Oil, energy and climate change
Demands for emission cuts mean that more oil companies are now investing in
renewable energy. But can offshore wind ever be as profitable as oil and gas?
The PSA has been given government responsibility for safety within offshore
wind on the Norwegian shelf. In a series of articles, we take a closer look at
what offshore wind power is and how the new industry can be regulated. We are
also investigating what it is that makes more and more oil companies now invest
in renewable energy - and what consequences this has. The article is taken from
the magazine Dialog.
The petroleum industry has long been in severe weather, even before the
corona crisis and low oil prices.
Authorities and owners are demanding cuts in carbon emissions. Investors
withdraw their money. Newspapers do not accept fossil ads. Artists turn down
scholarships from oil companies. Young people demonstrate in the streets and
want an end to all oil activities.
- The companies are exposed to strong pressure from several quarters.
The pressure from institutional investors has increased so much in the last
couple of years that you can no longer operate as a large European oil and gas
company without having a strategy for how to reduce carbon emissions. This is
something completely new, says Valentina Kretzschmar, head of corporate
research at the global analysis company Wood Mackenzie.
Photo by Valentina Kretzschmar
- The pressure on the oil industry is constantly increasing, and it is considered
risky to invest in it. In comparison, investing in renewable projects has clear
advantages, says Valentina Kretzschmar in the analysis company Wood Mackenzie.
Photo: Wood Mackenzie
The development particularly affects the large European companies. The European
authorities require companies to pay attention to society and the environment,
not just to shareholders. They have also set clear targets for cuts in
greenhouse gas emissions. And consumers are targeting the oil industry when
emissions targets are not met.
Some oil companies respond by investing more in renewable energy. Some
withdraw completely from oil and gas. Some continue as before.
Renewables become profitable
It is almost impossible for oil companies to expand their business in renewable
energy, as long as it has to compete with oil and gas projects that provide a
much higher return, Kretzschmar stated in the summer of 2019.
- This was true in a 60 dollar per barrel scenario, but it does not apply if
the oil is sold for 35 dollars per barrel. With such an oil price, investments
in renewable projects can provide as great a return as oil and gas, she says.
At the end of March 2020, Kretzschmar published the report "Could clean
energy be the winner in the oil price war"? Here she claimed that the
corona crisis and the low demand for oil have accelerated the transition to
- What we in our models had expected would happen in 10-15 years, we now see
unfold right in front of our eyes, she says.
Even if the oil price should rise again, something Wood Mackenzie assumes it
will do from 2021, oil and gas are not as attractive as before.
- The pressure on the industry is constantly increasing, and it is
considered risky to invest in it. In addition, there is uncertainty due to the
large fluctuations in oil prices, and that oil and gas projects are very
expensive to develop.
- In comparison, investing in renewable projects has clear advantages, the
- They represent low risk, low carbon emissions and low costs. Many oil
companies therefore realize that it pays to spread the business, and not put
all the eggs in one basket.
Kretzschmar has also registered a change of attitude within some of the oil
- The vast majority of companies react reactively to external pressure. But
we are beginning to see that someone is actually taking responsibility for
limiting the harmful effects of climate change, says Kretzschmar.
She considers Equinor among the largest in Europe, and sees that the company
is investing heavily in offshore wind. They have been followed by, among
others, Shell and Total.
According to Kretzschmar, offshore wind fits very well with the core
competence of these companies:
- They can transfer their knowledge and skills and use them to develop this
new growth sector. We actually believe that offshore wind can deliver as large
dividends and cash flows as the companies are used to from their oil and gas
The PSA will be responsible for offshore wind
This is how the offshore wind industry works with safety
Facts about offshore wind
Hildegunn T. Blindheim, Director of Climate and Environment in Norwegian Oil
and Gas, dates the change of pace to December 2018. That was when the EU
launched "A clean planet for all" - a strategy document that
recommended net zero emissions in 2050.
Two months earlier, the UN Panel on Climate Change had published its report
on the difference between global warming of one and a half and two degrees.
- The seriousness of climate change is indisputable. The EU is setting a
clear direction, and we realized that here we must increase our efforts and set
ourselves new and more ambitious goals than before, says Blindheim.
The measures in the EU have largely been about developing renewable energy,
but the emission problems cannot be solved by electrification alone. The union
has an industry that must reduce its emissions. Steelworks and cement factories
require large amounts of electricity and heat, which is not possible to produce
only with the help of sun and wind. When gas-fired power plants cannot be used
as a backup solution and swing manufacturer, other solutions are needed. Such
- If you burn hydrogen instead of gas, a hydrogen power plant will function
as a solid, emission-free battery for various types of renewable energy, says
In addition, CO2 capture and storage facilities must be built to capture the
emissions, both from this production and other activities. This must happen on
such a large scale that it eventually becomes profitable.
- The technology is mature, but you have to get it built and rolled out so
that you reduce costs, she points out.
Blindheim led the work of creating a new, revised climate roadmap for the oil
industry. This resulted in the Konkraft report «The energy industry of the
future on the Norwegian shelf. Climate strategy towards 2030 and 2050 », which
was published in March 2020.
The roadmap states that the oil and gas industry in Norway will cut its
greenhouse gas emissions by 40 percent in 2030 compared to 2005, and reduce
them to close to zero in 2050.
- The absolute emissions of greenhouse gases remain at almost the same level
from year to year, even if the industry implements measures. Despite the fact
that we are beginning to see the contours of a decrease in emissions from the
shelf, they will be stable or go up a little for another couple of years. This
is because new fields are being put into production, Blindheim explains.
- When the industry decided on the new climate goals, it also saw that it
was necessary to put in place new reporting and follow-up systems, so that it
can settle the status along the way and ensure that the measures are
implemented. This system is scheduled to be ready during the year.
According to Blindheim, there has been a maturation in the oil industry in
the last couple of years. Instead of defending itself when it is identified as
a problem, it has acknowledged that it may be able to solve many of the
challenges facing the world:
- This is an industry that has crossed the Norwegian Channel and developed
horizontal drilling. We have a lot of technological expertise, and not least
the ability to carry out large, demanding industrial projects, which are
necessary if Europe is to succeed in achieving its climate goals, says the
director of climate and environment at Norwegian Oil and Gas.
Things take time
Leader of the trade union Industri Energi, Frode Alfheim, was involved in
drawing the new climate roadmap. He says that the employees and the employers
agree on the goals - and agree on the instruments.
According to Alfheim, it is about developing technology that can reduce
emissions in its own sector even more, at the same time as new industry in the
form of offshore wind, hydrogen and CO2 capture and storage is built up.
- We run mining on a non-renewable resource, he points out. - At some point,
the mines begin to empty, or the resources become more and more difficult to
- If we were to shut down all emission points in Norway, it would not have
helped in the global climate fight. On the contrary. We had increased the
global emissions of CO2, says Frode Alfheim in the trade union Industri Energi.
Photo: Marie von Krogh
The jobs in the oil and gas industry must be replaced, but according to Alfheim
it will take several decades, and we must build on what we have.
- Those who talk about quitting oil in 2030, live in my head on a distant
planet, he says.
- If we were to shut down all emission points in Norway, it would not have
helped in the global climate fight. On the contrary. We had increased global
emissions of CO2, he emphasizes, and points out that shale oil from the USA has
57 times higher emissions of CO2 per unit produced than oil from the Norwegian
Alfheim believes that we may be too hung up on oil being equal to fuel. He
reminds us that petroleum is an input factor in a number of industries, and is
part of a number of products we surround ourselves with and depend on -
everything from plastics to medicines and textiles. Today, this amounts to only
11 percent of the annual consumption of oil and gas, but he believes the share
will increase in the years to come.
- The corona and oil price crisis may lead to an increased investment in
offshore wind, but energy consumption, and thus the demand for oil and gas,
will probably grow as soon as the economy begins to pick up speed again. The
oil industry will continue to be the most important contribution to employment
and income for AS Norge, the union leader believes, and points out that
offshore wind and other new industries are dependent on support and subsidies
to become profitable.
- A subsidized industry can not support the welfare state, Alfheim points
- I think most people in Norway understand, more than ever, how important it
is that we have this industry.
- And that we have been so wise that we nationalized the ownership of oil
Robert Jaques de Vries
Leder / manager
SAIPEM EMPLOYEES ASSOCIATION
Address: Tenvikveien 64, N-3140 Nøtterøy, NORWAY
Phone: +47 92213442