Measured by the energy performance of what it sells, the oil industry is the most efficient of all. A kilo of gasoline, the most widely sold product, contains 10,500 kilocalories, and the energy used to deliver it to the end user, throughout its lifecycle, varies between 500 and 800 kilocalories. No other energy source has such a high performance rate, which explains why, for over half a century, oil and gas have continued to account for 60% of world energy consumption. There is no magic to it, just technology. Could such an industry stay out of the energy transition drive? Obviously not, and for several reasons. The first and most important one is that this transition is intended to halt the use of the fossil fuels they are so good at producing. If the demand for oil should fall, as many hope or expect will happen over the next few years, they need to do more about finding a new job. Oil companies know how to make energy today, particularly oil and gas, and, more importantly, they know how to deliver it to the end user, whose habits, needs and whims they are familiar with.
It's all about finance
The financial frenzy is the second reason driving companies to work on renewables. For one reason or another, their shareholders, sometimes States that own majority stakes, are pressurizing companies into taking a more socially responsible approach, particularly as regards the environment. In recent decades, the biggest change that has occurred in the global economy, particularly in industrialized countries, is the tremendous power acquired by the financial sector which, on a quarterly basis (the pace set by the publication of financial results), puts pressure on companies and their strategies. In the last few years, finance has become more sensitive to environmental issues, both because the problem has got worse and because it doesn't know where else to invest the huge amount of liquidity it now has. With the yields from traditional financial activities close to zero, occasionally even negative, the value of an investment inevitably changes to something other than the simple interest rate. Consequently, ethical and sustainable choices become more important. This is why many investors are putting pressure on the oil companies in which they invest to make efforts to develop renewable or transition sources. The example of Total is the most interesting, particularly because, among the big companies, it has steered the greatest amount of investments into renewables, beginning in 2011 with the acquisition of Sunpower, a major photovoltaic panel manufacturer, followed, in 2016, by the acquisition of Saft, a leading electrical battery company. These decisions have been welcomed by finance and advocated by the French government, which is stranded with over 50 nuclear power plants it can’t shed, and having a few difficulties with its energy transition as a result.
At the global forefront in biofuels
Another reason why companies are investing in the transition is more technical, as they often operate in segments where they can benefit from the development of particular products. This is the case with biofuels which, despite considerable difficulties, have become one of the main alternatives to fossil fuels over the last ten years. Biofuels require the direct involvement of oil refineries, which is where they are mixed with the gasoline and diesel to be sold to car drivers. Global biofuel production has increased from 0.1 million barrels a day 20 years ago to 1.5 million barrels a day now, equivalent to the production volume of an OPEC country like Angola. It is worth highlighting the actions taken by Neste Oil here. The Finnish oil company, which is mostly State-owned, is at the forefront of second generation biofuel production, primarily using food waste. Italian company Eni holds the record for being the first to convert two big traditional refineries, in Marghera and Gela, to biofuel production.
Wind power at sea, new frontiers
In the world of renewables, it is increasingly clear that the future belongs to wind power at sea, where most of the additional capacity is currently being built and where costs are plummeting. The North Sea is the new frontier and Statoil is becoming the world leader in the development of floating platform wind turbines. At the government’s behest, transition has become a strategic objective for the Norwegian company, which is 67% State-owned, and the skills developed in the North Sea, on oil and gas platforms, are allowing it to develop new cutting-edge projects. Less spectacular, particularly given its often negative results, is the experience of BP, which is nonetheless heavily involved both in the wind power and biofuels. The historic British Petroleum name was abandoned in 2001 to launch Beyond Petroleum, a slogan which has been reappraised, given that the transition has proved very difficult over the last 16 years, while income has continued to be derived from traditional activities, which have made up for the losses on renewables. Shell, which invested heavily in renewables, particularly wind power, at the turn of the century, has had to be more selective about its activities in the electricity sector, while continuing to make constant efforts.
In October 2107 the company made an important step in recharging cars by purchasing, for a not defined amount, the Dutch company NewMotion, that manages 30,000 electric columns across Europe. Second generation biofuels, deep sea floating wind farms, electricity storage, charging points at fuel stations may sound futuristic, but oil companies are already there, continuing to do what they know best and keeping the finance people happy.