Where Will Big O&G Profits Go?

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Growing energy demand, skyrocketing oil prices, and high gas prices somehow made for a great year for O&G companies. 

  • Total posted a profit of $9.86 billion in Q3 2022, more than double the $4.77 billion it earned in the same time last year

  • BP recorded a profit of $8.2 billion, up from $3.3 billion in 2021 

  • Shell’s profits rose from $4.1 billion to $9.45 billion over the same period

And these are just a few of the examples.

In addition to passing profits off to investors, these companies have to decide where to invest their newfound windfall. Will they start new oilfields and double down on O&G? Or will they move money into renewables to help achieve their climate targets? 

In its 2022 World Energy Outlook, the International Energy Agency said there’s little room for new oil and gas investments if the world wants to reach Paris Climate Agreement goals and limit global temperature increase to 1.5 degrees Celsius by 2050.

But O&G companies know what’s making them money right now: fossil fuels. Renewable energy production is still expensive and slow to generate returns.

So it seems O&G companies plan to invest their profits in both emissions-heavy fossil fuel projects as well as in renewables like green hydrogen, biofuels, and more. 

  • Total recently acquired the Clearway Energy Group, boosting its renewable generating capacity

  • BP acquired biogas producer Archaea Energy Inc. as well as a 40 percent stake in a massive Australian green hydrogen project

  • Shell acquired Solenergi Power Pvt. Ltd., one of India’s largest renewable developers, and announced a joint venture to develop hydrogen refueling stations in China

  • Chevron acquired the Renewable Energy Group, a biofuel company

And yet…

  • Total is pushing to start a pair of new oil fields in Africa that would increase its crude production by roughly 15 percent, or 200,000 barrels a day

  • Many oil majors are pushing to increase LNG production by the end of the decade

Total’s CEO called it an “all-of-the-above energy approach,” investing in oil, LNG, and electricity. 

Even with record profits, the potential of a recession seems to have played a role in keeping O&G majors in the business they know—and still tiptoeing around renewables. Thanks to an abundance of money, O&G companies can invest in both fossil fuels and renewables in efforts to balance the short term with the long term. 

The Earth, in the meantime, wonders just how “long term” it has.