that the large oil and gas companies are looking beyond the financial incentive, these companies may be taking climate change seriously. Although it’s probably safe to say that these companies are also looking to preserve their control on the energy the world uses.
Several other smaller companies have already invested in renewable energy. Energy start-ups and new disruptive technologies are making significant headway into solar energy panels, wind technology, and geothermal energy — to name a few.
But the financial and operational clout of the oil and gas giants may bring a new leap in innovation and usage of renewable energy. While they may have seen renewable energy as opposed to their own business interests, the immense resources at their disposal can make renewable energy more viable. The big companies getting involved could potentially close the gap between renewables being partially used, and being used ubiquitously.
What strategies are they employing?
Big Oil is re-allocating internal resources to create whole new departments and divisions.
Royal Dutch Shell, for example, has created the New Energies Division, which is focused on diversifying energy assets (e.g. hydrogen energy, biofuels). Eni, the Italian multinational oil and gas company, has created an energy solutions department to identify and execute renewable energy opportunities. Equinor, formerly Statoil, now has its New Energy Solutions Unit as well.
Another strategy is to outright increase spending on renewables.
Total, the French oil giant is allocating $500 million annually to ramp up renewables spending. The figure is 3 percent of capital expenditure. Equinor now commits about 3-5 percent of annual expenditures to renewable energy.
Strategic acquisitions are also part of the playbook. In 2017, to gain an edge in solar technology, BP acquired Lightsource, the largest solar project developer in Europe for approximately $200 million.
Oil and gas is here to stay, for now
While these big oil companies are steadily making the transition towards renewables, they still profit from fossil fuels. Oil and gas are still integral to the global economic machine — and a crucial resource that is fueling Big Oil’s renewable energy investments. Ironically, it could be that the profit that made energy companies so big and powerful could be the factor that allows renewable energy to become better and more widely used.