In the past four years, several of the world’s largest oil and gas producers have outlined ambitious plans to shift from fossil fuel production to clean energy provision. The transformation would be needed, chief executives argued, to help cut global emissions and provide a future for their companies as the energy system evolved to greener fuels.
Now, though, some companies have already begun to row back on certain goals, raising the question of whether Big Oil can progress to lower carbon sources of revenue — and whether it wants to.
BP, last year, slowed the pace at which it will reduce its oil and gas production while, in March, Shell weakened its climate targets to accommodate plans to grow its liquefied natural gas business.
In the US, ExxonMobil, which has never committed to move away from oil and gas, has appeared bolder than ever: filing a lawsuit against an activist shareholder that has been pressuring the company to set more ambitious transition goals.
Part of the reversion reflects a recognition by some stakeholders of the challenges of the energy transition, and the fact that more oil and gas will be needed to meet global energy demand until renewable alternatives can be scaled up.
But it also reflects how few investors have been convinced that large oil companies can profitably execute the transition plans they set out.
Shell recently revised its climate targets to accommodate plans to keep its gas business © Peter Boer/Bloomberg
“Some of them attempted to go to market to create transition strategies, and the response from the shareholder base has been largely that they do not believe these companies can do that,” says Joanne Salih, partner in the energy and natural resources division at consultancy Oliver Wyman.
“It creates a very difficult dynamic for a public company, because you either go against your shareholder base and risk the implications, or you continue with the strategy that’s proven.”
Shu Ling Liauw, chief executive of Accela Research, which analyses climate strategies, says part of the problem is that many of the sector’s plans were conceived in the middle of the coronavirus pandemic when oil prices had collapsed and it was easy to make “transformational decisions”.
“It’s not really a backtrack, it’s a rebase, it’s a changing of the emphasis from aspirational targets to ‘how do we actually execute?’,” she says. “When they made those ambitions, they didn’t really have a plan . . . transitioning customers away from oil
