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Renewable energy investment path of international oil companies

Renewable energy investment path of international oil companies

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The spread of the new crown pneumonia epidemic globally has affected the supply and demand pattern of the global oil and gas market, and has accelerated the process of business transformation and structural adjustment of traditional oil and gas companies to a certain extent. Since 2020, European International Petroleum Corporation has begun and increased asset acquisitions in photovoltaic power generation, wind power, hydrogen energy, biomass, and CCS/CCUS and other new energy and low-carbon business fields. In the first half of this year, international oil companies and oil service companies in Europe and North America exhibited the following characteristics in the acquisition of new energy and low-carbon business assets. "

Under the established zero-carbon target, European oil companies continue to advance in the field of renewable energy mergers and acquisitions

After Shell, Total, bp, Statoil, Eni, Repsol and other European international oil companies successively disclosed the zero carbon emission plan targets, they announced their respective companies' renewable energy development by 2025, 2030 and 2050. the goal. Among them, Shell plans to expand its electricity wholesale and retail business on a large scale, and strive to become the world's largest integrated electricity supplier by 2030; Total strives to expand its renewable power generation capacity by 10 times by 2050, and renewable electricity sales account for the company 40% of sales revenue. The mergers and acquisitions of renewable energy assets by European oil companies in the first half of the year are also organized around these goals and plans.

Actively implement new energy asset mergers and acquisitions around the development goals of comprehensive energy companies. On February 5, Total announced the purchase of a 2.2 GW solar power plant assets and 600 MW battery energy storage assets in Texas, USA from renewable energy developer SunChase Power and private energy investment company MAP RE/ES; On February 16, bp and Chevron invested 40 million US dollars in the start-up Eavor for the research and development of geothermal power generation; on February 18, the Italian company Eni said that it signed an agreement from the renewable energy developer X-Elio Energy. Acquired three photovoltaic projects in Spain with a total generating capacity of 140 MW.

In addition, Eni also said that it is negotiating with X-Elio for a larger-scale strategic cooperation to increase its renewable energy projects in Spain by at least 1,000 megawatts in the next five years; on February 26, Shell announced that its subsidiary Shell’s overseas investment department has reached an agreement to acquire 100% of the shares of Next Kraftwerke, a German virtual power plant operator; on March 12, Italy’s Eni and the Italian National Loan Agency (CDP) established GreenIT with 51% equity. In the future About 800 million euros (957 million US dollars) will be invested in solar and wind energy production within 5 years, and an installed capacity of about 1,000 megawatts will be achieved by 2025; on May 7, Statoil announced that it will purchase 91 million euros from the private equity firm Enterprise   Investors. The acquisition of 100% of the shares of the Polish land-based renewable energy developer Wento. This acquisition can not only support Statoil in its efforts to become a leading company in the energy transition, but also provide a strong momentum for the growth of the Polish energy market.

In addition, Total Group’s acquisition of French company Fonroche   Biogaz and Shell’s acquisition of 40% of Canadian clean technology company Enerkem can be seen as the layout and progress of European international oil companies in renewable gas and biofuels and other new energy businesses.

Consider implementing asset mergers and acquisitions for new energy-related businesses based on a diversified development strategy. In addition to marching into the renewable power industry, the European International Petroleum Corporation, in accordance with relevant diversified development strategies, also pays great attention to the layout of advanced mobile travel business, and pays attention to the use of capital operations, including battery production, charging network and technology, charging piles, etc. A competitive advantage is formed in the electric vehicle value chain.

On January 25, Shell announced the acquisition of ubitricity, a UK-based on-street charging network service provider for electric vehicles. Shell said that ubitricity has the largest public electric vehicle charging network in the UK, with more than 2,700 charging points under its umbrella, with a market share of more than 13% in the UK; the company has also established emerging public charging stations in Germany and France, and in Europe More than 1,500 private charging stations have been installed for fleet customers. This acquisition marks Shell’s expansion into the fast-growing street electric vehicle charging market and the expansion of its overall electric vehicle charging business. On June 23, bp invested US$7 million in IoTecha, an American smart electric vehicle charging company, continuing its recent years of continuous consolidation of the development foundation of electric vehicle network charging business around the world through asset mergers and acquisitions. bp's goal is to provide more than 70,000 public electric vehicle charging stations worldwide by 2030.

The optimization and adjustment work under a certain asset scale has already started. On February 23, Total announced that it would sell half of its equity in France's two renewable energy asset portfolios to Banque des Territoires and Credit Agricole Assurances. The total power generation capacity of these two investment portfolios is close to 340 megawatts, valued at approximately US$600 million. The latest statistics from Fitch International show that Total's renewable energy projects have reached 40, which is a leading position among international oil companies. Although this sale of rights and interests in renewable assets is only an individual event of Total, it reflects a trend signal that the traditional oil and gas industry giants have been deeply involved in the deployment of renewable energy and after a period of accumulation, they have begun to pass assets. Spin-off and disposal, and proceeded to optimize the renewable energy asset structure. From this perspective, the European International Petroleum Company represented by Total has already led the international oil companies in other parts of the world in this regard.

Renewable energy investment return level and contribution rate continued to increase. For a long time, the renewable energy power generation industry has relatively low risks and stable returns, and the rate of return has tended to be consistent with that of public utilities. According to IHS Markit estimates, since 2010, the median annual operating return on oil and gas investment capital has been 7.4%, photovoltaic and wind energy manufacturing has been 4.7% to 7.3%, and renewable energy power generation has been close to 0.5% to 0.7%. However, in recent years, international oil companies are striving to improve the rate of return of the new energy business, thereby enhancing the competitiveness of the new energy business, and allowing low-carbon investment to make greater contributions to the company's overall performance. Statoil’s after-tax income in the first quarter of 2021 was US$2.66 billion, of which 50% of the income, or US$1.34 billion, came from renewable energy; Total’s income in the first quarter of this year was comparable to the level before the new crown epidemic, except for the rise in oil and gas prices. In addition to factors, the increase in power generation revenue and profits is also an important factor. At present, European international oil companies represented by Total, Statoil, bp, and Shell are trying to achieve double-digit return on investment from new energy assets.

The public's response was mixed. Although European international oil companies are actively moving forward in the energy transition process, for example, BP has formulated a very radical energy transition plan, divesting a large proportion of oil and gas businesses and assets, greatly increasing investment in renewable energy businesses, and even spares no hesitation for green and clean development Sacrifice the current profits; in May, the French oil and gas giant Total changed its name to TotalEnergies, in order to demonstrate its desire to become a diversified energy company; others such as Shell, Repsol, Eni, Statoil, etc. European oil companies are also in the forefront of global oil and gas companies in terms of announcing zero-carbon goals and green development. But society and the public have different degrees of recognition. What is particularly unexpected is that on June 7, a court in The Hague, the Netherlands, ruled that Shell must cut its net carbon emissions by 45% from 2019 by 2030, greatly increasing Shell’s “to 2030 Years ago, we will reduce emissions by 20% on the basis of 2016". This also reflects to a large extent that oil companies in different regions are under different pressures in terms of energy transition and development.

North American International Petroleum Corporation adheres to the oil and gas business and focuses on asset mergers and acquisitions in the decarbonization and low-carbon development model of the oil and gas business

Unlike European oil companies, North American International Oil Companies, represented by ExxonMobil and Chevron, choose to stick to their oil and gas business. They firmly believe that the basic logic of oil and gas market demand will not be changed due to the new crown epidemic and choose to use CCS/CCUS technology. Decarbonization of the oil and gas business.

ExxonMobil has pledged to invest US$3 billion in low-carbon fields from now to 2025, and in December 2020 updated the company's carbon emission targets that are aligned with the Paris Agreement. But in the first half of this year, ExxonMobil hardly had any capital operation transactions in the field of renewable energy. Chevron also only involved two capital operations: First, on February 16th, it invested 40 million US dollars in start-up Eavor with bp for the research and development of geothermal power generation; second, on February 25th, Chevron Announced the launch of the second "Future Energy Fund" with a scale of US$300 million. This fund will focus on investments in the fields of industrial decarbonization, distributed energy and circular carbon economy in the future.

International oil service companies implement business transformation and accelerate their entry into the new energy field through joint ventures and cooperation

The new crown epidemic has a huge impact on the oil and gas industry, and international oil service companies bear the brunt. After several quarters of consecutive losses, Schlumberger, Halliburton and other internationally renowned oil service companies implemented energy transformation and digital transformation through investment and acquisition of new energy and low-carbon assets and improved their investment effects. In the first quarter of this year To achieve a profit and loss reversal, Baker Hughes achieved substantial loss reduction.

At the beginning of the year, after selling its two traditional businesses in North America, such as fracturing and sucker rods, Schlumberger also established the Schlumberger New Energy Business Unit, focusing on hydrogen, lithium, carbon capture and storage, geothermal energy, etc. Business; reached an agreement with the thermal energy partner TEP to establish STEP Energy, a geothermal project development company, to use the expertise of its partners to develop efficient and profitable geothermal power generation projects; Schlumberger New Energy Business Unit, CEA and its partners announced , The European Commission approved the establishment of Genvia, a clean hydrogen production technology company. The joint venture will bring together excellent science and advanced engineering technology to accelerate the development of core technologies to achieve cheap hydrogen production, energy storage and large-scale fuel applications; June , Schlumberger and Panasonic announced that they will cooperate to develop new lithium battery production processes and increase lithium battery production to help meet the rapidly growing global electric vehicle market. Schlumberger's new energy business department has been established for only one year, but it has laid out a diversified new energy sector, with the most outstanding results among traditional oil service companies. Baker Hughes and the Norwegian industrial cluster carbon capture and storage developer Borg Carbon Dioxide announced that they will cooperate in a carbon capture and storage project to serve as a hub for decarbonization of industrial sites in the Viken region of Norway.

As the global energy transition and green development continue to deepen, we will wait and see whether the follow-up global international oil companies will continue to increase differentiation or gradually converge in renewable energy asset mergers and acquisitions.