By Barney Smith
Interestingly, Exxon Mobil is not the only oil major to have an AGM this week. (See Greenbarrel of 20 May) Total, the French major, also has its AGM this week, on Friday 28 May, to be precise.
Total, like Shell and BP, its larger European competitors, is pledged to be carbon neutral by 2050 and, like them, is engaged in the difficult transition from an oil company to an energy company. But what makes Total interesting is the claim that they are doing rather better than their opposite numbers in oil. Arguably they are doing more on renewables too.
By any standards,2020 was an exceptional year for the oil industry; not only did the price per barrel fall by an average of 35 per cent from 2019, but demand for petroleum products fell by as much as 9 per cent. Yet according to the figures advanced by the company itself, its results were “stronger than those of our peers” with adjusted net income of $4.1 billion, cash flow of almost $18 billion and a low organic pre-dividend breakeven, at $26 a barrel (with Brent trading at $66.44 on 24 May). Straight comparisons are not easy but Total seem to have written down their Canadian Oil sand assets, taking a hit of $10 billion, which resulted in an IFRS loss for the year of $7.2 billion.
More interestingly, in 2020 Total spent around $2billion on renewables and electricity generation, and the company make the point that this line was the only element which an austerity budget did not cut.
The company has certainly made a reasonable start on renewables. It has already invested in Seagreen 1, a major fixed-bottom offshore wind project in the UK, with a generating capacity of up to 1.5 GW and also plans floating wind farms, principally in South Korea of some 2 GW. In addition it has invested significantly in solar, with a project in Qatar and the purchase of 20 per cent of Adani Green Energy Limited (AGEL), the largest solar developer in the world. With the expansion into India, and a portfolio of projects in the United States, the Group now claims to have projects under construction and in development of 35 GW by 2025, a good start to the much more ambitious target of 100 GW of electricity generating capacity by 2030. Furthermore, to cope with the intermittence problem posed by renewables, the company has also launched in two phases at Dunkirk what turns out to be the largest stationary storage project in France for the production of green hydrogen from renewables. All this, coupled with an interest in LNG, can only underline Total’s determination to successfully transition to selling energy rather than oil.
This emphasis on investing in renewables also throws an intriguing light on the recent statement by the CEO, Patrick Pouyanne, that the amount of money now available for oil companies to purchase renewables is greater than the availability of renewables themselves. The inevitable result is an increase in their price. His statement echoes a more dismissive remark from the Chairman/CEO of Exxon Mobil, Darren Woods, that the only asset which oil companies bring to the opportunity presented by renewables is their cheque book.
It is true that current renewables opportunities are not endless, but what is needed is not necessarily the money to tease out clever new inventions but rather the money to bring existing inventions to scale. For while It is also true that oil companies have little direct expertise in e.g. running a solar farm, they have a great deal of relevant expertise in e.g. project management or the deployment of semi-submersible rigs. The fact is that the renewables sector is crying out for large-scale investment which the oil companies could provide.
