OPINION: The bounceback in energy prices has come just in time for the oil majors.
It allows companies to please shareholders with strong dividends and governments with more spending on renewables.
Balance sheet strength also brings renewed confidence to executives, allowing them to fight their corner more robustly.
Shell takes the heat
None is more in the public eye than Shell, which has soaked up much of the investor, political and even judicial heat on decarbonisation.
This is not because it has done the least, but maybe because it has done more than most and been happy to talk about it.
Shell has suffered most by losing a court case in its home base, the Netherlands, and been given legal climate-mitigation goals.
Activist shareholders have also been putting increasing pressure on the board to set more “inspirational” targets on carbon dioxide reduction.
Chief executive Ben van Beurden has been at the forefront of the debate over the role of big oil companies and climate action.
A bounceback in second-quarter earnings at $2.63 billion on a current cost of supply basis, thanks to higher oil prices, has certainly helped.
Shell announced a 40% increase in dividends and kicked off a $2 billion share buyback scheme on the back of the profit surge.
This has delighted investors, while the supermajor has moved to boost its green credentials by buying US residential renewables retailer Inspire Energy.
However, these advances have not stopped it coming under fire for pressing on with plans for the Cambo offshore oil field development near the Shetlands, north-east Scotland.
“As long as the UK still needs oil and gas...for its society, it’s better to produce it in its own backyard,” argues Van Beurden.
The argument in Western Europe over the future of hydrocarbons will continue to rage, but the British government — a low-carbon leader as well as a crude producer — has shown no sign yet of wanting to wind down North Sea operations.
Meanwhile, other European oil companies have rebuilt their finances as crude prices have more than doubled to $75 per barrel since November.
Strong public pressure
Eni said it would beat its 2021 target of getting 2 gigawatts of renewable energy installed and under construction.
But the amount of cash being invested by oil companies in low-carbon power remains small compared with hydrocarbons.
The oil majors are not up against the wall as they were last year, when many were driven into loss by a collapse in crude prices due to Covid-19.
Yet the public pressure on them remains strong — particularly in Europe — to quickly cut emissions, if not production. Carbon capture and hydrogen would help, although renewable projects themselves are not trouble-free, as is shown by the first-half loss at services supplier Saipem.
Meanwhile, manpower shortages and project delays continue to cast a cloud; look at the problems facing Singapore yard owner Sembcorp Marine.
It’s not Covid and out yet.
(This is an Upstream opinion article.)