Global oil giants made ambitious pledges some years ago to transition toward cleaner energy, responding to mounting pressure from investors, governments, and environmental groups.
However, data now shows a stark reversal as the oil firms are scaling back renewable investments and reinvesting heavily in fossil fuels. This shift is driven by surging oil prices, shareholder priorities, and energy security concerns.
Companies such as British Petroleum, Shell, and ExxonMobil, which had previously committed to reducing carbon emissions and investing in wind, solar, and other renewable energy projects, are now reallocating resources to oil and gas ventures.
For instance, BP, which once vowed to cut oil and gas production by 40 percent by 2030, recently slashed planned investment in renewable energy and increased annual oil and gas spending to $10 billion.
“It’s a radical shift,” Murray Auchincloss, the CEO of BP told the Reuters news agency.
“This is a reset BP, with an unwavering focus on growing long-term shareholder value,” he said, according to The Associated Press news agency.
The British company cut planned annual investment in energy transition businesses by more than $5bn from its previous forecast, to between $1.5bn and $2bn per year.
It now aims to grow oil and gas production to between 2.3 million and 2.5 million barrels of oil equivalent per day (boepd) in 2030 excluding future potential divestments. It pumped 2.36 million boepd in 2024 including production from its LNG-focused gas and low carbon unit.
Under Auchincloss’s predecessor, Bernard Looney, BP pledged in 2020 to cut oil and gas output by 40 percent while rapidly growing renewables by 2030. It lowered that target to 25 percent in 2023.
Similarly, Shell has said it will no longer develop new offshore wind projects and will separate its power division into two connected businesses.
Once seen as a cornerstone of Shell’s energy transition strategy, the move signals a significant shift from low-carbon ventures and a renewed emphasis on more traditional energy sources like oil and gas.
Offshore wind is one of the major sources of renewable energy that Europe is counting on to decarbonise electricity production, but in recent years projects have been mired by soaring costs and supply chain issues.
The restructuring is part of a company-wide review launched in 2023 aimed at reducing costs and focusing resources on higher-return activities.
Similarly, American big oil firms Exxon and Chevron have also firmed up their commitment to fossil fuel expansion.
Early this month Exxon Mobil said it was looking to increase its oil and gas output by 18 percent between 2026 and 2030. It is looking to increase its earnings by 2030 by $20 billion over this year’s projected $34.2 billion.
Meanwhile, Chevron increased its oil and gas volumes by 7 percent year-over-year, while planning to cut back spending on low-carbon projects by 25 percent.
Both Exxon and Chevron are now planning to enter the electricity business eyeing increasing energy demands at data centres, fuelled by an artificial intelligence boom. The firms are looking to use natural gas to power the technology industry’s AI data centres.
Record profits and shareholder resistance
One reason why the oil majors are returning to fossil fuels is the allure of higher profits. High energy prices have driven record profits, with shareholders pocketing huge dividends.
Shell, Total Energies, Exxon Mobil, BP and Chevron recorded combined profit of $123.4 billion in 2023, according to company filings.
The five super-majors such as British Petroleum, Shell, Chevron, ExxonMobil and TotalEnergies rewarded shareholders with dividend payouts of more than $100 billion in 2023.
The Institute for Energy Economics and Financial Analysis (IEEFA) said companies were likely to pay shareholders even more in 2024 despite weaker Brent or gas market prices leading to lower profits.
The big oil companies enriched shareholders with dividend payments and share buy-backs worth $104bn in 2022, according to the IEEFA.
Investors prioritising high returns is also pushing oil firms to focus on their most profitable assets.
Some shareholders have criticised renewable projects as costly, unproven, and less profitable than traditional energy.
Faltering policies
The retreat by oil majors also comes after governments around the world slowed the rollout of clean energy policies and delayed targets as energy costs soared following Russia’s full-scale invasion of Ukraine in 2022.
European oil giants that had invested heavily in the clean energy transition found their share performance lagging US rivals Exxon and Chevron, which had kept their focus on oil and gas.
Norway’s state-controlled Equinor also slowed spending on renewables.
BP, Shell and Equinor reduced low-carbon spending by 8 percent in 2024, Rohan Bowater, analyst at Accela Research, told Reuters.
Meanwhile, Equinor blamed supply-chain bottlenecks and high prices for its slow moves on wind energy.
“The offshore wind segment has been through demanding times in the last couple of years due to inflation, cost increase, bottlenecks in the supply chain,” Equinor told Reuters.
The company “will continue to be selective and disciplined in our approach,” it added.
The scenario is the same in the US, where Exxon and Chevron have blamed a lack of “clarity” on energy subsidy rules for holding back investments in climate technologies and renewables.
“Even before these renewable rollbacks, almost all the oil majors were locked into new oil and gas production,”explained Kelly Trout, research director at Oil Change International, an advocacy organization aiming to facilitate a just transition to clean energy.
A report from Oil Change International found that six of the eight largest oil companies had explicit goals to increase oil and gas production. Since then, Trout says that has grown to seven companies, with Shell being the only exception.
Implications for Nigeria
Nigeria, Africa’s largest oil producer, stands at a crossroads as this global trend unfolds. The country relies on oil exports for over 90 percent of its foreign exchange earnings and about 50 percent of government revenues.
The renewed focus on fossil fuels by international oil companies (IOCs) could bring both opportunities and challenges for Nigeria’s economy and energy transition goals.
Nigeria could attract fresh investments in its oil and gas sector, particularly in offshore and LNG projects. Companies like Shell and TotalEnergies have already signalled interest in expanding operations in Nigeria’s deepwater fields.
Last year, Shell said its Nigerian subsidiary announced a final investment decision (FID) on Bonga North, a deep-water project off the coast of Nigeria.
Shell said Bonga North has an estimated recoverable resource volume of more than 300 million barrels of oil equivalent (boe) and will reach peak production of 110,000 barrels of oil per day (boepd), with first oil expected by the end of the decade.
The Ubeta oilfield (OML 58), the first blueprint project under this initiative, achieved an FID last year through a partnership between TotalEnergies and NNPC Limited.
Higher oil production and rising global oil prices could provide much-needed revenue for the Nigerian government, which is grappling with mounting debt and a weakening currency.
