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European majors slow clean energy investments

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Investors rewarding oil and gas focus

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New Trump U.S. presidency among big factors in 2025

By Ron Bousso

LONDON, Dec 27 (Reuters) - Major European energy

companies doubled down on oil and gas in 2024 to focus on

near-term profits, slowing down - and at times reversing -

climate commitments in a shift that they are likely to stick

with in 2025.

The retrenchment by oil majors comes after governments

around the world slowed the rollout of clean energy policies and

delayed targets as energy costs soared following Russia's

full-scale invasion of Ukraine in 2022.

Big European energy companies that had invested heavily in

the clean energy transition found their share performance

lagging U.S. rivals Exxon and Chevron ( CVX ), which had

kept their focus on oil and gas.

Against this backdrop, the likes of BP and Shell

this year sharply slowed their plans to spend billions

on wind and solar power projects and shifted spending to

higher-margin oil and gas projects.

BP, which had aimed for a 20-fold growth in renewable power

this decade to 50 gigawatts, announced in December it would spin

off almost all its offshore wind projects into a joint venture

with Japanese power generator JERA.

Shell, which once pledged to become the world's largest

electricity company, largely stopped investments in new offshore

wind projects, exited power markets in Europe and China and

weakened carbon reduction targets.

Norway's state-controlled Equinor ( EQNR ) also slowed

spending on renewables.

"Geopolitical disruptions like the invasion of Ukraine have

weakened CEO incentives to prioritise the low-carbon transition

amid high oil prices and evolving investor expectations," Rohan

Bowater, analyst at Accela Research, told Reuters. He said BP,

Shell and Equinor ( EQNR ) reduced low-carbon spending by 8% in 2024.

Shell told Reuters it remained committed to becoming a net

zero emissions energy business by 2050 and continues to invest

in the energy transition.

Equinor ( EQNR ) said: "The offshore wind segment has been through

demanding times in the last couple of years due to inflation,

cost increase, bottlenecks in the supply chain, and Equinor ( EQNR ) will

continue to be selective and disciplined in our approach."

BP did not respond to a request for comment.

TOUGH CLIMATE

The oil companies' retrenchment is bad news for efforts to

mitigate climate change. Global heat-trapping carbon emissions

are forecast to climb to a new high in 2024, which will be the

warmest year on record.

And 2025 is shaping up to be another tumultuous year for the

$3 trillion energy sector, with climate-sceptic Donald Trump

returning to the White House. China, the world's biggest crude

oil importer, is trying to revive its faltering economy,

potentially boosting oil demand.

Europe faces continued uncertainty over the war in Ukraine

and political turmoil in Germany and France.

All those tensions were laid bare at the annual United

Nations climate conference in Baku in Azerbaijan in November,

when the host country's President Ilham Aliyev, hailed oil and

gas as "a gift from God".

That summit yielded a global climate finance deal but

disappointed climate advocates who had hoped governments would

coalesce around a phase-out of oil, gas and coal.

The energy companies will be watching to see if Trump

follows through on promises to repeal President Joe Biden's

landmark green energy policies, which have spurred investments

in renewables across the United States.

Trump has vowed to remove the United States from global

climate efforts, and has appointed another climate sceptic, oil

executive Chris Wright, as his energy secretary.

OIL DEMAND

There are potential pitfalls in the energy majors' renewed

emphasis on oil and gas.

Demand growth in China, which has driven global prices for

two decades, is slowing, with growing signs that its gasoline

and diesel consumption is plateauing.

At the same time, OPEC and top oil producing allies have

repeatedly delayed plans to unwind supply cuts as other

countries, led by the United States, increase oil output.

As a result, analysts expect oil companies to face tighter

financial constraints next year. Net debt for the top five

western oil giants is expected to rise to $148 billion in 2024

from $92 billion in 2022, based on LSEG estimates.

(Editing by Catherine Evans)