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

PHOTOS: Momma black bear and cubs spotted in Townsite

A momma black bear and her two cubs, spotted getting near The… Continue reading

Pay guarantee removed for some Kootenay on-call paramedics

Guarantee phased out as BCEHS introduces a new “scheduled on call” model

Home sales down, price correction coming: Realtor

There has been a 10 per cent drop in single family dwelling… Continue reading

Local photographer raises over $5,000 for Cranbrook Food Bank

Damien Vincent raised the money through his version of the Front Porch Family Photo project

No active confirmed COVID-19 cases in Interior Health: BCCDC

Numbers from the BCCDC’s dashboard show 193 of the 195 COVID-19 cases in the region have recovered

March dental conference key to many of B.C.’s COVID-19 cases

Early infections from China, Iran were quickly contained

Vancouver Island First Nations gather to remember woman fatally shot by police

Nuu-chah-nulth Tribal Council requests an independent investigation

Regional District of Kootenay Boundary rescinds all Grand Forks-area evacuation orders

Evacuation alerts for 1,136 Boundary properties remain in effect as officials monitor forecasts

MAP: Dr. Henry reveals which B.C. regions have seen most COVID-19 cases

B.C. health officials release a first look at how the novel coronavirus has reached all corners of the province

Tla-o-qui-aht First Nation woman, 26, fatally shot by police in Edmundston, N.B.

Police were conducting a well-being check at the time of the incident

Introducing the West Coast Traveller: A voyage of the mind

Top armchair travel content for Alaska, Yukon, BC, Alberta, Washington, Oregon and California!

Seniors to receive up to $500 in promised COVID-19 emergency aid in early July

The Liberal government first promised the extra help in mid-May, but had to create a new system to deliver the aid

VIDEO: Revelstoke bear wanders into Animal House pet store

Staff got ready to chase it out with a broom

Nelson counsellor works online with university students in central Asia during pandemic

Robin Higgins is home from her job in Tajikistan because of COVID-19

Most Read