OPINION: European oil majors' clean energy investments are showing an encouraging move into profit while their oil businesses suffer losses as the pandemic weighs on oil demand.
Yet US oil giants are focusing their hopes on a recovery in demand and a return to pre-pandemic prices.
Renewables marked a bright spot in otherwise bleak financial results for Norway's Equinor, which is also looking forward to a billion-dollar gain from a recent offshore wind deal with BP in the US.
European majors' approach
Equinor's new chief executive Anders Opedal also announced plans for it to reach net zero carbon emissions — including from energy consumption — by 2050.
Italy's Eni booked a loss in the quarter due to reduced oil demand, but income from its renewables segment enjoyed strong growth.
Meanwhile, BP chief executive Bernard Looney expressed confidence that hydrogen will become a "material" part of its business — but not before the 2030s.
BP also aims to reduce its output of fossil fuels by 40% by 2030, while increasing annual investments in renewables tenfold.
Eni, Repsol, Equinor, Total and Shell are among those also moving along this road.
But while several oil companies showed off their revenue flows from renewables, the scale of these businesses remains small.
And investors hoping for shorter-term gains are unaccustomed to supermajors asking them to take a leap of faith on a long-term strategy.
Covid-19 could hasten a shift away from fossil fuels, but the industry remains divided about the future.
US giants' approach
In the US, ExxonMobil is convinced clean energy is simply not ready to provide the world’s power solutions and that underinvestment in oil will again drive up its demand and prices.
Alongside Chevron, ExxonMobil has decided to maintain shareholder dividends while sticking to what one equities analyst called "austerity on steroids".
ExxonMobil appears to be holding out for an eventual resurgence in oil demand rather than preparing for a future in which the world relies far less on fossil fuels.
The company plans to raise its oil and gas output by almost a third over the next three years, while looking to carbon capture and offsets to reduce its overall footprint.
But the oil industry still faces strong public and government pressure to invest in clean energy sources — even during the pandemic.
Demand, output uncertainty
Covid-19 is forcing new lockdowns in Europe and threatens others elsewhere. European and US companies' differing visions face the same element of unpredictability.
As Chevron's chief executive Mike Wirth lamented, the world’s economy is simply not recovering to pre-pandemic levels of demand.
With Brent crude as low as $35 per barrel, oil companies have responded by slashing spending, laying off workers and retrenching towards projects more able to reach break-even. This tough approach has even allowed some to post modest profits.
But most oil bosses agree it remains extremely difficult to see when demand will recover to pre-pandemic levels, or if it ever will.
Shell chief executive Ben Van Beurden recently acknowledged his company's oil production may have already peaked, saying, "It is probably fair to say that 2019 was the high point."
That is no reason for despair among oil majors already embarking on a strategic energy transition.
(This is an Upstream opinion article.)