Suncor pipes that carry various liquids from their MacKay River pad in the oil sands in Fort McMurray Alta, on Monday June 12, 2017. Budget cutting in response to the twin challenges of COVID-19 demand destruction and low oil prices as Saudi Arabia and Russia fight a price war mean the world’s oil and gas industry will likely spend less on renewable energy going forward. THE CANADIAN PRESS/Jason Franson

Big Oil’s interest in renewable energy investments expected to waver: report

Carbon mitigation budgets will be looked at carefully, an analyst says

Budget cutting in response to the twin challenges of COVID-19 demand destruction and low oil prices mean the world’s oil and gas industry will likely spend less on renewable energy going forward.

But a report from consultancy Wood Mackenzie says that won’t likely slow the overall investment in renewables — fossil fuel players really weren’t putting much money into it anyway.

“In a US$60 per barrel oil price environment, most companies were generating strong cash flow and could afford to think about carbon mitigation strategies,” said Valentina Kretzschmar, vice-president, corporate analysis, at Wood Mackenzie.

“But now … all discretionary spend will be under review — that includes additional budget allocated for carbon mitigation. And companies that haven’t yet engaged in carbon reduction strategies are likely to put the issue on the back burner.”

Earlier this week, Calgary-based oilsands giant Suncor Energy Inc. announced it would cut its 2020 capital budget by 26 per cent or $1.5 billion in response to lower global oil prices linked to a price war between Saudi Arabia and Russia.

Two previously approved projects were put on hold for as much as two years: A $1.4-billion plan to install two cogeneration units at its Oil Sands Base Plant in northern Alberta that would have reduced greenhouse gas emissions, as well as a $300-million wind power plant in southern Alberta.

But the company insists it still intends to meet its environmental targets.

“We’re committed to our 2030 goal to reduce the GHG intensity of our operations by 30 per cent,” said Suncor spokeswoman Erin Rees. “Commissioning of the cogen was originally slated for 2023.”

Fellow oilsands producer Cenovus Energy Inc. has cut its capital spending plan for 2020 by 32 per cent and, although the details haven’t all been worked out, spokeswoman Sonja Franklin said it remains committed to its target of net zero GHG emissions by 2050 and a 30 per cent reduction in carbon intensity per barrel by 2030.

Choosing fossil fuel investments over renewables is like Kodak investing in film after inventing the digital camera in the 1970s, said Greenpeace Canada campaigner Keith Stewart.

“The current oil price crash is a preview of what will play out in the coming years, as electric vehicles coupled with cheap solar and wind power do to oil demand what digital cameras did to the market for film,” he said.

“If oil companies can’t evolve to deal with investors increasingly concerned about climate risk, then we should make sure they don’t take their workers and communities down with them.”

On Wednesday, Spanish energy giant Repsol, which produces some of its oil and gas in Canada, said it would cut its 2020 capital budget by more than one billion euros (about C$1.55 billion), but would still maintain its target to reduce its carbon intensity for 2020 by three per cent compared to 2016.

It vowed to significantly increase its renewable power generation capacity and to reduce carbon dioxide emissions across all its businesses.

“With these measures, amidst the current extraordinary conditions, Repsol ensures the robustness of its balance sheet in the short term while it continues to pursue its goal to achieve net zero carbon emissions in 2050,” it said in a statement.

READ MORE: Okanagan pumps dip below $1 per litre

In its report, Wood Mackenzie notes that the five European oil and gas majors have committed to spend just over US$5 billion per year between them on zero carbon technologies in the near term, about nine per cent of their pre-crisis upstream development budget out to 2022.

But it notes the total renewable energy portfolio by the group, including those most focused on diversifying into renewables such as Repsol and Portugal’s Galp, is about 7.4 gigawatts of operational renewable capacity (a gigawatt is enough to power roughly 700,000 homes).

By comparison, Iberdrola, one of the world’s largest renewable power asset owners, has almost five times that capacity (32 GW, including hydro) and added almost three GW during 2019, it said.

Installations of both wind and solar continued to increase through the last oil price downturn, Wood Mackenzie’s analysis shows, because most investment comes from outside the oil and gas sector.

It adds that oil prices that average around US$35 per barrel reduce the returns from new oil and gas projects to a level where renewable investments can compete on an economically level playing field.

“Capital allocation is no longer a one-way street for Big Oil. Renewables projects suddenly look as attractive as upstream projects at US$35 per barrel.”

Dan Healing, The Canadian Press


Like us on Facebook and follow us on Twitter.

Coronavirusoil and gas

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Haida Gwaii libraries launch new ‘takeout’ curbside pickup service

As of June 5, cardholders can once again access physical copies of books, DVDs and more

Blacktail Haida Gwaii working to reopen with new covered patio

Chef-owner Edi Szasz hopes to reopen on June 25, the one-year anniversary of the restaurant

Skidegate daycare staff recognized for creative care during COVID-19

Staff have been using social media to share isolation activities, read stories and sing songs

Village of Queen Charlotte approves business facade improvement grants

Applications from Gather, dental clinic, A Level Up approved, leaving about $14,000 up for grabs

Recycling services in Queen Charlotte, Port Clements expanding next week

Residential plastics will be accepted again, but most residential transfer stations remain closed

VIDEO: B.C. dentist gets grand welcome home after two months in hospital fighting COVID-19

Michael Chow was given a surprise send off by hospital staff and ‘welcome home’ from neighbours

‘Like finding a needle in a haystack’: Ancient arrowhead discovered near Williams Lake

The artifact is believed to be from the Nesikip period between 7,500 BP to 6,000 BP

Friends, family mourn Salt Spring Island woman killed in suspected murder-suicide

A GoFundMe campaign has been launched for Jennifer Quesnel’s three sons

PHOTOS: Anti-racism protesters gather in communities across B.C.

More protests are expected through the weekend

Indigenous chief alleges RCMP beat him during arrest that began over expired licence plate

Athabasca Chipewyan Chief Allan Adam calling for independent investigation

‘I’m pissed, I’m outraged’: Federal minister calls out police violence against Indigenous people

Indigenous Minister Marc Miller spoke on recent incidents, including fatal shooting of a B.C. woman

Indigenous families say their loved ones’ deaths in custody are part of pattern

Nora Martin joins other Indigenous families in calling for a significant shift in policing

UPDATED: Pair accused of ‘horrific’ assault at Vancouver’s Oppenheimer Park arrested

Police say Jason Tapp, 30, and Nicole Edwards, 33, did not show up to meet their bail supervisor this week

Most Read