As the clean energy transition continues, it’s getting harder for oil and gas majors to ignore.
That doesn't mean it's easy to reorient these companies around a new set of technologies. For majors dabbling in clean energy, there are some risks with undefined rewards.
“Diversification into renewables is a difficult business proposition for the majors. It’s a challenge for their CEOs to keep their shareholders happy and also make sure the business transitions into the low carbon future,” said Valentina Kretzschmar, director of corporate research at Wood Mackenzie. “At the same time, most of them understand this is the future — this is the way things will evolve.”
Balancing the perceived risk profile of renewables projects with their potential is among the chief challenges now confronting oil and gas majors.
A new report from Wood Mackenzie Power & Renewables seeks to highlight areas where oil and gas majors may find an easier entrance into the market.
Author Tom Heggarty, a senior solar analyst at WoodMac, said success will hinge partly on majors detaching from traditional thinking about risk and return — which are both lower in renewables projects than in oil and gas — and considering clean energy as a new business prospect.
“That’s the key pushback we get when we speak to companies like ExxonMobil, Total or any of the oil and gas majors,” said Heggarty, of the lower returns for renewables projects. “What we’re saying to some of these companies is they need to think about these investments in a totally different way.”