Can U.S. Oil Companies Follow Equinor’s Renewable Path?

Up until 2018, the Norwegian oil company Statoil was one of the world’s integrated supermajor oil companies. While not quite on the level of ExxonMobil (XOM) or Chevron (CVX), the company was one of the world’s major oil producers.

In fact, that remains the case today, although Statoil is now Equinor. The company changed its name in 2018, which also coincides with the timing of a shift of direction in company strategy.

Photo: Carina Johansen / NTB scanpix

Equinor aims to become a net-zero carbon company by 2050. In other words, they are striving to supply energy with an overall net zero contribution of carbon to the atmosphere.

It would seem to make sense, with the world seeking to reduce the use of carbon-intensive energy sources, that oil companies would use today’s revenues to invest in lower-carbon energy sources, which will undoubtedly grow in importance in the decades ahead.

Although most of the integrated supermajors have been making some investments into renewables, none of them have reached the milestone Equinor reported this week when it released its earnings.

For the first quarter of 2021, Equinor reported after tax earnings of $2.66 billion. But an astounding $1.34 billion — right at 50% of the total — came from the company’s renewable segment. No other major oil and gas company has come close to meeting a measure like this, so let’s take a look at how Equinor achieved this.

One of the most important factors enabling Equinor’s shift is that the Norwegian government is the majority shareholder of the company. That means that the company goals will be aligned with the goals of the government, which isn’t always the case with oil and gas companies.

In recent years, Equinor has made major investments in wind and solar power, and the company is developing low-carbon solutions such as hydrogen and carbon capture and storage (CCS) on an industrial scale. The company’s intends to grow its renewable energy capacity tenfold by 2026.

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