Oil & gas industry today
Investment by the oil and gas industry outside of core areas is growing, but remains a relatively small part of overall capital expenditure
Capital investment by Majors and selected other companies in new projects outside oil and gas supply
dollars (2018) |
2.5 |
|
2.0 |
||
Billion |
||
|
||
|
1.5 |
1.0
0.5
2015 |
2016 |
2017 |
2018 |
2019 |
2.5%
2.0%
1.5%
1.0%
0.5%
Biofuels
CCUS
Solar PV
Onshore wind
Offshore wind
Share of total capital investment (right axis)
Notes: Capital investment is measured as the ongoing capital spending in new capacity from when projects start construction and are based on the owner's share of the project. Companies include the Majors and selected others (ADNOC, CNPC, CNOOC, Equinor, Gazprom, Kuwait Petroleum Corporation, Lukoil, Petrobras, Repsol, Rosneft, Saudi Aramco, Sinopec, Sonatrach). CCUS investment is in large-scale facilities; it includes developments by independent oil and gas companies in Canada and China and capital spend undertaken with government funds.
43 | The Oil and Gas Industry in Energy Transitions | IEA 2020. All rights reserved
Oil & gas industry today
A larger share of recent spend in new areas has come through M&A plus venture activity, focused on renewables, grids and electrified services such as mobility
M&A and corporate venture capital spending by Majors and selected other companies outside of core oil and gas supply
|
|
Mergers and acquisitions |
|
dollars (2018) |
6 |
|
18% |
|
|||
|
|
|
|
Billion |
4 |
|
12% |
|
|
||
2 |
|
6% |
|
2015 |
2016 |
2017 |
2018 |
2019 |
||
|
Solar PV and wind generation |
|
|
Other power generation |
||
|
|
|
||||
|
|
|
||||
|
CCUS |
|
|
|
Biofuels and low-carbon gases |
|
|
|
|
|
|||
|
|
|
|
|||
Corporate venture capital
dollars (2018) |
0.6 |
|
|
Billion |
0.4 |
|
0.2
2015 |
2016 |
2017 |
2018 |
2019 |
||
|
Electricity distribution/retail |
|
Electrified services and efficiency |
|||
|
|
|||||
|
|
|||||
|
Other |
|
|
Share of total M&A (right axis) |
||
|
|
|
||||
|
|
|
||||
Notes: M&A = mergers and acquisitions; only transactions with disclosed values are included. Electrified services include battery storage and electric vehicle (EV) charging; low-carbon gases include low-carbon hydrogen and biomethane; other includes digital technologies, data analytics and mobility services. Companies include the Majors and selected others (ADNOC, CNPC, CNOOC, Equinor, Gazprom, Kuwait Petroleum Corporation, Lukoil, Petrobras, Repsol, Rosneft, Saudi Aramco, Sinopec, Sonatrach).
44 | The Oil and Gas Industry in Energy Transitions | IEA 2020. All rights reserved
Oil & gas industry today
Shifts in business strategy vary considerably by company
Investment and strategic responses to energy transitions by selected companies (illustrative, based on 2015-19 activity)
Company
BP
Chevron
Eni
ExxonMobil
Shell
Total
CNPC
Equinor
Petrobras
Repsol
|
|
|
|
|
Supplying liquids |
|
|
|
|
||
Enhancing traditional oil and |
Deploying |
and gases for |
Transitioning from fuel to “energy companies” |
||||||||
CCUS |
|
energy |
|||||||||
gas operations |
|
|
|
|
|
||||||
|
|
transitions |
|
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|
|||||
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|||
Reducing |
Reducing |
Sourcing |
For |
For |
Low- |
Advanced |
Solar PV |
Other |
Electricity |
Electrified |
|
methane |
CO2 |
renewable |
centralised |
carbon |
and wind |
power |
services / |
||||
EOR |
biofuels |
distribution/retail |
|||||||||
emissions |
emissions |
power |
emissions |
gases |
generation |
generation |
efficiency |
||||
● |
● |
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● |
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● |
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● |
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● |
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● |
● |
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● |
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● |
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● |
● |
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● |
● |
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● |
● |
● |
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Notes: PV = photovoltaic. Full circle = growth area supported by observed strategic investments (e.g. M&A) and/or capital/operational expenditures in commercial-scale activities; half circle = announced strategy and/or minor investments, venture capital and/or research and development (R&D) spending; empty circle= limited evidence of investment activity. For methane and CO2 emissions, which are not based on project and spending data, assessments reflect the presence and strength of methane reduction and emissions intensity targets, as well as evidence of their implementation, the emissions intensity trend of new investment, transparent reporting of absolute emissions and sources, and linking of executive and staff compensation to achieving goals. Power generation and efficiency investments in the Transitioning category pertain to projects destined for commercial sales (not own use). Electrified services include battery storage and EV charging. Low-carbon gases include low-carbon hydrogen and biomethane.
45 | The Oil and Gas Industry in Energy Transitions | IEA 2020. All rights reserved
Oil & gas industry today
Accommodation with energy transitions is a work in progress
Some large oil and gas companies have made strategic and investment moves to diversify outside their core businesses of oil and gas supply, as well as to reduce the environmental footprint and enhance the efficiency of operations. Within the energy sector, these responses can be grouped into four areas: i) traditional oil and gas operations; ii) CCUS; iii) low-carbon liquids and gases; and iv) transitioning from “fuel” to “energy” companies; these options are further elaborated in
Section IV.
Emissions reduction measures and targets feature prominently in the strategies of many large oil and gas companies. As noted above, these measures include efficiency improvements, choosing lower-carbon sources to supply those facilities, reduced flaring and reduced methane emissions.
However, for the moment, investments by oil and gas companies in non-core areas remain a minor part of their overall spending, and operational improvements vary in terms of their observed results.
As measured by the CO2 intensity of invested capital, emission indicators for some companies (e.g. BP, Shell, Equinor) have improved by over 10% since 2015, while for several other companies they have worsened. Some players (e.g. ExxonMobil, Chevron, Eni) have become important off-takers of renewable power through corporate power purchase agreements.
Aggregate trends suggest that alignment by the industry with energy transitions is, at best, a work in progress. To a degree, this reflects broader policy and market signals, which in most parts of the world have not encouraged a wholesale change in company strategic priorities. But the bottom line remains that there are few signs of the significant reallocation of capital spending that would be required to meet the goals of the Paris Agreement.
46 | The Oil and Gas Industry in Energy Transitions | IEA 2020. All rights reserved