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

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

Chief Constable Norm Lipinski, Surrey Police Service. (Submitted photo)
Surrey chief constable says ‘comprehensive’ public engagement to be done this year

Norm Lipinski says Surrey Police Service has ‘good momentum’

Burnsview Secondary in a Google Streetview photo.
UPDATE: Knife recovered after schoolyard stabbing in North Delta

One teen now out of hospital, and other has been released to custody of family with conditions

The City of Surrey is seeking public input on its walking routes, including Semiahmoo Trail. (Tracy Holmes photo)
Surrey seeks input from seniors on city’s walking routes

Online survey is part of city’s Age Friendly Strategy

Surrey-raised forward Jujhar Khaira in action with Edmonton Oilers. (Photo: nhl.com)
Q&A: Surrey’s Jujhar Khaira credits parents for their hard work on his path to NHL

Port Kells-raised player talks about his journey to pro hockey with Edmonton Oilers

Maj.-Gen. Dany Fortin, vice-president of logistics and operations at the Public Health Agency of Canada, speaks at a news conference on the COVID-19 pandemic in Ottawa, on Friday, Jan. 15, 2021. THE CANADIAN PRESS/Justin Tang
B.C. records 500 new COVID-19 cases Wednesday, 14 deaths

Outbreak at Surrey Pretrial jail, two more in health care

Vancouver Canucks’ Travis Hamonic grabs Montreal Canadiens’ Josh Anderson by the face during first period NHL action in Vancouver, Wednesday, Jan. 20, 2021. THE CANADIAN PRESS/Jonathan Hayward
Horvat scores winner as Canucks dump Habs 6-5 in shootout thriller

Vancouver and Montreal clash again Thursday night

A woman writes a message on a memorial mural wall by street artist James “Smokey Devil” Hardy during a memorial to remember victims of illicit drug overdose deaths on International Overdose Awareness Day, in the Downtown Eastside of Vancouver, on Monday, August 31, 2020. THE CANADIAN PRESS/Darryl Dyck
B.C. paramedics respond to record-breaking number of overdose calls in 2020

On the front lines, COVID-19 has not only led to more calls, but increased the complexity

Eighteen-year-old Aidan Webber died in a marine accident in 2019. He was a Canadian Junior BMX champion from Nanaimo. (Submitted)
Inadequate safety training a factor in teen BMX star’s workplace death in 2019

Aidan Webber was crushed by a barge at a fish farm near Port Hardy

Southern resident killer whales in B.C. waters. Research shows the population’s females are more negatively influenced by vessel traffic than males. (Photo supplied by Ocean Wise Conservation Association)
Female orcas less likely to feed in presence of vessel traffic: study

Research the southern resident population raises concerns over reproduction capacity

(Black Press Media files)
Transport Canada not budging on enclosed deck rules, despite calls from BC Ferries union

There have been at least 23 cases of the U.K. variant detected in Canada, four of which are in B.C.

The Elk Valley Hospital is adapting to meet the needs of patients in the Elk Valley.
1-in-5 COVID tests coming back positive in and around Fernie, sparking concern

Dr Ron Clark of Elk Valley Hospital said one in five tests was returning positive for COVID-19

Ralliers gather in front of the Cityviews Village apartment building in Maple Ridge to protest attempts to evict low-income tenants by the building owner. (Ronan O’Doherty - The News)
Tenants protest pressure tactics by new landlord at Maple Ridge apartment building

Protest held in front of Cityviews Village on 223 St. Tuesday to rally against low-income evictions

Throughout December, RCMP conducted CounterAttack road checks as police worked to keep roads free of impaired drivers. (BLACK PRESS file photo)
‘You can’t make this stuff up’: Stories from the B.C. CounterAttack campaign

Amusing, yes, but a reminder impaired driving affects ability to drive and to make good decisions

Most Read