Major European Energy Companies Shift Focus to Oil and Gas in 2024

By Ron Bousso

LONDON (Reuters) – Major European energy companies have intensified their focus on oil and gas in 2024, prioritizing short-term profits and, at times, reversing climate commitments. This trend is expected to continue into 2025.

The retreat by oil majors follows a global slowdown in clean energy policy rollouts and delayed targets, prompted by rising energy costs after Russia's invasion of Ukraine in 2022.

European energy firms that heavily invested in the transition to clean energy have seen their stock performance lag behind U.S. counterparts like Exxon and Chevron, which maintained their commitment to oil and gas.

Companies like BP and Shell have significantly reduced their spending on wind and solar projects, shifting funds to more profitable oil and gas endeavors. In December, BP announced a spin-off of most of its offshore wind projects into a joint venture with Japanese company JERA, in contrast to its previous goal of reaching 50 gigawatts of renewable power.

Shell has halted investments in new offshore wind projects, pulled back from electricity markets in Europe and China, and weakened its carbon reduction goals.

Norway's state-controlled Equinor also scaled back on renewable spending. Analyst Rohan Bowater of Accela Research noted that geopolitical disruptions, including the Ukraine invasion, have diminished CEOs' motivations to prioritize low-carbon transitions as oil prices remain high.

Shell maintains its commitment to becoming a net zero emissions energy company by 2050 and continues investing in transition efforts, while Equinor pointed out challenges in the offshore wind sector, citing inflation and supply chain bottlenecks.

Climate Concerns

The energy companies' pivot towards fossil fuels is detrimental to climate change mitigation efforts. Predictions indicate that global carbon emissions will hit record highs in 2024, potentially making it the warmest year on record.

The energy sector faces uncertainty in 2025, particularly with climate-skeptic Donald Trump potentially returning to the White House. China, the leading crude oil importer, is attempting to rejuvenate its economy, which may increase oil demand. Europe's ongoing turmoil due to the war in Ukraine and political instability in Germany and France further complicate matters.

At the recent United Nations climate conference in Baku, attendees revealed tensions surrounding climate initiatives, as Azerbaijan’s President praised oil and gas as a “gift from God.” The summit resulted in a global climate finance agreement but fell short of advocates' hopes for a commitment to phase out fossil fuels.

Energy companies are closely watching for Trump's promised repeal of Biden's green energy policies, which have bolstered U.S. renewable investments. Trump has also indicated plans to withdraw the U.S. from global climate initiatives, appointing climate skeptic Chris Wright as energy secretary.

Oil Demand Challenges

Despite the renewed focus on oil and gas, challenges persist. China's demand growth, which has historically driven global prices, is slowing, with signs that gasoline and diesel consumption is plateauing. Meanwhile, OPEC and major oil-producing allies have postponed plans to lift supply cuts, while the U.S. continues to increase its oil output.

Analysts predict that oil companies will encounter tighter financial conditions next year. Net debt for the five largest Western oil giants is projected to rise to $148 billion in 2024, up from $92 billion in 2022, according to LSEG estimates.