Eni, Equinor, Repsol lean into low-carbon investment ahead of forecast oil and gas production plateau

Eni, Equinor and Repsol — three European majors with advanced climate strategies — are matching the low carbon investments of larger operators while spending less on oil and gas production growth and returning less cash to shareholders.

Based on 2023 results, Eni spent $2.4 billion on low carbon, Equinor $2.1 billion and Repsol $1.5 billion. This compares to an average of $2.1 billion for the supermajors.

Eni is committed to spending 70% of its capex on low carbon by 2030, Equinor 50%, and Repsol 40%.

Source: Evaluate Energy and Evaluate Energy Documents

Of the supermajors, only the Europeans have made equivalent targets public. Shell and BP both target 50%, while TotalEnergies targets 30%.

Chevron has not quoted a percentage but does plan to spend $10 billion between 2022 and 2028 on low carbon initiatives.

Unlike the supermajors, which all plan to grow production this decade, Equinor and Repsol plan to keep production flat between 2025 and 2030. Eni plans a short-term production increase with a plateau from 2026-2030. All three firms have seen relatively flat production profiles across the last three years.

The three firms are adopting a managed investment strategy, with new developments focused on short cycle projects, enabling them to have more flexibility to sell assets and hit their targets.

Eni and Repsol both have absolute scope three reduction targets for 2030. Amongst the supermajors only BP has such a target.

Eni and Repsol (although not Equinor) are also returning a smaller share of their profits to shareholders as they look to reinvest a comparatively larger share than the supermajors into low carbon divisions.

Source: Evaluate Energy and Evaluate Energy Documents

All three firms are channeling low carbon investments into power generation and renewable fuels, although they organize low carbon assets in different ways and see varying degrees of profitability in these divisions.

Eni strategy

Eni’s low carbon strategy is focused in two areas — low-carbon electricity and sustainable mobility.

Low-carbon electricity is managed by its power division, Plenitude, which saw profits rise 11% to €681 million ($737 million) in 2023.

“The 2023 result of Plenitude came in the context of another highly volatile and challenging year for energy suppliers and again emphasized the quality of the model,” said CEO Claudio Descalzi.

But only 16% of Eni’s power generation is renewable. The division currently has 3GW of renewable power capacity and is targeting 15GW by 2030 and 60GW by 2050.

Source: Evaluate Energy and Evaluate Energy Documents

Sustainable mobility — which includes EV charging, biofuels and biomethane — is managed by Enilive, established at the beginning of 2023. The division is also profitable, reporting a 10% improvement in EBITDA year-on-year to €1 billion ($1.1 billion), despite weaker product markets.

The division is growing rapidly. In 2023 Eni saw biorefinery throughput up almost 60% year-on-year, while biofuel capacity was 50% higher at 1.65 million tons per year after the acquisition of the St Bernard biorefinery in the US.

Enilive also oversees the development of new vectors such as Sustainable Aviation Fuel (SAF) and CCS.

Repsol strategy

Like Eni, Repsol has a utility business that it calls ‘low carbon generation,’ with 6GW of renewable capacity currently and a target of 10GW by 2027. The firm plans to nearly double its electricity customer base to four million by 2027.

Also, like Eni, this business is profitable, generating returns of €75 million ($81million) in 2023. Repsol only invests in projects that offer 10% equity returns.

Repsol’s renewable fuels business is grouped in its industrial segment, which also includes refineries.

The firm is spending over €5.5 billion ($6 billion) repurposing its seven refining complexes over the next four years to produce renewable fuels, renewable hydrogen and biomethane. It will also soon commission an advanced biofuels plant in Cartagena, Colombia.

Repsol’s goal is to reach a total production capacity of between 1.5 and 1.7 million tons of renewable fuels, renewable hydrogen and biomethane in 2027, and up to 2.7 million tons in 2030.

These industrial low carbon businesses are forecast to deliver almost 40% of revenue growth by 2027.

By that date, Repsol expects €1.2 billion ($1.3 billion) of annual cashflow from low carbon, split evenly between the utility business and industrial low carbon fuels.

“Low carbon generation in Iberia for Repsol is at the heart, at the core of the business of the company,” says Repsol CEO Josu Jon Imaz on the firm’s recent fourth quarter results.

Equinor strategy

Equinor also produces low carbon electricity — largely from offshore wind — in its renewables division. It is targeting 12GW of renewable capacity by 2030.

The renewable division posted a loss of €33 million ($36 million) in 2023 due to ongoing investments in new wind projects — although it was profitable in 2022.

The firm also has a CCS business as part of its oil and gas division and expects returns of 4-8% from both renewables and CCS projects going forward.

The two divisions are forecast to deliver just under a quarter ($6 billion) of annual average cashflow of $26 billion by 2035, with the remainder coming from oil, gas, and trading.

“With the profitability and the volumes, low carbon solutions will be a source for long-term cash flow,” says CEO Anders Opedal.

 

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