The gas station you know best will transform into a charging station.

Image: Eni, Italy's oil company, unveils its green data center. Eni's CEO stated that he hopes the facility will increasingly rely on green energy.

In 2020, oil giants—especially those based in Europe—began gradually shifting their focus toward power companies. Driven by mounting pressure from governments and investors, industry leaders like BP (British Petroleum) and Shell are accelerating their production of clean energy. At the end of July, Royal Dutch Shell secured a major project to build a massive offshore wind farm off the coast of the Netherlands. Meanwhile, during the first half of this year, TotalEnergies, one of the world's four largest petrochemical companies headquartered in France, acquired a battery manufacturer under its umbrella. This company is set to make several significant investments in solar power projects in Spain as well as wind farms near Scotland. Additionally, TotalEnergies has expanded its electric vehicle charging infrastructure in Spain by partnering with Shell and BP.
These companies, while cutting their capital budgets, have also abandoned their previously more ambitious drilling plans. Shell recently announced it will delay developing new oil fields in the Gulf of Mexico and the North Sea, while BP has pledged that it will no longer pursue oil exploration in any new countries. Under pressure from governments and investors, European oil companies are accelerating their shift toward cleaner energy production, with electricity taking center stage. Some are even starting to promote hydrogen as part of this transition, alongside natural gas, which they see as a clean bridging fuel—helping move away from coal and oil toward renewable energy sources.
For executives at these companies, the sharp drop in oil demand triggered by the pandemic—and the resulting decline in profits—pose another significant threat: unless they reshape their business models, they risk becoming "dinosaurs destined for extinction." Claudio Descalzi, the 65-year-old CEO of Italy's Eni Group, remarked, "Over the past six years, our oil commodities have experienced extreme volatility." He has spent nearly 40 years with the company. Looking ahead, he expressed his ambition to build a business that increasingly relies on green energy rather than oil. "We aim to move away from volatility and uncertainty," he added.
Bernard Looney, a veteran who has worked at BP for 29 years and took over as CEO this February, stated: "The world's demand for energy is evolving, so we need to adapt—and frankly, change the products we deliver." The bet is that electricity will become the primary means of providing clean energy in the future.

Image: Floating solar installation in the UK, a joint venture between BP and Lightsource

Analysts say that U.S. giants like ExxonMobil and Chevron have historically been slower than their European counterparts in committing to ambitious climate-related goals, partly because they face less pressure from governments and investors—though recent calls from the U.S. financial community have been growing louder. Jason Gammel, a senior oil analyst at investment bank Jefferies Group, notes, "We’re seeing greater differentiation in corporate strategies between U.S. and European oil companies than at any other point in my career." Companies such as Shell and BP are now striving to redefine themselves for this new era—shifting away from extracting natural resources from the Earth and transforming instead into power providers rather than traditional oil drillers.
They aim to leverage their existing teams of thousands of engineers to oversee the construction of next-generation energy facilities; utilize their extensive network of gas stations to offer services such as electric vehicle charging; and tap into their established trading platforms—typically used for buying and hedging various energy futures—to help cities or major corporations secure low-carbon energy supplies. Today, all of Europe's major oil companies have set ambitious targets to reduce carbon emissions that drive climate change. Most of these companies have committed to achieving "net-zero emissions" by 2050, a goal that has also gained strong backing from governments in countries like the EU and the UK.
These companies plan to achieve this goal by selling more and more renewable energy sources, and in some cases, by offsetting emissions through so-called nature-based solutions—such as planting forests to absorb carbon. Electricity remains central to most of their strategies. Meanwhile, hydrogen—a clean-burning gas that can store energy and generate power for vehicles—is also playing an increasingly important role.

Image: Eni CEO Claudio Descalzi stated, "We aim to stay away from volatility and uncertainty."

BP has been the most prominent player in terms of transformation. In August, Looney announced plans to more than double its investment—specifically targeting low-emission businesses like renewable energy—to $5 billion annually over the next decade, while simultaneously cutting oil and gas production by 40%. By 2030, BP aims to generate renewable energy equivalent to the output of dozens of large-scale offshore wind farms. However, Looney emphasized that maintaining oil and gas production remains essential, as it will ensure robust cash flow to fund the company’s future growth. Environmental advocates and analysts alike hailed Looney’s statement about BP’s declining oil and gas output as a significant breakthrough, one that is likely to put pressure on other companies across the industry, ultimately driving broader industry-wide change.
"BP's move clearly sets it apart from its peers," says Andrew Grant, an analyst at London-based nonprofit Carbon Tracker. He notes that, so far, most other oil companies have been reluctant to confront the "trend toward reducing fossil-fuel production." While both environmental and investment communities remain skeptical about whether century-old giants like BP and Shell can adapt to this new challenge, these companies undeniably bring scale and deep technical expertise to the task. Energy historian Daniel Yergin, who is set to publish a book titled *The New Map* exploring today’s energy transition, adds: "Shifting a global economy that still relies on fossil fuels for 80% of its energy supply will be an enormous undertaking." Yet he emphasizes, "These companies are remarkably adept at managing large-scale, complex projects—skills that are absolutely essential for navigating a transformation of this magnitude."
Michele Della Vigna, head of natural resources research at Goldman Sachs, noted that major oil companies have increased their investments in low-carbon energy to as much as 15% of their average capital expenditures in 2020 and 2021—and when natural gas is included, this figure rises to around 50%. He added, "The reason they're doing this is due to pressure from regulators and shareholders." Meanwhile, Oswald Clint, an analyst at Bernstein, predicts that over the next decade, major oil companies will expand their renewable energy businesses—such as wind, solar, and hydrogen—by approximately 25% or more annually.
Once a stalwart in the stock market, oil companies' shares have now been flagged by investors as heading downward—partly because climate change is set to erode demand for their products. Meanwhile, European power companies are seen as having taken far more decisive steps toward embracing the new energy era compared to the oil industry. "For investors, it’s incredibly challenging to remain confident that they can succeed," said Mr. Clint, referring specifically to the oil sector’s struggle to adapt to ongoing transformation. However, he added that, with the momentum building behind these emerging businesses, capital is expected to flow back into oil stocks. Interestingly, the profitability of supplying electricity sometimes falls short of what can be earned from drilling for oil and natural gas. Still, executives believe that wind farms and solar parks could generate more predictable revenue streams—driven in part by customers eager to purchase products labeled "green."
Eni's Descalzi said that after retrofitting its refineries in Venice and Sicily to produce low-carbon fuels from plants, the company achieved stronger financial performance this year—outpacing its traditional business—even amid challenging market conditions. Oil companies remain firm in their belief that they must continue making select investments in oil and gas, particularly because these revenues can help fund the energy transition of tomorrow. "We can’t afford to make even the slightest mistake," TotalEnergies CEO Patrick Pouyanné recently told analysts. Low-cost oil projects, meanwhile, will undoubtedly play a key role in shaping the future.
During the pandemic, BP, TotalEnergies, and Shell have all carefully evaluated their investment portfolios—partly to determine whether, as oil remains at the heart of their businesses, the growing pressure from climate change and the lingering impact of the pandemic might mean that their existing oil reserves could ultimately stay stranded on the balance sheet. These reserves, whose development costs could run into billions of dollars, may never be tapped—or their revenues could fall short of earlier expectations. Such moves have already led to write-offs totaling tens of billions of dollars in the second quarter, and more write-offs are likely as companies recalibrate their strategies. "The transition isn't over yet," says Luke Parker, Vice President of Corporate Analysis at market research firm Wood Mackenzie. "As the real-world implications of the energy transition become clearer, we’ll see more companies joining the shift."

Translated from Sina Auto

Email:
info@adtfm.com

Phone:
021-20532053

Address:
2nd Floor, No. 150 Jindian Road, Pudong New Area, Shanghai