Big Oil Shifting Spending to Renewables

Major oil companies could shift more than a fifth of their drilling investments to renewable energy as wind and solar grow rapidly over the next two decades, Wood Mackenzie says.

But modern wind and solar projects are too small to replace those companies' fossil fuel operations, the energy research and consultancy firm said in a report Monday, Fuel Fix reported.

In recent years, European oil majors like Shell, BP and Total have poured billions of dollars into renewable energy projects from West Texas to the North Sea, acknowledging solar and wind will have a bigger role in the energy mix in decades to come.

Wood Mac said it believes with today's technology, wind power will grow 6% a year and solar will expand 11% a year over the next two decades.

The research firm said technological breakthroughs could dramatically alter its projections, meaning renewables could grow faster than it expects.

But the firm said major oil companies would have to spend some $350 billion on today's solar panels and wind turbines to boost renewables to just 6.5% of their current energy production.

Offshore wind projects, it said, could offer the oil majors the biggest scale, "on par with upstream mega-projects," while solar "is more fragmented and competitive."

"Wind and solar are increasingly important strategic growth themes that the majors cannot afford to ignore as they plan for 2035 and beyond," Wood Mac said. "Companies are only just starting to sow the seeds for the radical changes that lie ahead."

London-based BP plc, the largest natural gas marketer in North America, at one time was the wind energy leader in the United States, and it continues to make strategic renewables investments.

At BP’s annual meeting in May, CEO Bob Dudley said the company would continue to shift to natural gas while eyeing a lower carbon world.

Overall, offshore wind "may be the most attractive route to organic growth in the near-term," said Wood Mackenzie's researchers. "It offers scale and scalability on a par with upstream mega-projects. Solar is more fragmented and competitive, but Total has used mergers and acquisitions to establish early-mover advantage."

Wood Mackenzie expects capital increasingly to be diverted from upstream to build positions in wind and solar. Renewables could account for more than 20% of total capital allocation for the most active players post-2030.