"Big Oil\u2019s ambitious decarbonization strategies have gone bust"

" Big Oil\u2019s ambitious decarbonization strategies have gone bust \r\n\r\nBack in February 2020, \u00a0 British oil and gas multinational\u00a0 BP Inc.\u00a0 (NYSE:BP) announced an\u00a0 ambitious goal \u00a0to become net-zero by 2050 through, among other things, aggressively cutting oil and gas production and also undertaking one of the industry\u2019s most expansive renewable electricity build-outs.\r\n\r\nIn April of the same year, deep in the throes of the oil price crash, BP\u2019s Dutch peer\u00a0 Shell Plc\u00a0 (NYSE:SHEL) warned that global oil demand had been permanently destroyed and effected its\u00a0 biggest dividend cut \u00a0since the Second World War.\r\n\r\nA year later, a\u00a0 Dutch court \u00a0ordered Shell to cut its greenhouse gas emissions harder and faster despite the company having previously pledged to cut GHG emissions by 20% by 2030 and to net-zero by 2050. The court in The Hague demanded Shell to cut emissions by 45% by 2030 compared to 2019 levels.\r\n\r\nUnfortunately, the global energy transition is proving more arduous than expected, which, combined with rising costs and profitability concerns, is forcing Big Oil companies to recalibrate their decarbonization goals to align with market realities.\r\n\r\nLast year, BP unveiled\u00a0 a new decarbonization strategy \u00a0that entails (1) a slower decline in upstream investments and scrapped former plans to shrink refining; (2)\u00a0 focus more on higher-margin hydrogen and biofuels as well as offshore wind; and (3) higher spending in both oil and gas as well as low carbon. According to the company, the new strategy will offer higher shareholder returns, especially critical to the company after it severed ties with Russia\u2019s\u00a0 Rosneft . BP\u2019s nearly 20% stake in Rosneft helped to add several billion dollars to its bottomline.\r\n\r\nAnother hit to the decarbonization drive: the ESG investing boom of yesteryears has gone bust. Environmental, social and governance (ESG) investing spiked in 2020 and 2021 amid the COVID-19 pandemic with low oil prices driving more investments beyond fossil fuels, while fund managers tried to appear more climate-conscious. But the latest oil price boom; political backlash against ESG led by Republican politicians as well as claims about greenwashing have made ESG investing lose plenty of luster.\r\n\r\nIndeed, LSEG Lipper data showed that in the first 11 months of 2023, ESG funds only managed to pull $68 billion in net new deposits, a sharp drop from $158 billion in 2022 and $558 billion for all of 2021,\u00a0 Energy Intel \u00a0reports.\r\n\r\nA sharp focus on ESG and renewable energy has been cited as a big reason why European Big Oil stocks, including BP and Shell, are facing a considerable\u00a0 equity valuation gap \u00a0and continue to trade at a discount to their American counterparts.\r\n\r\n Exxon: Too Much Renewables Could Backfire \r\n\r\nIt\u2019s going to be interesting to see whether these European oil and gas majors will start adopting some of the more innovative, if somewhat disingenuous, decarbonization strategies that their American brethren have unveiled.\r\n\r\nLast year,\u00a0 Exxon Mobil Corp.\u00a0 (NYSE:XOM) CEO Darren Woods urged companies to\u00a0 stop focusing on certain energy sources , such as renewable energy, to save the climate, warning that it would be a \u201chuge mistake \u00a0to be picking winners and losers and focusing on specific technologies\u201d, according to Business AMBE.\u00a0 Instead, \u201cwe need to look more broadly and let the markets figure out which solutions deliver the most emissions reductions at the lowest cost, \" Woods said. Woods argued that an attempt to quickly move away from oil and gas immediately could be disastrous for clean energy, adding that producing less LNG, for example, something else\u2013could lead to higher demand for dirtier fuels such as coal.\r\n\r\nAccording to Woods, Europe should borrow a leaf from the U.S.\u2019 approach to climate policy, adding that the continent risks driving companies away by over-regulating. Woods told Bloomberg that various carbon capture technologies under development in the U.S. will play a key role in the global decarbonization drive.\r\n\r\nBack in April 2023, Woods touted Exxon\u2019s burgeoning Low Carbon business, saying it has the potential to generate hundreds of billions in revenues and even outperform its legacy oil and gas business in the coming decades. According to Woods, the business could grow to generate tens of billions of dollars in revenue after the initial 10-year ramp-up.\r\n\r\n\" This business is going to look quite a bit different from the base business of Exxon Mobil. It is going to have a much more stable, or less cyclical, profile ,\" Dan Ammann,\u00a0 president of Exxon's two-year-old Low Carbon Business Solutions unit, has vowed.\r\n\r\nLast year,\u00a0 Exxon Mobil \u00a0signed a long-term contract with industrial gas company\u00a0 Linde Plc . (NYSE:LIN) involving offtake of carbon dioxide associated with Linde\u2019s planned clean hydrogen project in Beaumont, Texas. Through the contract, Exxon will transport and permanently store as much as 2.2M metric tons\/year of CO2 from Linde\u2019s plant.\r\n\r\nExxon is hardly alone in ambitious CCS plans.\r\n\r\nLast February, oil field services giant \u00a0Schlumberger Ltd \u00a0(NYSE:SLB) discussed its newly carved SLB New Energy unit which will focus on niches such as carbon solutions, hydrogen, energy storage, geothermal\/ geoenergy and critical minerals each with a minimum addressable market of $10 billion, as reported by Bloomberg NEF.\r\n\r\nMeanwhile, scores of Big Oil companies stand to benefit from $7 billion in subsidies from the U.S. government as part of the bipartisan infrastructure law to build seven regional hydrogen hubs."

"Big Oil\u2019s ambitious decarbonization strategies have gone bust"

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