With electric cars in focus, oil firms eye green investments
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New Delhi: Oil and gas companies across the world are turning out to be the new backers of the clean energy industry, as the transportation sector looks set to move away from fossil fuel guzzlers to electric powered vehicles.
Big oil’s diversification of product portfolio is expected to benefit the clean energy industry in India, which is undergoing the largest capacity expansion drive.
The country has a target of 175 gigawatt (GW) of renewable energy capacity by 2022, out of which 100 GW is to come from solar power.
Higher taxes on fossil fuels and the climate change goals of national governments are also prompting oil and gas companies to recalibrate their energy mix to focus on natural gas, biofuels, solar power and technologies for power storage and carbon capture.
BP Plc., China National Petroleum Corp., Eni S.p.A., Petróleos Mexicanos, Reliance Industries Ltd., Repsol S.A, Saudi Arabian Oil Co. Royal Dutch Shell Plc., Statoil ASA and Total SA, representing one fifth of the world’s oil and gas production, announced a $1-billion fund last November under the Oil and Gas Climate Initiative (OGCI)—to finance development of low carbon technologies.
France’s Total SA announced its 25% investment in a 27-megawatt photovoltaic power plant at Nanao in Japan’s Honshu Island.
“Getting into renewable energy business is a natural expansion for global oil and gas companies as hydrocarbon reserves are finite.”
“Renewable energy business helps them to have a sustainable product mix and with installation cost on the downward curve; it makes financial sense in the medium and long term, although it appears to be in conflict with their product portfolio in the short term,” said Amit Kumar, partner, renewables, PricewaterhouseCoopers.
Kumar said that in the last 4-5 years, global oil and gas producers had shown their interest in developing portfolio in the renewable energy sector in markets like Africa and Asia including India.
A statement from BP Plc., in response to an emailed query, said the energy group was pursuing investments in low carbon technologies.
“The path to a lower carbon future will also be shaped by technological advancement, so BP’s venturing activities include investing in companies focusing on low carbon solutions,” it said.
India’s solar power industry is very attractive, said Kalpana Jain, senior director, Deloitte in India. “There are many global firms looking at participating in this sector organically and inorganically. Individual companies’ objectives will guide their investment strategy,” she added.
Kumar of PwC said global oil and gas firms, however, are cautious as their appetite to invest in a particular market depends on the rate of return it offers and matured policies helping to make money sustainably in the long term.