Shell, BP boost profit, sink investment in renewable energy

Oil and gas giant Shell last week announced a historic near $40 billion (€37.18 billion) profit in 2022. Other multinational energy firms have simultaneously registered record windfalls, among them BP and fossil fuel powerhouse, ExxonMobil. 

The super profits are thanks in large part to spiraling energy prices driven by Russia's invasion of Ukraine.

Amid skyrocketing consumer energy costs, the likes of US president Joe Biden have labelled the wins a "windfall of war" and demanded higher taxes. 

But the oil and gas bonanza has sparked a parallel concern that climate mitigation targets are being sacrificed for profits.

Expanding fossil fuel production

BP this week announced record earnings and a higher dividend for shareholders. At the same time, it also watered down pledges to reduce climate-warping greenhouse gas emissions and raised oil and gas production targets.

BP head Bernard Looney was accused of making a complete U-turn, after pioneering commitments to achieve net zero emissions by 2050 just three years ago. 

"We need a rapid transition to net zero. Society has got to deliver on the Paris goals," said Looney in 2020. 

Now a promised emissions cut of 35-40% by 2030 will be scaled back to 20-30%. Commitments to reduce fossil fuel production by 40% by 2030 will be decreased to 25%.

"The shift in BP's strategy flies in the face of the world's urgent need to reduce fossil fuel production," said Maeve O'Connor, an oil, gas and mining analyst at UK-based climate think tank, Carbon Tracker. 

BP told DW that 35% of its capital expenditure will be invested in "transition growth engines," that is to say energy transition investments that include electric vehicle (EV) chargers and sustainable aviation fuels. The figure is "expected" to grow, said a spokesperson.

But the $8 billion BP has earmarked for transition growth engines by 2030 will be offset by a planned $8 billion "capital spending on oil and gas," said O'Connor.

Record profits not reinvested in clean energy

BP isn't the only company scaling back. Analysts say a negligible proportion of oil and gas profits are being reinvested into the clean energy transition that is key to keeping temperature rise below 1.5 degree Celsius (2.7 degrees Fahrenheit).

About 1.5% of Shell's total expenditure in 2021 was invested in wind and solar electricity projects —defined as renewables under the "EU taxonomy for sustainable activities" — according to reporting by environmental campaigners Global Witness.

While Shell said that 12% of its capital expenditure was earmarked for "renewable and energy solutions," the UK-based climate group found a "significant portion" of this spending "actually goes to investments in climate-wrecking [natural] gas." 

Natural or fossil gas is commonly referred to as a bridge or "transition" fuel, including by the EU. While burning gas pumps out less carbon than coal, it emits a lot of methane, a much more potent greenhouse gas than CO2 — even if it dissipates faster.    

Global Witness have lodged a complaint with the US Securities and Exchange Commission (SEC), calling on the watchdog to investigate Shell's "misleading claims that overstate its energy transition efforts."

"Shell shouldn't get away with using its tiny investments in renewables as a fig leaf to cover up the reality that it is continuing to profit from the energy crisis at the expense of people and the planet," said Zorka Milin, a senior legal advisor at Global Witness.

Including gas under renewables was a form of greenwashing, added Milin. 

Shell denies misleading investors on renewables

Shell boss Wael Sawan said he would "refute the claim" that the fossil fuel firm's renewable energy solutions' accounting is misleading due to the high gas component. 

The company said it had invested about $3.5 billion in 2022 in renewables and energy solutions and that would remain steady in 2023. 

Sawan said in a call with reporters that there "had been a real pivot toward energy transition investments," but that those investments "go into the areas where we can see line of sight toward attractive returns to be able to reward our shareholders."

Shell told DW in a statement that the reported "capital expenditure in our renewables and energy solutions (RES) business" doesn't account for "energy-transition" spending in other areas like "EV charging or biofuels, or investments in renewable natural gas."

But Milin of Global Witness said that activities such as EV charging also include "Shell's global network of petrol stations which power conventional fossil fuel-based vehicles."

Climate impacts shrouded in green PR

According to a recent report by Influence Map, a think tank monitoring the impact of lobbying on climate policy, companies are misleading the public about their clean energy commitments.

The big five supermajor oil and gas companies — Shell, TotalEnergies, BP, ExxonMobil, and Chevron — spent an average of $750 million in 2021 on climate-related communications activites. That's a conservative estimate, said the authors. 

Around 60% made "green claims," including about their pro-climate credentials, that were "inconsistent" with investment plans, according to the study.

Around 12% of the oil majors' 2022 capital expenditure was forecast to be earmarked for "low carbon" activities, which is well short of the Paris Agreement climate goals, the report said.

"It's an effort to push action to actually mitigate climate change further and further down the line," Faye Holder, an analyst at Influence Map, said of the strategy.

Since the Russian invasion of Ukraine and the resulting scramble for gas "a lot of that green PR has fallen to the wayside," said Holder, adding that communications are now back "to overtly promoting oil and gas" as a way to achieve "energy security."

Reporting by Influence Map and researchers at the University of Utrecht in the Netherlands found that three European oil and gas companies posted signifiantly more "patriotic" claims on social media about "energy security" and "energy independence," while green claims were steady or decreased by almost 20% in the case of Shell.

Assertions by oil and gas majors like BP and shell that fossil fuels like gas are key to energy security are "disingenuous," considering the potential to quickly accelerate renewable capacity, said Thomas Day, an analyst at the Berlin-based think tank, the New Climate Institute. 

Oil and gas majors won't 'lead us out of the climate crisis'

As renewable energy prices plummet, and in a scenario where oil prices again fall precipitously, traditional energy companies face the risk of holding into a portfolio of "stranded" assets, said Guy Prince, oil analyst at Carbon Tracker. These are assets that become a liability as they are no longer economically viable.

But Prince says oil and gas companies are willing to take the risk because investing heavily in renewables goes "against their core business model."

"They can't make as much money from it," he said. 

These fossil fuel giants enjoy effective monopoly market share, Prince said. This will not be the case with renewables, with diverse players already established in that market. 

"The decades of technical experience they have is in oil and gas," Prince said. "These companies are not going to lead us out of the climate crisis."

Kristie Pladson contributed to this report. 

Edited by: Jennifer Collins