Despite growing calls for an urgent energy transition, some of the world's largest oil companies are backing away from commitments to shift to renewable energy and planning to expand fossil fuel exploration.
Top energy companies including BP, Shell, Exxon and Chevron will double down on oil and gas investments in 2024 to focus on short-term profits.
This shift comes at the expense of their decarbonization plans – a trend expected to continue until 2025.
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Big European oil companies BP and Shell have sharply slowed plans to spend billions of dollars on wind and solar projects this year and shifted spending toward higher-margin oil and gas projects.
Although both companies Lobbying for billions in carbon capture subsidiesa climate technology designed to capture CO2 emissions from large sources such as oil refineries. Climate experts say the technology cannot replace targeted emissions reductions.
BP, which aims to grow renewable energy power generation 20 times to 50 gigawatts within ten years, announced in December that it would spin off almost all offshore wind power projects into a joint venture with Japanese power generator JERA.
Shell, which once promised to become the world's largest power company, has largely halted investment in new offshore wind projects, exited power markets in Europe and China and weakened its carbon reduction targets.
Shell told Reuters it remains committed to becoming a net-zero emissions energy business by 2050 and continues to invest in the energy transition.
Meanwhile, Norway's state-controlled Equinor has also slowed spending on renewable energy.
Accela Research analyst Rohan Bowater told Reuters that BP, Shell and Equinor would reduce low-carbon spending by 8% in 2024.
Likewise, major U.S. oil companies Exxon Mobil and Chevron have strengthened their commitment to fossil fuel expansion.
Earlier this month, ExxonMobil said it wanted to increase its oil and natural gas production by 18% between 2026 and 2030. The company hopes to increase its revenue by $20 billion in 2030 from the $34.2 billion expected this year.
Meanwhile, Chevron's oil and gas production increased 7% annually while it plans to cut spending on low-carbon projects by 25%.
Exxon Mobil and Chevron now both plan to get into the power business Focusing on the growing energy needs of data centersdriven by the artificial intelligence craze. The companies are looking to use natural gas to power artificial intelligence data centers in the technology industry.
researchers say Natural gas has a 33% lower carbon footprint than coal.
Policy is shaky
After Russia launched a full-scale invasion of Ukraine in 2022, energy costs soared, governments around the world slowed the rollout of clean energy policies and delayed targets, and oil majors tightened spending.
European oil majors that have invested heavily in the clean energy transition have found their share prices lagging U.S. rivals Exxon Mobil Corp. and Chevron Corp., which have focused on oil and gas.
“Amid high oil prices and changing investor expectations, geopolitical disruptions such as the Ukraine invasion have undermined CEOs' incentives to prioritize a low-carbon transition,” Accela Research's Bowater said.
Equinor, meanwhile, blamed supply chain bottlenecks and high prices for slow progress in its wind business.
Equinor told Reuters that “the offshore wind sector has gone through tough times over the past few years due to inflation, cost increases, supply chain bottlenecks.”
The company “will continue to remain selective and disciplined in our approach,” it added.
The same is true in the United States, where both ExxonMobil and Chevron are present Energy subsidy rules blamed on lack of 'clarity' Block investment in climate technologies and renewable energy.
The days ahead will be more difficult
Global heat-trapping carbon emissions are expected to climb to a new high in 2024, This will be the hottest year on record.
With climate skeptic Donald Trump back in the White House, 2025 is shaping up to be another tumultuous year for the $3 trillion energy industry.
China, the world's largest crude oil importer, is also trying to revive its faltering economy, which could boost oil demand.
At the same time, Europe also faces continued uncertainty over the war in Ukraine and political unrest in Germany and France.
All these tensions were laid bare in November at the United Nations' annual climate conference in Baku, Azerbaijan, when host country President Ilham Aliyev praised oil and gas as “a gift from God.”
That summit resulted in a global climate finance deal, but disappointed climate advocates who had hoped that governments would unite to phase out oil, gas and coal.
Energy companies will be watching to see whether Trump follows through on his pledge to repeal President Joe Biden's landmark green energy policies that have spurred investment in renewable energy across the United States.
Trump has vowed to exclude the United States from global climate efforts and appointed another climate skeptic, oil executive Chris Wright, as his energy secretary.
oil and gas trap
Yet despite these concerns, there are potential pitfalls in energy majors' renewed focus on oil and gas.
Demand growth in China, which has driven global prices for two decades, is slowing, with growing signs that its gasoline and diesel consumption has stabilized.
Meanwhile, OPEC and major oil-producing allies have repeatedly delayed plans to lift supply cuts as other countries, led by the United States, increase oil production.
As a result, analysts expect oil companies to face tighter financial constraints next year. Net debt of the five Western oil majors is expected to increase from $92 billion in 2022 to $148 billion in 2024, according to LSEG estimates.
Oil companies are also facing increasing regulatory pressure, and states such as New York are planning Fossil fuel company fines total $75 billion Pay the price for climate damage over the next 25 years.
Meanwhile, climate experts warn continued investment in fossil fuels will put $557 trillion worth of assets at risk Will become useless by 2050.
Researchers say the world can reach net-zero emissions by mid-century without new fossil fuel plans.
- Reuters, with additional editing and input by Vishakha Saxena
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