The Low-Carbon Investment Gap: Oil and Gas Majors’ 2024 AGMs

The 2024 AGMs for major oil and gas companies will prove pivotal for assessing the industry’s progress toward low-carbon investment and net carbon intensity targets. Accela Research is a company bridging climate plans and finance for net-zero investments — their latest report deep-dives into this issue, highlighting significant gaps and the critical need for increased low-carbon investments to meet future targets. You can read the full report here.

The Current State of Low-Carbon Transition

Accela’s comprehensive analysis of five European and two Australian oil and gas majors reveals that, on average, these companies have only achieved a 4% reduction in net carbon intensity from FY19-23. This is starkly below targets of a 15-20% reduction, underscoring the slow pace of progress in transitioning to low-carbon portfolios. The report emphasises that European majors will need to invest approximately $300 billion between now and 2030 to achieve their existing net carbon intensity goals.

Key Takeaways from Accela’s report

This year, Accela’s annual report features a ‘Transition League Table’, which ranks the oil and gas majors based on their transition strategies; their framework highlights the most crucial elements of transition performance, providing an overview of where each company stands.

1. BP Leads Oil and Gas: Accela notes BP’s climate transition plan for its progress and ambition, and for surpassing its European peers.

2. Imminent Emission Intensity Targets: FY30 targets are approaching quickly, yet little progress has been made to date, with companies likely to miss targets by up to 15%.

3. Challenges for European Majors: European oil and gas companies are not on track to meet FY30 emission intensity targets with their current low-carbon product ambitions. For instance, Shell and BP have only shifted about 5% of their energy sales portfolios to low carbon as of FY23.

4. Significant Investment Required: A substantial $300 billion investment in low-carbon initiatives is necessary to meet emission targets by FY30. Current commitments total $166 billion, leaving a gap of approximately $134 billion.

The report stresses that without a significant boost in low-carbon investments, the oil and gas sector will struggle to transition effectively. For example, a 10% increase in low-carbon fuels by FY30 is projected to decrease carbon intensity by around 13%, whereas a similar increase in gas sales would only reduce intensity by between 2% to 4%. This highlights the need for a focused investment in renewable energy sources like solar and wind.

The report also details how Australian oil and gas companies, Woodside and Santos, are lagging significantly behind their European counterparts. These companies lack clear intensity targets and have made minimal progress in developing low-carbon offerings. Their scope 1 and 2 ambition stands at 30%, compared to around 50% for European majors.

Closing the Investment Gap

To close the low-carbon investment gap, oil and gas majors need to substantially increase their financial commitments toward renewable energy, the report surmises. The required investment of $300 billion translates to the deployment of approximately 309GW of renewables between FY24-30. This investment is especially crucial for companies like BP and Shell, which have broader emission coverage compared to peers such as TotalEnergies.

Accela Research’s 2024 report determines that the upcoming 2024 AGMs will be critical in determining whether oil and gas majors can meet their low-carbon targets. With significant investment gaps and minimal progress to date, the industry faces a challenging path ahead to achieve its emission reduction goals. Shareholders should be armed with an understanding of what this means for their investments. 
Read the complete report on the Accela Research website here.