Big oil companies' demand for fossil fuels shows no signs of slowing down.
This week, Shell lowered its carbon emissions target. The decision comes amid an energy transition that will take decades to fully implement, as countries and industries around the world aim to reach net zero by 2050.
On Thursday, the British energy giant announced it aims to reduce its customers' emissions from the use of petroleum products by 15% to 20% by 2030, up from its previous target of 20%.
The company also dropped its 2035 target of a 45% reduction in net carbon intensity, citing “uncertainty in the pace of change” in the energy transition. Net carbon intensity measures the emissions associated with each unit of energy sold.
The revised commitment comes in the wake of rapid consolidation among oil majors as they seek to expand acreage and shareholder insistence that companies continue to post record profits and stick to their core businesses. The International Energy Agency, which advocates for green technology, said in November that the oil and gas industry invested about $20 billion in clean energy in 2022, representing just 2.5% of total capital spending.
That may be too much of a burden for investors. BP (BP) received a letter from an activist hedge fund earlier this year demanding a rollback of the British oil and gas producer's “irrational” green energy strategy, saying it was “driving down BP's share price. Of course,” he insisted.
BP lowered its own carbon emissions targets about a year ago.
The shareholder pressure comes at a time when accelerating renewable energy technology is difficult amid high interest rates. Last month, Shell sold part of its ownership in two US-based green energy projects.
The problem for oil companies is that renewable energy projects that pass the return-on-investment hurdle are “hard to find,” Stewart Glickman, an energy equity analyst at CFRA Research, told Yahoo Finance last month.
As ESG initiatives and investment styles lose popularity, energy companies are also becoming more proactive in their environmental efforts.
Last month, two impact-focused funds put their bets on ExxonMobil (XOM) shareholder votes after the Houston-based oil giant filed a lawsuit to remove the measure from proxy votes. He withdrew a climate change-related proposal that he had planned to make.
The oil producers said in their complaint that activist investors Arjuna Capital and Follow This. They were driven by an “extreme agenda” aimed at “downsizing the company's existing operations.”
Mark Kramer, senior lecturer at Harvard Business and author of the ExxonMobil case study, says green advocates are losing the battle to pressure the oil industry into more aggressive energy transition efforts. says.
“It's clear: It's not working,” he told Yahoo Finance in February. “The profitability of oil and gas is so high right now that it's very difficult for companies to get out of it or even discuss it.” [of] To move away from it. ”
Rather, oil companies are betting that for the energy transition to occur, natural gas, considered a cleaner fossil fuel, will be needed.
“We believe in natural gas and LNG [liquified natural gas] It will play an important role in replacing coal in high-temperature heavy industrial applications. These will help address both local air emissions and broader climate issues,” says Shell’s Energy Transition Strategy.
Oil company executives argue that fossil fuels meet about 80% of the world's energy needs and that developing countries are overwhelmingly dependent on fossil fuels. Reducing those energy sources will set those regions back.
“We can't replace an energy system that took 150 years to build overnight,” ExxonMobil CEO Darren Woods said at the Asia-Pacific Economic Cooperation Conference in San Francisco in November. Ta.
“The problem is not oil and gas. It's emissions,” he added. ExxonMobil has cut its operational methane emissions in half since 2016, including a goal of reducing company-wide greenhouse gas emissions by 20% to 30% by 2030. Says.
“Climate change solutions are too focused on reducing supply, which is a recipe for human suffering and global poverty,” Woods added.
Ines Ferre is a senior business reporter at Yahoo Finance. Follow her on X @ines_ferre.
