Sizing up Big Oil's clean tech moves
Oil giants face tricky strategic decisions as they move into renewables, vehicle electrification and other tech beyond their very dominant fossil fuel lines, argues a new analysis released via the Oxford Institute for Energy Studies.
Why it matters: The OIES analysts argue that giants like ExxonMobil, BP and Shell must navigate two large and contradictory global forces: growing political, societal and market pressure to cut global emissions and the strong likelihood that "significant volumes of oil and gas will be required well after 2050."
The big picture: "This poses a major challenge for [international oil companies], whose current business models and technologies are incompatible with full decarbonization, but whose future depends on them being part of the solution."
Where it stands: Companies are employing a mix of strategies that involve investments — both directly and via their VC arms — in tech that replaces fossil fuels, as well as ways to find and produce oil-and-gas more efficiently and see it burned it with less pollution.
- The paper is a helpful look at some of the specific kinds of investment that different companies are making, such as Equinor's investment in a company developing solars cells made with perovskite.
The intrigue: The energy transition is a challenge for companies, as the technology may fall outside their core competency or they're getting involved in businesses that may provide lower returns or use unproven technologies.
One cool part of the paper breaks down oil majors' patents by broad technology types and technologies. It's c0-authored by Rob West, whose consultancy Thunder Said Energy maintains a patent database that provides a window into companies' positioning
- The high-level takeaway: So far just 8% of the patents are in what's broadly described as "new energies," including renewables.
- The rest are "aimed at improving the efficiency of fossil fuels, which indicates that companies remain focused on their traditional activities."
But, but, but: The picture looks somewhat different when you turn to the majors' VC arms. They looked at 200 VC investments by the largest oil companies, and new energies had the second-highest total
- One thing West and OIES director Bassam Fattouh emphasize is that for all the attention renewables and electrification, that won't be nearly enough to decarbonize the energy sector.
- "The [international oil companies] have an opportunity to develop non-electric zero carbon technologies to help fill this gap," they note.
The bottom line: "IOCs should ramp up on technologies where they see real opportunities and they are in a good position to exploit. But it remains very unclear whether these investments are being pursued as part of a long-term vision or as part of an ad-hoc approach," the paper states.