The West’s biggest energy companies are plowing tens of billions of dollars back into
oil
and
gas
extraction rather than pursuing the kind of large-scale transition to green energy sought by environmentalists.
Spending plans at ExxonMobil, Chevron, BP, and Shell show the companies putting trust in returns from oil and gas, which equated to record profits this past year, over lower-carbon energy sources. In some cases, the big players are pulling back from previously planned expansions into green ventures to devote more cash to fossil fuels to get through the decade, leading some to criticize the companies for walking back on their commitments to slow climate change.
Oil and gas prices have fallen from their 2022 peaks after the invasion of Ukraine and fallout from the war sent them spiking, but tight supplies and shifting market dynamics, especially Europe’s sanctioning of Russian energy exports, have driven up the value of fossil fuels in general and those sourced from friendlier nations in particular.
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Exxon, which announced full-year earnings of $55.7 billion, plans to invest some $17 billion in lower-emissions ventures such as carbon capture and hydrogen between 2022 and 2027, up from $15 billion in its prior plan, CEO Darren Woods said during the company’s earnings call detailing 2022 earnings.
Still, the company continues to see the most value in oil and gas. For this year alone, upstream spending, or spending geared toward oil and gas exploration and production activities, is expected to be approximate to Exxon’s six-year budget for lower-carbon business opportunities.
Of the $23 billion to $25 billion in capital and exploration expenses Exxon expects in 2023, roughly half is planned for upstream activities.
Chevron, which earned $35.5 billion in 2022, has increased its 2023 capital budget by 25% from the year before, focusing billions of dollars on production in the Permian Basin of Texas and New Mexico and offshore in the Gulf of Mexico.
Both companies have
outperformed
Europe-based rivals BP and Shell in the stock market over the last year, in part because BP and Shell acted more aggressively to reduce their greenhouse gas emissions relative to their American counterparts.
BP recently shifted gears and amended previous capital plans that provided for slowing oil production to reduce emissions. BP now intends to decrease oil production by 25% by 2030, down from a previous target of 40%.
The updated capital plan marks an additional $1 billion per year through 2030 for fossil fuel production.
BP CEO Bernard Looney has been fending off detractors of the plan, which led the company to reduce its emissions reduction forecasts.
“Our strategy squarely fits with giving the world what it wants and needs, which is: Please help me with energy security and affordability today, and please don’t discount the energy transition,” Looney told Barron’s.
Environmental groups and many Democratic lawmakers have sharply criticized big energy companies for profiting at unprecedented levels while consumers pay higher prices and accused them of doing too little to finance a transition to greener energy sources.
“I would think that with the profits they’re raking in, they would want to step into that clean energy future using all of their assets and leverage,” Rep. John Sarbanes (D-MD), a member of the House Energy and Commerce Committee, said during a recent hearing.
“But for some reason, their reflex, their instinct, is to keep doubling down on the old way of doing things,” he said.
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Looney stressed that directions were coming from the top. President Joe Biden has
demanded
oil majors spend more of their profits on production and refining and said the economy would need oil and gas for “a while” during his State of the Union speech.
“Here in the United States, the administration is saying, ‘We want you to drill more,’” Looney said. “We’re going to drill more.”
