Big Oil Is Spending Serious Money On Clean Energy

With the energy transition now in full swing, the green and low-carbon energy sectors have been seeing record investment inflows as governments as well as public and private sectors double down on climate goals. In 2021, global spending on green energy climbed 27% Y/Y to a record $755B as per a Bloomberg New Energy report. That compared favorably with annual global energy investments which are estimated to have increased 10% Y/Y to USD 1.9 trillion, in line with pre-crisis levels.

In the past, fossil fuel companies have been repeatedly lambasted for ‘greenwashing’ and dedicating only minuscule amounts of their huge capex budgets to renewable energy. But that trend now appears to be turning around.

According to a report by energy investment navel-gazer Evaluate Energy, global upstream M&A hit a record $144 billion in 2021 with Woodside Petroleum (OTCPK:WOPEF), Santos (OTCPK:STOSF), and BHP Group (NYSE:BHP) undertaking multibillion-dollar international mergers while Pioneer Natural Resources (NYSE:PXD), ConocoPhillips (NYSE:COP) and Continental Resources (NYSE:CLR) made huge Permian acquisitions and scores of gas companies joined the consolidation wave in the U.S.

But an even more interesting trend has emerged: last year, traditional oil and gas companies were among the most active when it came to striking green energy deals and investments.

Upstream oil and gas producers struck a total of 81 green energy deals in 2021, the most active of which were Shell Plc. (NYSE:RDS.A), Eni S.p.A (NYSE:E), BP Plc. (NYSE:BP), TotalEnergies SE (NYSE:TTE), and Chevron (NYSE:CVX). Another interesting finding was that a greater number of emerging sectors have been gaining traction, including hydrogen production projects, electric vehicle charging, and biofuels.

#1. Shell Plc

According to Evaluate Energy, Shell agreed to 10 green/low carbon energy deals

in 2021, making it the single most active company among all oil and gas producers.

The company’s investments were highly diverse, with no more than three deals related to any individual sector. Half of its deals revolved around wind and solar energy but it also had deals in the electric vehicle, biofuel, and retail power sectors globally.

Shell agreed to four new deals in Q4 alone, of which two were in the U.S. solar services sector. First, it acquired a cleantech solar power service company, Cleanloop, via a U.S. solar subsidiary. Then it acquired a large utility-scale solar and energy storage developer, Savion LLC, from Macquarie’s Green Investment Group. The other two Q4 deals were in the Australian retail power sector and the Irish offshore wind sector.

Shell has accelerated the pace of divestiture of its oil and gas assets and is preparing to sell stakes in two natural gas-producing clusters in the British North Sea, according to Reuters.

The Clipper Hub and Leman Alpha complex could fetch as much as $1b for the supermajor.

Shell has sold a number of aging upstream assets in the North Sea in recent years, including a $3.8b sale to Harbour Energy (OTCPK:PMOIF) in 2017.

#2. Eni S.p.A

Italy’s largest integrated oil and gas company, Eni S.p.A, closed nine green energy deals in 2021, with six being in wind or solar. The deals could potentially result in Eni’s combined wind and solar portfolio across Italy, France, Spain, and the U.K. growing by over 5 GW in annual capacity, should all related projects reach completion.

Eni agreed to two of its deals in Q4. It acquired a 20% stake in the U.K.’s Dogger Bank Wind Farm C project from Equinor (NYSE:EQNR) and SSE for £70 million apiece. The combined stake represents around 240 MW overall capacity. The project is the third phase of the world’s largest offshore wind farm (3.6 GW) and is currently under construction. Production of this particular phase is slated to start in 2025.

In separate news, Var Energi, a private North Sea oil and gas producer owned by Eni and HitecVision, is set to go public in Oslo on February 16th at an ~$8.0b valuation.

Eni owns 70% of Var, having contributed their North Sea assets to Var in exchange for equity in 2018. Rumors of the IPO have been in the market for weeks, as Bloomberg flagged listing plans in January at a $10b valuation.

#3. BP Plc

Evaluate Energy notes that BP has been extremely active in the electric vehicle space in recent years compared to its peers. In March, the British major acquired a stake in German firm Digital Charging Solutions GmbH alongside BMW Group (OTCPK:BMWYY) and Daimler Mobility AG. DCS is one of Europe’s leading developers of digital charging solutions for automotive manufacturers and vehicle fleet operators.

In June, BP led a $13.2 million investment round and invested $7 million in U.S.-based EV charging firm IoTecha. BP completed its EV activity for the year in December, agreeing to acquire another U.S.-based EV charging firm, AMPLY Power.

#4. TotalEnergies SE

French energy multinational TotalEnergiesSE completed six low-carbon deals in 2021. The bulk of TotalEnergies’ green energy investments came in the first half of 2021, with arguably the highest-profile of these deals taking place in the solar sector.

In January, the company acquired a 20% stake in Adani Green Energy Ltd. (AGEL) in India and then completed another significant acquisition a week later, this time in the United States. Both deals are key to Total’s plans to reach 35 GW of gross production capacity from renewable sources by 2025 while adding 10 GW per year from that point going forward. AGEL has over 14.6 GW of contracted renewable capacity, with an operating capacity of 3 GW, plus 3 GW under construction and 8.6 GW under development. The company aims to achieve 25 GW of renewable power generation by 2025.

The acquisition in the United States saw Total acquire a development pipeline of 2.2 GW of solar projects and 600 MW of battery storage assets in Texas from SunChase Power.

#5. Chevron Corp.

Chevron Corp. stands out as the only non-European to feature on this list. The U.S. supermajor has been especially active in the more emerging sectors that make up the green energy industry. Among its highlights for the year, Chevron made two investments in hydrogen-based projects in the U.S.

The first was an investment in Raven SR Inc. with a handful of industry partners. Later, Chevron agreed to acquire ACES Delta LLC, which was previously a joint venture between Mitsubishi Power Americas Inc. and Magnum Development LLC.

By Alex Kimani for Oilprice.com