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With a growing focus on climate change, oil and gas companies are increasingly no longer attracting investments solely based on their ability to generate returns but also how environmentally responsible they are while generating those returns.
“The investor community is ultimately seeing a change in risk profiles of the oil and gas companies they are investing in and a growth opportunity, of course for ‘greener’ forms of energy,” David Linden, head of energy transition at Westwood Global Energy Group, told Hart Energy.
Since investors have different risk appetites, Linden said he is seeing oil and gas companies adopt different strategies in a push toward cleaner energy production. While the efforts of these companies can be divided according to ‘varying shades of green,’ Linden bucketed them into three major groups.
The first group of companies, which he referred to as the ‘greening companies’ are setting up emission reduction targets and going through the process of high-grading hydrocarbons, investments in renewables, e-mobility solutions, hydrogen and carbon capture with some rebranding themselves as integrated energy companies.
Within this group, there are different approaches, he said. For instance, BP plans to cut fossil fuel production by 40% over the next decade while TotalEnergies is focused on growing its hydrocarbon portfolio and renewables at the same time.
The benefit of this ‘greening’ strategy’ Linden said, is a derisking portfolio and safeguarding investor money in the longer term.
“But you have to be big and rich to do something like this and the money will ultimately come from hydrocarbons,” he said.
The second group, which Linden noted is the largest and most diverse group that consists of NOCs, midcaps and shale companies, is committed to reducing the so-called Scope 1 and 2 emission in their operations.
However, while these companies retain their core competencies doing what they do best, they face increasing pressure from both investors and climate activists amid growing energy demand.
The third group, harshly termed the ‘do nothing’ group, isn’t doing much to tackle climate change, Linden said.
“This group is consciously saying that there is all this ESG chat but I’m not going to do anything about this now…NOCs were accused of being in this category, but most of them are now are adopting energy transition in some shape or form,” he said.
Jump to a topic:
- Energy transition strategies (0:29)
- How complex is the path to net-zero? (8:55)
- U.K.’s energy crisis (13:07)
- Role of new technologies for low-carbon future (18:00)
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