1 00:00:00,200 --> 00:00:02,600 Speaker 1: This is Tom Rowlands Reese and you're listening to Switched 2 00:00:02,640 --> 00:00:06,320 Speaker 1: on the podcast brought to you by BNF. Energy transition 3 00:00:06,400 --> 00:00:08,520 Speaker 1: investment from the oil and gas sector rows six point 4 00:00:08,600 --> 00:00:11,080 Speaker 1: six percent last year to reach thirty three point four 5 00:00:11,119 --> 00:00:13,880 Speaker 1: billion dollars, while spending on low carbon technologies as a 6 00:00:13,880 --> 00:00:17,400 Speaker 1: share of CAPEX also saw arise, reaching seven point six percent. 7 00:00:17,680 --> 00:00:20,919 Speaker 1: While these increases may suggest that decarbonization remains an aim 8 00:00:20,960 --> 00:00:23,320 Speaker 1: of fossil fuel majors, when we dig into the figures, 9 00:00:23,360 --> 00:00:26,599 Speaker 1: the pictures become more nuanced, with seven investors accounting for 10 00:00:26,680 --> 00:00:29,120 Speaker 1: eighty five percent of twenty to twenty four's low carbon 11 00:00:29,120 --> 00:00:31,600 Speaker 1: spend and only thirteen of the forty one firms we 12 00:00:31,640 --> 00:00:34,360 Speaker 1: assessed raising low carbon investment as a share of capex. 13 00:00:34,800 --> 00:00:37,440 Speaker 1: So what lies behind the varying strategic approaches of oil 14 00:00:37,479 --> 00:00:40,360 Speaker 1: and gas companies, Which companies are increasing their focus on 15 00:00:40,479 --> 00:00:43,800 Speaker 1: energy transition investment and what impact has the Trump Administration's 16 00:00:43,840 --> 00:00:46,880 Speaker 1: review of clean energy tax credits had. Today I'm joined 17 00:00:46,880 --> 00:00:49,760 Speaker 1: by member of our Oil team, associate Claudio Lubis, and 18 00:00:49,840 --> 00:00:52,840 Speaker 1: we discuss findings from his note Oil and Gas Energy 19 00:00:52,840 --> 00:00:57,080 Speaker 1: Transition twenty twenty four Clean CAPEX jumps, which BINYEP clients 20 00:00:57,120 --> 00:00:59,720 Speaker 1: can find at BNF go on the Bloomberg terminal or 21 00:00:59,760 --> 00:01:03,160 Speaker 1: on com. All right, let's get talking about oil and 22 00:01:03,160 --> 00:01:17,560 Speaker 1: gas energy transition investment with Cloudio Claudio. Welcome to the podcast. 23 00:01:17,640 --> 00:01:20,920 Speaker 1: Is this your first time unswitched on? It is? Thank you. 24 00:01:21,600 --> 00:01:24,560 Speaker 1: So today we're speaking specifically about a report you recently 25 00:01:24,600 --> 00:01:27,240 Speaker 1: published that I think combines a lot of the things 26 00:01:27,240 --> 00:01:30,119 Speaker 1: that are part of your BNF analyst DNA, the Oil 27 00:01:30,160 --> 00:01:33,520 Speaker 1: and Gas Energy Transition Investment Trends for twenty twenty four. 28 00:01:33,640 --> 00:01:36,039 Speaker 1: Can you tell us a little bit more about the 29 00:01:36,120 --> 00:01:38,199 Speaker 1: report and yeah, what it's all about. 30 00:01:38,480 --> 00:01:40,840 Speaker 2: Well, thank you, Tom, and it's great to be here. 31 00:01:41,080 --> 00:01:45,880 Speaker 2: This report essentially collates and analyzes the investment going into 32 00:01:45,920 --> 00:01:49,160 Speaker 2: the energy transition for forty one of the large publicly 33 00:01:49,160 --> 00:01:52,000 Speaker 2: listed oil and gas companies around the world up until 34 00:01:52,040 --> 00:01:55,320 Speaker 2: twenty twenty four, and the energy transition related sector here 35 00:01:55,400 --> 00:01:58,520 Speaker 2: pertains to the typical low carbon areas that BNF covers, 36 00:01:58,680 --> 00:02:03,200 Speaker 2: ranging from sol when technologies you know, other renewable technologies, 37 00:02:03,280 --> 00:02:07,320 Speaker 2: advanced transport which revolves mostly around electric vehicle charging, all 38 00:02:07,400 --> 00:02:10,840 Speaker 2: the way to the relatively more novel areas like carbon 39 00:02:10,880 --> 00:02:15,519 Speaker 2: capture and storage, hydrogen sustainable plastics and even renewable fuels. 40 00:02:16,000 --> 00:02:20,280 Speaker 1: So so everything that we would call green basically, yeah, 41 00:02:20,320 --> 00:02:22,399 Speaker 1: from a climate perspective exactly. 42 00:02:22,560 --> 00:02:25,200 Speaker 2: And just to quickly add on here that this is 43 00:02:25,240 --> 00:02:27,079 Speaker 2: pretty similar, if you want to view it this way, 44 00:02:27,240 --> 00:02:30,800 Speaker 2: to the Global Energy Transition Investment Trend Report, which is 45 00:02:30,960 --> 00:02:34,280 Speaker 2: an annual flagship from BNF looking into how much the 46 00:02:34,360 --> 00:02:37,880 Speaker 2: real economy invests in these so called green sectors. Except 47 00:02:37,919 --> 00:02:40,800 Speaker 2: for this report, it specifically focuses on the large oil 48 00:02:40,800 --> 00:02:41,520 Speaker 2: and gas players. 49 00:02:41,760 --> 00:02:44,680 Speaker 1: And I'm right in assuming that this is and we 50 00:02:44,720 --> 00:02:46,320 Speaker 1: can dive into this a bit deeper in a moment, 51 00:02:46,400 --> 00:02:48,760 Speaker 1: but this is still something. I mean, they're oil and 52 00:02:48,800 --> 00:02:52,440 Speaker 1: gas companies, so presumably this is something of a sideline 53 00:02:52,440 --> 00:02:55,519 Speaker 1: for them compared to they're still investing in their core 54 00:02:55,600 --> 00:02:57,880 Speaker 1: business as well. Right, So in this report, we're not 55 00:02:57,880 --> 00:03:00,400 Speaker 1: trying to suddenly say that oil and gas companies are 56 00:03:00,440 --> 00:03:03,640 Speaker 1: now green. It's more just there is this part of 57 00:03:03,680 --> 00:03:06,680 Speaker 1: them that is pushing into these new areas. 58 00:03:07,120 --> 00:03:09,960 Speaker 2: Absolutely, And if I could go into a very high 59 00:03:10,040 --> 00:03:12,919 Speaker 2: level numbers just to basically elaborate or what you meant here, 60 00:03:13,080 --> 00:03:15,880 Speaker 2: what we found was that off these forty one companies, 61 00:03:15,919 --> 00:03:18,920 Speaker 2: there are total capital expenditures, which includes you know, everything 62 00:03:18,919 --> 00:03:22,320 Speaker 2: they invested upon, ranged around four hundred and forty billion 63 00:03:22,400 --> 00:03:25,079 Speaker 2: dollars last year, which is, you know, a four percent 64 00:03:25,200 --> 00:03:26,680 Speaker 2: year on year increase, but at. 65 00:03:26,560 --> 00:03:28,400 Speaker 1: The same across all forty one companies. 66 00:03:28,400 --> 00:03:30,920 Speaker 2: That is right, yes, but if we look into the 67 00:03:30,960 --> 00:03:34,040 Speaker 2: external investment by these group of companies into the so 68 00:03:34,160 --> 00:03:37,760 Speaker 2: called low carbon sectors, we saw that annual figures actually 69 00:03:37,800 --> 00:03:41,000 Speaker 2: rebounded by around seven percent to hit over thirty three 70 00:03:41,040 --> 00:03:45,240 Speaker 2: billion dollars. So this saw the share of the energy 71 00:03:45,240 --> 00:03:48,960 Speaker 2: transition investment by these companies grew marginally to around seven 72 00:03:49,000 --> 00:03:52,080 Speaker 2: point six percent, up from around seven point four percent 73 00:03:52,160 --> 00:03:54,600 Speaker 2: the previous year or in twenty twenty three. So the 74 00:03:54,720 --> 00:03:58,280 Speaker 2: energy transition investment made by these companies, yes, it grew, 75 00:03:58,400 --> 00:04:00,800 Speaker 2: but at the same time it's still or quite a 76 00:04:00,840 --> 00:04:04,280 Speaker 2: minor portion of the group's overall investment figure. 77 00:04:04,440 --> 00:04:07,400 Speaker 1: It's really interesting what you've just mentioned for a few reasons, 78 00:04:07,440 --> 00:04:09,000 Speaker 1: so I just want to make sure that we get 79 00:04:09,040 --> 00:04:13,280 Speaker 1: the full picture. So overall investment by these companies rose 80 00:04:13,400 --> 00:04:16,800 Speaker 1: in twenty twenty four in everything, but it rose slightly 81 00:04:16,880 --> 00:04:20,359 Speaker 1: more in proportional terms into the green stuff. Is that 82 00:04:20,400 --> 00:04:21,760 Speaker 1: what you're saying exactly? 83 00:04:22,000 --> 00:04:25,279 Speaker 2: So in terms of the overall CAREBAX in twenty twenty four, 84 00:04:25,320 --> 00:04:28,200 Speaker 2: it grew at around three point five percent, But when 85 00:04:28,240 --> 00:04:32,040 Speaker 2: we look into specifically the energy transition related investment, that 86 00:04:32,120 --> 00:04:33,800 Speaker 2: actually grew almost seven percent. 87 00:04:34,240 --> 00:04:38,560 Speaker 1: You know, you mentioned our Global Energy Investment Trends report. 88 00:04:38,680 --> 00:04:41,480 Speaker 1: The other thing I was thinking about is our ratios, 89 00:04:41,520 --> 00:04:45,040 Speaker 1: and we have this number for every dollar invested in 90 00:04:45,080 --> 00:04:48,360 Speaker 1: fossil fuels it has to before going into green energy. 91 00:04:48,920 --> 00:04:53,000 Speaker 1: So here it's something like zero point one, So I 92 00:04:53,000 --> 00:04:56,120 Speaker 1: mean unsurprising they're quite far off of that ratio. What 93 00:04:56,200 --> 00:05:00,360 Speaker 1: I find actually just interesting is and maybe slightly hopeful 94 00:05:00,360 --> 00:05:04,120 Speaker 1: from environmental perspective, is that it's not zero. And because 95 00:05:04,120 --> 00:05:06,000 Speaker 1: these companies have a lot of money and they can 96 00:05:06,080 --> 00:05:08,280 Speaker 1: move the needle if they chose to dive into an area, 97 00:05:08,320 --> 00:05:09,760 Speaker 1: is that a fair thing to say? Yeah? 98 00:05:09,800 --> 00:05:12,760 Speaker 2: Absolutely, I think the four to one ratio which you've mentioned, 99 00:05:13,080 --> 00:05:16,120 Speaker 2: which is based on our research across different Parris aligned 100 00:05:16,240 --> 00:05:19,280 Speaker 2: net zero and one point five degree aligned climate scenarios, 101 00:05:19,440 --> 00:05:23,040 Speaker 2: that represents the whole economy, or the entire global real economy, 102 00:05:23,080 --> 00:05:26,320 Speaker 2: whereas this research focuses specifically on the oil and gas company, 103 00:05:26,400 --> 00:05:27,840 Speaker 2: so they're definitely not there yet. 104 00:05:27,839 --> 00:05:29,839 Speaker 1: In terms of the four to one. But you know, 105 00:05:30,040 --> 00:05:32,200 Speaker 1: and in fairness, I don't think we should ever expect 106 00:05:32,279 --> 00:05:35,520 Speaker 1: them to make it there because they're specifically no, I mean, 107 00:05:35,560 --> 00:05:37,120 Speaker 1: and that's I think the point I was trying to 108 00:05:37,120 --> 00:05:39,200 Speaker 1: make is that at least they're on the map from 109 00:05:39,200 --> 00:05:41,600 Speaker 1: a green perspective. You hope they'll invest more in these areas, 110 00:05:41,680 --> 00:05:45,040 Speaker 1: but it's not insignificant, I suppose. I mean, thirty three 111 00:05:45,040 --> 00:05:46,760 Speaker 1: billion dollars is a lot of money, whichever way you 112 00:05:46,760 --> 00:05:49,039 Speaker 1: look at it. Precisely. Yeah, one of the things you 113 00:05:49,080 --> 00:05:50,480 Speaker 1: talked about in the report. I mean, you look at 114 00:05:50,480 --> 00:05:54,680 Speaker 1: these forty one different companies, and they're not all generic. 115 00:05:54,760 --> 00:05:56,839 Speaker 1: You know, there's quite a lot of difference that you 116 00:05:57,080 --> 00:06:00,320 Speaker 1: see between Well, firstly, what kind of companies they we say, 117 00:06:00,320 --> 00:06:03,120 Speaker 1: oil and gas companies. Those come in many flavors and 118 00:06:03,240 --> 00:06:06,440 Speaker 1: you know, many different ownership structures, positions within the value chain. 119 00:06:06,520 --> 00:06:10,040 Speaker 1: But then also in terms of you know, some are 120 00:06:10,120 --> 00:06:13,080 Speaker 1: investing maybe more, you know, especially if we're thinking in 121 00:06:13,160 --> 00:06:16,000 Speaker 1: terms of these ratios, So who's who's leading the way here? 122 00:06:16,040 --> 00:06:17,839 Speaker 1: What types of companies are leading the way? 123 00:06:18,040 --> 00:06:20,960 Speaker 2: Yeah, that's a that's a great set of questions to answer. 124 00:06:20,960 --> 00:06:23,119 Speaker 2: The first part of that questions within Within the forty 125 00:06:23,120 --> 00:06:26,000 Speaker 2: one companies that we covered, we try to encapsulate an 126 00:06:26,120 --> 00:06:28,560 Speaker 2: entire range of the oil and gas companies. So this 127 00:06:28,760 --> 00:06:32,960 Speaker 2: revolves around let's say integrated oil majors. So integrated companies 128 00:06:33,000 --> 00:06:35,240 Speaker 2: are those that covers the entire value chain of the 129 00:06:35,240 --> 00:06:38,880 Speaker 2: oil and gas industry, ranging from upstream or production all 130 00:06:38,920 --> 00:06:41,279 Speaker 2: the way to marketing and downstream so you know, the 131 00:06:41,320 --> 00:06:43,719 Speaker 2: processing of the fuels and also selling it towards the 132 00:06:43,800 --> 00:06:46,680 Speaker 2: end users. We also have those that are very focused 133 00:06:46,680 --> 00:06:50,599 Speaker 2: on the downstream site, so most likely revolving around refineries. 134 00:06:50,880 --> 00:06:54,280 Speaker 2: We then have those that focus on exploration and production, 135 00:06:54,600 --> 00:06:57,440 Speaker 2: essentially those that focuses on the upstream sectors or getting 136 00:06:57,440 --> 00:06:59,800 Speaker 2: the oil out the ground, drilling it and then producing it. 137 00:07:00,080 --> 00:07:03,320 Speaker 2: And we have other companies who also fall within the 138 00:07:03,320 --> 00:07:07,200 Speaker 2: integrated majors, but more towards the national oil companies rather 139 00:07:07,240 --> 00:07:10,520 Speaker 2: than the integrated big oil that we often hear like Shell, 140 00:07:10,800 --> 00:07:15,360 Speaker 2: BP Total. And to your second point regarding who's been 141 00:07:15,440 --> 00:07:18,160 Speaker 2: leading within this avenue per se, I think it's worth 142 00:07:18,200 --> 00:07:20,840 Speaker 2: noting that each of these forty one companies, they have 143 00:07:20,920 --> 00:07:24,920 Speaker 2: different financial capabilities, they're different to one another, and one 144 00:07:24,960 --> 00:07:26,880 Speaker 2: way we can look at this or one way that 145 00:07:26,880 --> 00:07:30,480 Speaker 2: we've been looking at this is to understand and quantify 146 00:07:30,560 --> 00:07:33,400 Speaker 2: how much clean investment they're making as a share of 147 00:07:33,440 --> 00:07:37,440 Speaker 2: their overall capital expenditures. And as a key takeaway or 148 00:07:37,480 --> 00:07:40,640 Speaker 2: as a key high level conclusion is that refiners and 149 00:07:40,800 --> 00:07:44,440 Speaker 2: the integrated oil majors in Europe essentially sit amongst the 150 00:07:44,480 --> 00:07:47,240 Speaker 2: leaderboards here now when we look into the integrated oil 151 00:07:47,280 --> 00:07:50,440 Speaker 2: majors in Europe, so this includes the big oil companies 152 00:07:50,480 --> 00:07:55,560 Speaker 2: you often hear specifically BP, Total Shell, any equinor, but 153 00:07:55,600 --> 00:07:58,920 Speaker 2: we also include GULP and repsol within this categorization. 154 00:07:59,160 --> 00:08:00,160 Speaker 1: These companies have been. 155 00:08:00,000 --> 00:08:03,200 Speaker 2: Invested somewhere around ten to over twenty percent of their 156 00:08:03,240 --> 00:08:06,960 Speaker 2: overall investment figures into clean technologies, and a part of 157 00:08:07,000 --> 00:08:10,680 Speaker 2: this stems from mainly the fact where they're based there 158 00:08:10,760 --> 00:08:13,880 Speaker 2: is arguably a structural decline and demand for the fuels 159 00:08:13,920 --> 00:08:16,640 Speaker 2: that they sell. But at the same time, Europe's also 160 00:08:16,720 --> 00:08:19,640 Speaker 2: home to quite a lot of stringent climate policies, so 161 00:08:19,720 --> 00:08:22,840 Speaker 2: de carbonization for these companies has become an integral focus 162 00:08:22,880 --> 00:08:24,160 Speaker 2: over the past few years. 163 00:08:24,360 --> 00:08:26,520 Speaker 1: Can I just just want to dig into one thing 164 00:08:26,520 --> 00:08:29,840 Speaker 1: about the some of the European oil majors because you know, 165 00:08:30,280 --> 00:08:33,280 Speaker 1: in the figures you were just quoting were for twenty 166 00:08:33,320 --> 00:08:36,240 Speaker 1: fifteen to twenty twenty four, and so there has over 167 00:08:36,280 --> 00:08:38,760 Speaker 1: that decade been a trend of those companies investing more 168 00:08:38,800 --> 00:08:42,280 Speaker 1: and more in green technologies. But also there's been news 169 00:08:42,320 --> 00:08:45,640 Speaker 1: made with some of those companies pulling away. So a 170 00:08:45,760 --> 00:08:49,800 Speaker 1: question I have is, how did those companies change, say, 171 00:08:49,960 --> 00:08:53,160 Speaker 1: in twenty twenty four compared to previous years. Is there 172 00:08:53,360 --> 00:08:56,640 Speaker 1: proportional investment in green technology still on the rise, or 173 00:08:56,720 --> 00:08:58,400 Speaker 1: has that trend reversed. 174 00:08:58,160 --> 00:08:59,920 Speaker 2: When we look at it at a firm level in 175 00:09:00,000 --> 00:09:02,800 Speaker 2: between time periods. One interesting thing that we found, and 176 00:09:02,840 --> 00:09:05,080 Speaker 2: I'm going to speak to the entire companies that we 177 00:09:05,080 --> 00:09:09,439 Speaker 2: analyzed here, is that despite the overall high level figure 178 00:09:09,679 --> 00:09:12,280 Speaker 2: increasing year on year in terms of absolute values, we 179 00:09:12,360 --> 00:09:16,240 Speaker 2: found that less than half of the companies actually increased 180 00:09:16,440 --> 00:09:19,800 Speaker 2: in twenty twenty four the allocation of their clean spend 181 00:09:19,920 --> 00:09:23,439 Speaker 2: relative to previous years. And for these thirteen companies per 182 00:09:23,480 --> 00:09:26,560 Speaker 2: se that actually increased year on year, they're actually mostly 183 00:09:26,840 --> 00:09:29,040 Speaker 2: led by those who's already been plowing a lot of 184 00:09:29,080 --> 00:09:32,400 Speaker 2: clean capital. And in terms of the integrated European majors, 185 00:09:32,600 --> 00:09:36,400 Speaker 2: these are equinor Any and total energies. On the other hand, 186 00:09:36,600 --> 00:09:39,640 Speaker 2: we saw that a SHELL, for example, based on our numbers, 187 00:09:39,720 --> 00:09:42,640 Speaker 2: put back on the allocation of clean spend in twenty 188 00:09:42,679 --> 00:09:45,120 Speaker 2: twenty four when you compare that to their previous years. 189 00:09:45,520 --> 00:09:47,480 Speaker 1: So within that group, we're starting to see a bit 190 00:09:47,480 --> 00:09:51,240 Speaker 1: of a fracturing of like maybe a second tier emerging, 191 00:09:51,360 --> 00:09:53,520 Speaker 1: like not everyone is keeping pace with the rest of 192 00:09:53,559 --> 00:09:57,559 Speaker 1: the pack precisely. Yeah, got it. Okay, So talk about refiners. 193 00:09:57,640 --> 00:09:59,800 Speaker 1: Tell us a little bit more about about their activity 194 00:09:59,840 --> 00:10:02,280 Speaker 1: and space. Yeah, so refiners. 195 00:10:02,800 --> 00:10:05,040 Speaker 2: When we think about refiners and what their intentions are 196 00:10:05,080 --> 00:10:08,319 Speaker 2: to decarbonize, I think it's mostly driven by the fact 197 00:10:08,360 --> 00:10:10,760 Speaker 2: that they face a very uncertain future in terms of 198 00:10:10,840 --> 00:10:12,679 Speaker 2: oil demand. I mean, if you look into the different 199 00:10:12,760 --> 00:10:15,760 Speaker 2: scenarios around the world made by different agencies, we have 200 00:10:16,240 --> 00:10:18,880 Speaker 2: very contrasting pictures of what the world will look like 201 00:10:18,920 --> 00:10:21,880 Speaker 2: when it comes to oil consumption. So this has prompted 202 00:10:21,960 --> 00:10:24,560 Speaker 2: quite a lot of refiners to actually rethink and reject 203 00:10:24,559 --> 00:10:28,319 Speaker 2: a lot of their strategic ventures when it comes to decarbonization. 204 00:10:28,640 --> 00:10:32,600 Speaker 2: And we've seen that refiners have often opted to pivot 205 00:10:32,600 --> 00:10:36,360 Speaker 2: into something that they share technological synergies with, for example, 206 00:10:36,520 --> 00:10:40,079 Speaker 2: renewable fuels, Now, when we talk about the leaderboards here, 207 00:10:40,200 --> 00:10:42,600 Speaker 2: essentially who's leading when it comes to the share of 208 00:10:42,720 --> 00:10:46,280 Speaker 2: capital investment for clean technologies. Refiners are in the leaderboard, 209 00:10:46,400 --> 00:10:48,760 Speaker 2: and I want to pick out two companies that kind 210 00:10:48,760 --> 00:10:51,920 Speaker 2: of stood out. So these are ESK Innovation and also 211 00:10:52,120 --> 00:10:55,320 Speaker 2: neste who's invested at least over the past decade over 212 00:10:55,400 --> 00:11:00,240 Speaker 2: fifty percent of their overall CAPEX into the green technologies. Now, 213 00:11:00,240 --> 00:11:03,520 Speaker 2: for Estay, most of these have gone into renewable fuels production. 214 00:11:03,679 --> 00:11:06,160 Speaker 2: They're one of the earliest movers into that field, whereas 215 00:11:06,160 --> 00:11:09,240 Speaker 2: for ESK Innovation it pertains more to battery manufacturing. But 216 00:11:09,320 --> 00:11:11,640 Speaker 2: at the same time we also see that other refiners, 217 00:11:11,800 --> 00:11:14,320 Speaker 2: especially the pure players in the US, those that focus 218 00:11:14,559 --> 00:11:18,520 Speaker 2: most lyon just refinery and you know, producing fuels out 219 00:11:18,520 --> 00:11:22,079 Speaker 2: of crude, such as Phillip sixty six, Marathon and Valero, 220 00:11:22,240 --> 00:11:25,280 Speaker 2: have also invested a sizeable amount of their total care 221 00:11:25,320 --> 00:11:27,400 Speaker 2: PACs into green technologies. 222 00:11:27,600 --> 00:11:31,400 Speaker 1: That's so interesting, I mean with nest A and sk Innovation, 223 00:11:31,480 --> 00:11:34,400 Speaker 1: and actually it's more than half of their spend. And 224 00:11:34,480 --> 00:11:37,280 Speaker 1: like you say, it's into areas that are complementary. Because 225 00:11:37,280 --> 00:11:40,200 Speaker 1: I think of refiners as being companies that specialize in 226 00:11:40,280 --> 00:11:43,760 Speaker 1: doing things with molecules, and so moving into renewable fuels, 227 00:11:43,840 --> 00:11:47,760 Speaker 1: moving into batteries seems really consistent. I guess I've got 228 00:11:48,040 --> 00:11:50,200 Speaker 1: a follow up question, but just before we do, for 229 00:11:50,200 --> 00:11:52,800 Speaker 1: those listeners who are less familiar with this space, sk 230 00:11:52,960 --> 00:11:55,520 Speaker 1: Innovation and nest A, where are they based in the world, 231 00:11:55,600 --> 00:11:58,320 Speaker 1: Because I'm right, I'm saying refiners tend to be a 232 00:11:58,320 --> 00:12:02,040 Speaker 1: lot more local than say maybe some of the integrated 233 00:12:02,120 --> 00:12:02,720 Speaker 1: or companies. 234 00:12:03,160 --> 00:12:05,600 Speaker 2: Yeah, so in terms of where they're based, escal Innovation 235 00:12:05,800 --> 00:12:07,920 Speaker 2: is based in South Korea, and. 236 00:12:07,920 --> 00:12:11,199 Speaker 1: So the battery linkage makes a lot of sense. 237 00:12:10,960 --> 00:12:15,959 Speaker 2: Then precisely, and Nesta is based in Finland. But given 238 00:12:15,960 --> 00:12:18,080 Speaker 2: that they're one of the earliest movers into the field, 239 00:12:18,160 --> 00:12:21,679 Speaker 2: especially from a refining perspective, going into or diversifying into 240 00:12:21,720 --> 00:12:25,480 Speaker 2: renewable fuels, NESTE has actually expanded as footprint quite globally. 241 00:12:25,520 --> 00:12:29,240 Speaker 2: I would say they've have now a refinery in Rotterdam 242 00:12:29,360 --> 00:12:33,360 Speaker 2: and also a refinery in Singapore that produces sustainable aviation fuel, 243 00:12:33,440 --> 00:12:34,760 Speaker 2: so they have that global footprint. 244 00:12:35,240 --> 00:12:37,640 Speaker 1: A question I have, and I suppose it's impossible to 245 00:12:38,360 --> 00:12:41,400 Speaker 1: answer this for sure because it involves a parallel universe 246 00:12:41,520 --> 00:12:44,240 Speaker 1: that we don't have access to. But it'd be interesting 247 00:12:44,240 --> 00:12:46,640 Speaker 1: to get your opinion anyway, because it'salking about those companies. 248 00:12:46,880 --> 00:12:48,760 Speaker 1: You know, more than fifty percent of what they've been 249 00:12:48,800 --> 00:12:52,440 Speaker 1: investing in is in green technologies. I suppose in the 250 00:12:52,480 --> 00:12:55,480 Speaker 1: parallel universe where they weren't doing that, were they investing 251 00:12:55,640 --> 00:12:59,160 Speaker 1: more than they were in this universe into their core 252 00:12:59,320 --> 00:13:02,680 Speaker 1: oil and gas business or were they just investing less overall. 253 00:13:03,080 --> 00:13:05,960 Speaker 1: I suppose what my question is really driving at is 254 00:13:06,080 --> 00:13:09,280 Speaker 1: for those companies, does this represent a move into an 255 00:13:09,280 --> 00:13:12,959 Speaker 1: expansion into something new, or a move away from oil 256 00:13:13,000 --> 00:13:15,240 Speaker 1: and gas? I think somewhere in between the two. 257 00:13:15,280 --> 00:13:18,760 Speaker 2: I think, especially for refiners whose business model is not 258 00:13:18,960 --> 00:13:21,800 Speaker 2: integrated across the entire value chain, and especially when you 259 00:13:21,840 --> 00:13:25,560 Speaker 2: invest over fifty percent of your KPEX, that signals quite 260 00:13:25,559 --> 00:13:28,760 Speaker 2: a pivotal, slash abrupt change in where they want to 261 00:13:28,760 --> 00:13:31,240 Speaker 2: go strategically. And we can definitely see this when it 262 00:13:31,280 --> 00:13:33,440 Speaker 2: comes to nest Day, for example, wanting to be a 263 00:13:33,640 --> 00:13:37,360 Speaker 2: specialized renewal fuels producer when initially they started off as 264 00:13:37,360 --> 00:13:39,000 Speaker 2: a traditional refinery. 265 00:13:39,400 --> 00:13:41,440 Speaker 1: So we talked about some of the companies that have 266 00:13:41,960 --> 00:13:45,680 Speaker 1: been leading in terms of investment, particularly as a fraction 267 00:13:45,760 --> 00:13:49,160 Speaker 1: of their overall investment who has been lagging both over 268 00:13:49,160 --> 00:13:51,480 Speaker 1: the last decade and in twenty twenty four. 269 00:13:51,520 --> 00:13:55,120 Speaker 2: Specifically, when it comes to the laggards per se, there 270 00:13:55,120 --> 00:13:58,120 Speaker 2: are some companies that they invest quite a decent amount, 271 00:13:58,120 --> 00:14:01,280 Speaker 2: somewhere between three to five percent of their CAPEX into 272 00:14:01,280 --> 00:14:04,720 Speaker 2: green technologies. These are the other integrated majors like Eggs 273 00:14:04,720 --> 00:14:07,640 Speaker 2: and Mobile, Chevron and Petronas for example. But I think 274 00:14:07,640 --> 00:14:10,120 Speaker 2: the notable laggots here again if you look at the 275 00:14:10,160 --> 00:14:14,120 Speaker 2: last ten years, mostly pertain to the remaining integrated oil majors. 276 00:14:14,120 --> 00:14:17,240 Speaker 2: So the national oil companies who at times serve to 277 00:14:17,280 --> 00:14:21,520 Speaker 2: the interests of their nations, and also exploration and production companies. 278 00:14:21,560 --> 00:14:25,360 Speaker 2: Now exploration and production companies, they've invested very little or 279 00:14:25,720 --> 00:14:29,120 Speaker 2: no investment into clean technologies as a share of their 280 00:14:29,160 --> 00:14:31,760 Speaker 2: overall KPEX. And a part of this actually pertains to 281 00:14:31,800 --> 00:14:34,920 Speaker 2: the fact that for exploration and production firms, their main 282 00:14:34,960 --> 00:14:37,160 Speaker 2: goal is to pump oil out of the ground and 283 00:14:37,280 --> 00:14:39,960 Speaker 2: sell it at a profit, essentially to boost their short 284 00:14:40,040 --> 00:14:41,000 Speaker 2: term profitability. 285 00:14:41,280 --> 00:14:43,160 Speaker 1: It seems to me that from what you're saying, I mean, 286 00:14:43,360 --> 00:14:46,640 Speaker 1: let's start with national companies, would it even be realistic 287 00:14:46,680 --> 00:14:49,920 Speaker 1: to expect them to be investing a lot into green technologies, 288 00:14:49,920 --> 00:14:52,920 Speaker 1: because you know, a state owned company typically is there 289 00:14:52,960 --> 00:14:56,400 Speaker 1: to serve a singular purpose for the benefit of society, 290 00:14:56,480 --> 00:15:00,160 Speaker 1: and if the government wanted investment into green technologies, they 291 00:15:00,160 --> 00:15:04,000 Speaker 1: would probably have some other organization or arm of the 292 00:15:04,000 --> 00:15:07,080 Speaker 1: themselves do that. So is it realistic to ever expect 293 00:15:07,160 --> 00:15:11,880 Speaker 1: national oil companies to be boosting their expenditure in green technologies. 294 00:15:12,000 --> 00:15:13,680 Speaker 1: I suppose what I'm saying is am I being fair 295 00:15:13,840 --> 00:15:17,000 Speaker 1: like we should have low expectations for these companies just 296 00:15:17,080 --> 00:15:18,680 Speaker 1: from looking at the way they're owned. 297 00:15:19,440 --> 00:15:21,560 Speaker 2: Yeah, I think that's a that's a fair point. I'm 298 00:15:21,560 --> 00:15:23,080 Speaker 2: going to frame it in a different way here, and 299 00:15:23,320 --> 00:15:25,080 Speaker 2: I think a lot of the pressures when it comes 300 00:15:25,120 --> 00:15:28,600 Speaker 2: to decarbonizing, for example, has fallen more or the need 301 00:15:28,640 --> 00:15:32,120 Speaker 2: to decarbonize has fallen more into the integrated oil majors. 302 00:15:32,400 --> 00:15:35,720 Speaker 2: So for national oil companies again serving the purpose of 303 00:15:35,760 --> 00:15:38,000 Speaker 2: what their nation wants. And if we see over the 304 00:15:38,040 --> 00:15:41,240 Speaker 2: past few years, especially with a lot of geopolitical events 305 00:15:41,320 --> 00:15:44,760 Speaker 2: unfolding and also the post pandemic rebound which you know 306 00:15:44,880 --> 00:15:48,720 Speaker 2: Caesar increase in demand, we've seen energy security becoming quite 307 00:15:48,720 --> 00:15:52,720 Speaker 2: a buzzwords. With some of these national oil companies increasing 308 00:15:52,800 --> 00:15:54,960 Speaker 2: their production given that a lot of them are base 309 00:15:55,000 --> 00:15:57,480 Speaker 2: in fossil fuel exporting countries. I don't want to speculate 310 00:15:57,520 --> 00:16:00,000 Speaker 2: on their individual strategies, but I think you do make 311 00:16:00,040 --> 00:16:00,600 Speaker 2: a fair point. 312 00:16:00,880 --> 00:16:02,520 Speaker 1: And I suppose, I mean, I think you laid it 313 00:16:02,520 --> 00:16:05,280 Speaker 1: out really well. For the E and P companies, they 314 00:16:05,280 --> 00:16:08,480 Speaker 1: also have a singular purpose, I suppose generally speaking, are 315 00:16:08,480 --> 00:16:12,560 Speaker 1: they they're much smaller than the integrated oil majors. Is 316 00:16:12,840 --> 00:16:14,800 Speaker 1: you know, they're sort of set up to do one 317 00:16:14,840 --> 00:16:17,800 Speaker 1: thing and one thing only so and that they aren't like, 318 00:16:17,880 --> 00:16:20,160 Speaker 1: you know, they're not spread across the value chain, and 319 00:16:20,240 --> 00:16:23,480 Speaker 1: so we shouldn't necessarily expect that flexibility from them. Is 320 00:16:23,520 --> 00:16:26,880 Speaker 1: that Is that fair? Particularly in a in a world. 321 00:16:27,200 --> 00:16:29,920 Speaker 1: At one point in time before the pandemic, you know, 322 00:16:29,920 --> 00:16:32,680 Speaker 1: particularly in the US, they it was just all expand volumes, 323 00:16:32,760 --> 00:16:36,240 Speaker 1: invest more and into expanding their production. Now they are 324 00:16:36,320 --> 00:16:39,600 Speaker 1: really being forced in a very competitive market to eke 325 00:16:39,680 --> 00:16:42,840 Speaker 1: out a margin. So yeah, is it ever? Are we 326 00:16:42,880 --> 00:16:44,960 Speaker 1: ever realistically going to see those companies investing in the 327 00:16:45,080 --> 00:16:46,680 Speaker 1: energy transition? Yeah? 328 00:16:46,680 --> 00:16:49,280 Speaker 2: I think when it comes to those companies investing in 329 00:16:49,320 --> 00:16:52,360 Speaker 2: the energy transition, there are always possibilities for them to 330 00:16:52,400 --> 00:16:55,080 Speaker 2: increase the investment over the next few years. And if 331 00:16:55,120 --> 00:16:58,040 Speaker 2: we look into just exploration and production companies and how 332 00:16:58,080 --> 00:17:01,480 Speaker 2: much they've been investing into let's green technologies, both as 333 00:17:01,520 --> 00:17:04,240 Speaker 2: an absolute value and as a share of their overall capex, 334 00:17:04,359 --> 00:17:07,119 Speaker 2: we've seen that since twenty twenty two, these figures have 335 00:17:07,200 --> 00:17:11,360 Speaker 2: grown very slowly. But you're right, I think these exploration 336 00:17:11,400 --> 00:17:13,840 Speaker 2: and production companies their main goal is to focus more 337 00:17:13,880 --> 00:17:17,640 Speaker 2: on the production site and to extract the barrels at 338 00:17:17,960 --> 00:17:21,240 Speaker 2: minimal costs, so exercising capital efficiency. 339 00:17:20,800 --> 00:17:23,359 Speaker 1: And they tend to be quite localized as well. I 340 00:17:23,359 --> 00:17:26,679 Speaker 1: also thinking they don't necessarily have the footprint like geographically 341 00:17:26,720 --> 00:17:29,920 Speaker 1: to benefit from green investments. Is that fair? 342 00:17:30,080 --> 00:17:32,320 Speaker 2: Yeah, their footprint is definitely much smaller than if you 343 00:17:32,359 --> 00:17:34,840 Speaker 2: compare to the integrated oil majors or even some of 344 00:17:34,880 --> 00:17:38,080 Speaker 2: the national oil companies. Again, if we look into the US, 345 00:17:38,119 --> 00:17:40,200 Speaker 2: for example, we do have a lot of exploration and 346 00:17:40,240 --> 00:17:43,320 Speaker 2: production companies, but they're mostly very localized within a certain 347 00:17:43,359 --> 00:17:46,120 Speaker 2: basins or so, or within the US itself. 348 00:17:46,560 --> 00:17:49,440 Speaker 1: So I know we've been speaking in terms of investment 349 00:17:49,480 --> 00:17:53,480 Speaker 1: in the energy transition or into green technologies in abstract 350 00:17:53,640 --> 00:17:56,400 Speaker 1: dollar terms, but let's talk a little bit about you know, 351 00:17:56,640 --> 00:17:58,560 Speaker 1: what the money is actually going into. 352 00:17:59,160 --> 00:18:02,120 Speaker 2: Yeah, So if we look into just twenty twenty four, 353 00:18:02,359 --> 00:18:06,280 Speaker 2: we saw that WIN Energy, including both onshore and offshore 354 00:18:06,640 --> 00:18:09,919 Speaker 2: let oil and gases clean investment at around twelve billion 355 00:18:10,000 --> 00:18:12,520 Speaker 2: dollars or somewhere around that number. So focusing on the 356 00:18:12,560 --> 00:18:15,440 Speaker 2: past year, most of the investment, or the largest part 357 00:18:15,440 --> 00:18:19,160 Speaker 2: of the investment clean investment went into Win technologies at 358 00:18:19,200 --> 00:18:21,199 Speaker 2: over a third of the overall figure. 359 00:18:21,280 --> 00:18:22,359 Speaker 1: But I want to note here. 360 00:18:22,280 --> 00:18:28,480 Speaker 2: That that's largely underscored by financial close of Equinor's Empire 361 00:18:28,600 --> 00:18:31,440 Speaker 2: Win one project in New York very late last year, 362 00:18:31,480 --> 00:18:34,400 Speaker 2: which was valued at around five billion dollars. And this 363 00:18:34,520 --> 00:18:38,240 Speaker 2: project received a halt a stop work order a stopwork 364 00:18:38,359 --> 00:18:41,320 Speaker 2: order by the Bureau of Ocean Management in late April, 365 00:18:41,400 --> 00:18:43,600 Speaker 2: only for it to be reinstated back and for works 366 00:18:43,600 --> 00:18:46,560 Speaker 2: to continue a month later. But Win Energy has been 367 00:18:46,840 --> 00:18:49,240 Speaker 2: the top technology when it comes to oil and gases 368 00:18:49,240 --> 00:18:52,200 Speaker 2: clean investment in twenty twenty four, and this is closely 369 00:18:52,320 --> 00:18:55,720 Speaker 2: followed by Solar coming in second place with an investment 370 00:18:55,760 --> 00:18:59,000 Speaker 2: figure of around nine billion dollars, which is around twenty 371 00:18:59,040 --> 00:19:02,040 Speaker 2: five twenty six percent of the overall investment figure. And 372 00:19:02,240 --> 00:19:05,120 Speaker 2: this has been led by PetroChina and who closed three 373 00:19:05,160 --> 00:19:07,920 Speaker 2: of the largest spending deals within that sector are almost 374 00:19:07,960 --> 00:19:09,240 Speaker 2: all three billions altogether. 375 00:19:09,520 --> 00:19:11,560 Speaker 1: I mean, I'm just doing some quick mats here. That's 376 00:19:11,600 --> 00:19:14,920 Speaker 1: almost half of it is in wind and solar exactly 377 00:19:15,320 --> 00:19:18,240 Speaker 1: then the other because also, I mean we talk a 378 00:19:18,280 --> 00:19:21,119 Speaker 1: lot here and you mentioned in neuroport investment into two 379 00:19:21,200 --> 00:19:25,600 Speaker 1: molecules versus electrons, So is the other approximately half going 380 00:19:25,600 --> 00:19:27,680 Speaker 1: into molecules to an extent. 381 00:19:28,000 --> 00:19:30,639 Speaker 2: Apart from wind and solar. In twenty twenty four, the 382 00:19:30,720 --> 00:19:35,080 Speaker 2: other sectors that saw let's say sizable investment were renewable fuels, 383 00:19:35,400 --> 00:19:37,920 Speaker 2: energy storage, and hydrogen. So yeah, a lot of clean 384 00:19:37,960 --> 00:19:41,160 Speaker 2: molecules there as well. And specifically we saw that investment 385 00:19:41,160 --> 00:19:44,600 Speaker 2: into energy storage and hydrogen increased year on year. Now, 386 00:19:44,640 --> 00:19:47,240 Speaker 2: for energy storage this is mostly a factor of sk 387 00:19:47,359 --> 00:19:52,119 Speaker 2: innovation driving the investment figures, whereas for hydrogen this was 388 00:19:52,200 --> 00:19:57,320 Speaker 2: mainly attributed to Woodside's acquisition of although carbon ammonia producer 389 00:19:57,359 --> 00:20:00,000 Speaker 2: OCI in September last year at around two point five 390 00:20:00,040 --> 00:20:03,000 Speaker 2: for billion dollars. Now, just to quickly note that Woodside Energy, 391 00:20:03,040 --> 00:20:06,919 Speaker 2: which is based in Australia, they have decided to diversify 392 00:20:06,960 --> 00:20:10,399 Speaker 2: and expand their portfolio coming from just focusing on the 393 00:20:10,480 --> 00:20:11,960 Speaker 2: upstream sector, got it. 394 00:20:12,040 --> 00:20:15,440 Speaker 1: So it is quite diverse. It's also, interestingly, it's quite 395 00:20:15,480 --> 00:20:17,760 Speaker 1: lumpy some of this investment. For those of you not 396 00:20:17,760 --> 00:20:19,880 Speaker 1: familiar with the term lumpy, we just mean that there's 397 00:20:20,000 --> 00:20:22,400 Speaker 1: one or two really big investments that, you know, if 398 00:20:22,400 --> 00:20:24,480 Speaker 1: they hadn't happened, or if they happened next year, it 399 00:20:24,640 --> 00:20:26,960 Speaker 1: kind of distorts the way your chart looks. Your chart 400 00:20:27,000 --> 00:20:28,879 Speaker 1: looks a bit lumpy. I'm kind of curious to know 401 00:20:28,920 --> 00:20:31,360 Speaker 1: because we had this whole you know, conversation about you know, 402 00:20:31,680 --> 00:20:34,800 Speaker 1: refiners versus the integrated oil companies being two of the 403 00:20:34,800 --> 00:20:38,480 Speaker 1: biggest categories. Do you see a difference in the types 404 00:20:38,520 --> 00:20:41,480 Speaker 1: of things that refiners are investing in versus the integrated 405 00:20:41,520 --> 00:20:42,240 Speaker 1: oil companies. 406 00:20:42,680 --> 00:20:45,880 Speaker 2: Yes, so when it comes to the integrated oil companies, 407 00:20:45,880 --> 00:20:47,840 Speaker 2: and I'm going to focus a little bit on the 408 00:20:47,880 --> 00:20:51,919 Speaker 2: super majors. Now, we did group these companies into again 409 00:20:52,160 --> 00:20:55,159 Speaker 2: these broad categories. So super majors you can think of 410 00:20:55,200 --> 00:20:57,040 Speaker 2: it as like the big oil that you often hear 411 00:20:57,240 --> 00:21:02,840 Speaker 2: so BP Total Shell equinor alongside Chevron Exon in the US. 412 00:21:03,480 --> 00:21:05,800 Speaker 2: So for the super majors, a lot of the investment 413 00:21:05,800 --> 00:21:07,960 Speaker 2: have gone into wind and solar. And it's also the 414 00:21:07,960 --> 00:21:10,800 Speaker 2: fact that these big oil companies, the super majors, they 415 00:21:10,800 --> 00:21:14,280 Speaker 2: were one of the earliest movers into the decobonization ventures. Now, 416 00:21:14,359 --> 00:21:18,000 Speaker 2: for refiners, a lot of this pertains to renewable fuels 417 00:21:18,160 --> 00:21:21,280 Speaker 2: and energy storage. Now, for renewable fuels, we can see 418 00:21:21,280 --> 00:21:23,719 Speaker 2: that Neste for example, have led on this field as 419 00:21:23,760 --> 00:21:27,080 Speaker 2: previously mentioned. And for energy storage this has mainly been 420 00:21:27,160 --> 00:21:30,480 Speaker 2: led by investment by Esky Innovation. And we have seen 421 00:21:30,680 --> 00:21:34,399 Speaker 2: a smaller amount of investment by refiners going into CCS 422 00:21:34,600 --> 00:21:37,480 Speaker 2: which stands for carbon capture and storage hydrogen as well, 423 00:21:37,520 --> 00:21:40,879 Speaker 2: and this is mainly pertaining due to their operational synergies 424 00:21:40,960 --> 00:21:43,800 Speaker 2: that exist. So for ccs it abates the emissions of 425 00:21:43,840 --> 00:21:47,520 Speaker 2: their production, whereas for hydrogen, refiners often utilize hydrogen for 426 00:21:47,560 --> 00:21:50,679 Speaker 2: their hydro cracking and hydro treating processes, for example removing 427 00:21:50,680 --> 00:21:53,080 Speaker 2: impurities from their diesel produced. 428 00:21:53,920 --> 00:21:56,320 Speaker 1: So I can see, particularly from the point of view 429 00:21:56,320 --> 00:21:58,679 Speaker 1: of those fields where we've seen refiners going in that 430 00:21:58,880 --> 00:22:00,600 Speaker 1: a lot of the motivation might be, you know, these 431 00:22:00,600 --> 00:22:03,200 Speaker 1: are new areas, there are synergies that are well positioned 432 00:22:03,359 --> 00:22:07,920 Speaker 1: to benefit. We're talking about the super majors investing a 433 00:22:07,960 --> 00:22:12,280 Speaker 1: lot into wind and solar. There's no apparent obvious synergy. 434 00:22:12,440 --> 00:22:14,520 Speaker 1: Is this just so I suppose your question is what 435 00:22:14,600 --> 00:22:17,199 Speaker 1: is the motivation? Is it just purely they've got the 436 00:22:17,240 --> 00:22:20,119 Speaker 1: money you need to invest in something, and this is 437 00:22:20,160 --> 00:22:23,440 Speaker 1: something that is a diversification, a hedge, you know, depending 438 00:22:23,440 --> 00:22:27,120 Speaker 1: on the future of how energy is produced and consumed 439 00:22:27,600 --> 00:22:29,680 Speaker 1: on the planet. What is the motivation for those super 440 00:22:29,680 --> 00:22:31,359 Speaker 1: majors investing in wind and solar. 441 00:22:31,520 --> 00:22:34,439 Speaker 2: Yeah, that's a great question. Given that these super majors 442 00:22:34,440 --> 00:22:36,760 Speaker 2: were one of the earliest movers into the energy transition, 443 00:22:37,040 --> 00:22:39,880 Speaker 2: Solar and wind are some of the most mature technologies 444 00:22:40,119 --> 00:22:43,280 Speaker 2: and they've also seen some of the steepest cost reductions. 445 00:22:43,320 --> 00:22:46,280 Speaker 2: So again based on our LCOE studies or levelized cost 446 00:22:46,320 --> 00:22:48,920 Speaker 2: of energy studies, if we link this to so something 447 00:22:48,960 --> 00:22:52,639 Speaker 2: that's forward looking, then the pivot into wind and solar 448 00:22:52,800 --> 00:22:55,560 Speaker 2: or in fact any other renewable energy technologies at the 449 00:22:55,640 --> 00:22:59,359 Speaker 2: end of the day, from a decarbonization perspective, electrification and 450 00:22:59,560 --> 00:23:02,639 Speaker 2: you know, the utilization of renewable energy, they play a 451 00:23:02,680 --> 00:23:06,000 Speaker 2: crucial role. And if we look into our New Energy Outlook, 452 00:23:06,280 --> 00:23:08,720 Speaker 2: which is one of our annual publication that looks into 453 00:23:08,720 --> 00:23:11,400 Speaker 2: the evolution of the global energy systems in the mid 454 00:23:11,440 --> 00:23:14,000 Speaker 2: to long term. And let's just take their base case scenario, 455 00:23:14,080 --> 00:23:17,120 Speaker 2: for example, the economic transition scenario, which assumes no new 456 00:23:17,119 --> 00:23:19,720 Speaker 2: policies are an exted. Then we see that solar and 457 00:23:19,760 --> 00:23:23,159 Speaker 2: win in question collectively account for almost twenty percent of 458 00:23:23,160 --> 00:23:26,080 Speaker 2: the global primary energy demand by twenty fifty and that's 459 00:23:26,200 --> 00:23:29,520 Speaker 2: up from just over one or two percent last year. 460 00:23:29,720 --> 00:23:32,440 Speaker 2: So I think that partly answers the pivot to why 461 00:23:32,600 --> 00:23:34,840 Speaker 2: they go into solar and wind. And yeah, at the 462 00:23:34,840 --> 00:23:37,919 Speaker 2: same time, these assets also help companies reduce the carbon 463 00:23:37,960 --> 00:23:40,760 Speaker 2: intensity of the energy that they produce, which is quite 464 00:23:40,760 --> 00:23:43,879 Speaker 2: a key to carbonization metric for these firms. 465 00:23:43,720 --> 00:23:47,240 Speaker 1: Got it okay, So it can be integrated into their 466 00:23:47,480 --> 00:23:51,760 Speaker 1: overall either operations are accounting for producing the cleanest. 467 00:23:51,280 --> 00:23:54,480 Speaker 2: Barrel precisely, and a lot of oil companies now and 468 00:23:54,560 --> 00:23:58,200 Speaker 2: they focus on energy transition related metrics often go by 469 00:23:58,280 --> 00:24:00,480 Speaker 2: the energy intensity per barrel they produce. 470 00:24:00,720 --> 00:24:03,720 Speaker 1: And you mentioned the Empire Wind offshore wind project in 471 00:24:03,760 --> 00:24:05,359 Speaker 1: the US and how it's had a bit of a 472 00:24:05,359 --> 00:24:09,400 Speaker 1: bumpy ride with this new administration and represents a major investment, 473 00:24:09,520 --> 00:24:12,040 Speaker 1: and historically offshore wind has been one of these areas 474 00:24:12,040 --> 00:24:15,159 Speaker 1: where we've seen the super majors we've into, particularly leveraging 475 00:24:15,320 --> 00:24:17,760 Speaker 1: some of the synergies they see there questions not really 476 00:24:17,800 --> 00:24:20,720 Speaker 1: about offshore wind. It's really about this new administration in 477 00:24:20,760 --> 00:24:26,400 Speaker 1: the US, which is considerably less supportive of energy transition 478 00:24:26,480 --> 00:24:30,400 Speaker 1: technologies than the previous administration. How do you think this 479 00:24:30,680 --> 00:24:34,120 Speaker 1: impacts the overall picture that we're seeing, And in particular, 480 00:24:34,160 --> 00:24:36,760 Speaker 1: when we're sitting here in a year's time talking about 481 00:24:36,760 --> 00:24:40,160 Speaker 1: your report for twenty twenty five, what do you think 482 00:24:40,200 --> 00:24:41,720 Speaker 1: might be some of the things we've seen that have 483 00:24:41,880 --> 00:24:44,760 Speaker 1: really changed because of the sort of the political winds 484 00:24:44,760 --> 00:24:45,840 Speaker 1: that are blowing right now. 485 00:24:46,040 --> 00:24:48,520 Speaker 2: It's quite hard to say, because again this is more 486 00:24:48,520 --> 00:24:51,960 Speaker 2: of a historical accounting exercise just to give an overarching 487 00:24:52,040 --> 00:24:54,440 Speaker 2: view of what the sector has been doing. And there's 488 00:24:54,480 --> 00:24:57,680 Speaker 2: a lot of uncertainties looking ahead, especially given, like you say, 489 00:24:57,720 --> 00:25:00,520 Speaker 2: the new administration. We've already seen that for the Empire 490 00:25:00,560 --> 00:25:02,679 Speaker 2: Wind farm in New York that you know, over the 491 00:25:02,720 --> 00:25:03,720 Speaker 2: first five months. 492 00:25:03,520 --> 00:25:05,080 Speaker 1: Of the year has gone through a roller coaster. 493 00:25:05,440 --> 00:25:07,760 Speaker 2: And also if we take an example last year, just 494 00:25:07,840 --> 00:25:10,840 Speaker 2: in terms of the global picture or the real economy, 495 00:25:10,880 --> 00:25:14,280 Speaker 2: for let's say ccs in the US, the annual investment 496 00:25:14,600 --> 00:25:17,440 Speaker 2: actually declined, you know, thirty four percent year on Europe 497 00:25:17,480 --> 00:25:20,520 Speaker 2: because companies were waiting for the Internal Revenue Services to 498 00:25:20,760 --> 00:25:23,800 Speaker 2: release guidelines you know, for incentives under the forty five 499 00:25:23,920 --> 00:25:26,640 Speaker 2: Q text credit. So definitely policy is a factor here 500 00:25:26,680 --> 00:25:29,159 Speaker 2: that you know, bruised into the uncertainty looking ahead. But 501 00:25:29,240 --> 00:25:32,960 Speaker 2: it's also how many of the factors, such as geopolitics, 502 00:25:33,000 --> 00:25:35,280 Speaker 2: because that is that will affect a lot of the 503 00:25:35,280 --> 00:25:38,760 Speaker 2: strategies by the national oil companies, or even just oil 504 00:25:38,840 --> 00:25:41,639 Speaker 2: demand in general, whether it keeps an increasing whether we 505 00:25:41,760 --> 00:25:45,120 Speaker 2: start to see a more pronounced decline in regions, because 506 00:25:45,200 --> 00:25:47,040 Speaker 2: essentially a lot of the strategies by these oil and 507 00:25:47,080 --> 00:25:50,199 Speaker 2: gas companies do take into account the differing views or 508 00:25:50,320 --> 00:25:52,680 Speaker 2: what they anticipate oil demand to be. So there's a 509 00:25:52,720 --> 00:25:57,480 Speaker 2: lot of factors here, geopolitics, policy, oil demand. And one 510 00:25:57,520 --> 00:25:59,800 Speaker 2: thing I also want to add is I think most 511 00:26:00,040 --> 00:26:02,760 Speaker 2: poorly is the profitability right oil and gas companies at 512 00:26:02,800 --> 00:26:04,320 Speaker 2: the end of the day, they want to be profitable, 513 00:26:04,480 --> 00:26:06,639 Speaker 2: and we've seen so far at the start of the 514 00:26:06,720 --> 00:26:09,480 Speaker 2: year a couple of a couple of statements made by 515 00:26:09,680 --> 00:26:13,760 Speaker 2: some of the super majors, specifically bp shell equinor hinting 516 00:26:13,840 --> 00:26:16,560 Speaker 2: at a little bit of a retraction or a strategy 517 00:26:16,600 --> 00:26:19,600 Speaker 2: reset in terms of their green initiatives and in fact 518 00:26:19,680 --> 00:26:22,400 Speaker 2: wanting to produce more oil and gas or at least 519 00:26:22,480 --> 00:26:24,800 Speaker 2: invest more into oil and gas. Now, if we look 520 00:26:24,840 --> 00:26:27,320 Speaker 2: into the returns perspective, and just to give a side 521 00:26:27,400 --> 00:26:30,760 Speaker 2: note here, this will become a key factor into the 522 00:26:30,800 --> 00:26:34,520 Speaker 2: trajectory of flow carbon investment because right now, despite having 523 00:26:34,600 --> 00:26:37,640 Speaker 2: steep cost reductions, let's say, for WHEN and Solar, when 524 00:26:37,680 --> 00:26:39,800 Speaker 2: we look at their returns or their internal rate of 525 00:26:39,840 --> 00:26:42,280 Speaker 2: returns the IRR, we see that Let's say, if we 526 00:26:42,359 --> 00:26:45,440 Speaker 2: take the super majors, for example, they expect the IRS 527 00:26:45,480 --> 00:26:48,560 Speaker 2: for Solar and WIN to hover somewhere around you know, 528 00:26:48,640 --> 00:26:51,000 Speaker 2: seven to eight percent or even below that, whereas the 529 00:26:51,040 --> 00:26:54,560 Speaker 2: returns that they expect from their major traditional core business 530 00:26:54,840 --> 00:26:59,280 Speaker 2: upstream marketing and downstream sits over thirteen percent. So the 531 00:26:59,359 --> 00:27:03,240 Speaker 2: returns from the traditional hydrocarbon business expected by these companies 532 00:27:03,400 --> 00:27:06,879 Speaker 2: still trump that of the clean sectors or clean power 533 00:27:06,960 --> 00:27:09,119 Speaker 2: let's say, So this will be this will definitely be 534 00:27:09,160 --> 00:27:12,560 Speaker 2: a factor going ahead which might influence whether future investment 535 00:27:12,600 --> 00:27:16,560 Speaker 2: into lower carbon sectors, specifically renewable power increase or decline, 536 00:27:16,720 --> 00:27:17,200 Speaker 2: and that. 537 00:27:17,160 --> 00:27:20,320 Speaker 1: I suppose all ties back to this question of what 538 00:27:20,480 --> 00:27:22,560 Speaker 1: is the future of oil demand. I suppose because they 539 00:27:22,600 --> 00:27:26,200 Speaker 1: won't be getting such high returns from their core investments 540 00:27:26,200 --> 00:27:29,320 Speaker 1: if that is declining. Yeah, precisely, got it. I mean 541 00:27:29,359 --> 00:27:32,000 Speaker 1: it's interesting. I mean it sort of speaks to both 542 00:27:32,119 --> 00:27:35,520 Speaker 1: they are major players in this story. But also you know, 543 00:27:35,600 --> 00:27:38,320 Speaker 1: there's a question of how much agency is there really, 544 00:27:38,520 --> 00:27:41,840 Speaker 1: you know, are they just also responding to the economic 545 00:27:41,920 --> 00:27:44,840 Speaker 1: signals that the global economy at large is. 546 00:27:44,840 --> 00:27:48,240 Speaker 2: Producing precisely, And I think there's been a renowned focus 547 00:27:48,359 --> 00:27:51,600 Speaker 2: just within the energy sector at large, to focus less 548 00:27:51,680 --> 00:27:53,960 Speaker 2: on the long term and focus a little bit more 549 00:27:54,000 --> 00:27:57,240 Speaker 2: on the shorter term outlook. So definitely whatever short term 550 00:27:57,240 --> 00:28:00,400 Speaker 2: market fluctuations will definitely be a factor in how these 551 00:28:00,440 --> 00:28:03,840 Speaker 2: companies strategize and also allocate let's say, clean investment. 552 00:28:04,200 --> 00:28:07,399 Speaker 1: Well, I really look forward to next year's report, and 553 00:28:07,440 --> 00:28:09,720 Speaker 1: hopefully we'll have you on the podcast again next year. 554 00:28:09,840 --> 00:28:12,679 Speaker 1: It'll be really interesting to see how everything we've spoken 555 00:28:12,680 --> 00:28:15,480 Speaker 1: about today has evolved so cloudy. I just want to 556 00:28:15,520 --> 00:28:17,000 Speaker 1: say thank you so much for being on. 557 00:28:16,960 --> 00:28:19,239 Speaker 2: Today Noice, Thank you Tom, thanks for having me, and 558 00:28:19,280 --> 00:28:20,399 Speaker 2: thank you everyone for listening. 559 00:28:29,280 --> 00:28:32,400 Speaker 1: Today's episode of Switched On was produced by Cam Gray 560 00:28:32,640 --> 00:28:35,000 Speaker 1: with production assistance from Kamala Shelling. 561 00:28:35,119 --> 00:28:38,320 Speaker 2: Bloomberg NIF is a service provided by Bloomberg Finance LP 562 00:28:38,480 --> 00:28:41,480 Speaker 2: and its affiliates. This recording does not constitute, nor should 563 00:28:41,520 --> 00:28:44,840 Speaker 2: it be construed, as investment advice, investment recommendations, or a 564 00:28:44,880 --> 00:28:48,320 Speaker 2: recommendation as to an investment or other strategy. Bloomberg ANIF 565 00:28:48,360 --> 00:28:51,400 Speaker 2: should not be considered as information sufficient upon which to 566 00:28:51,440 --> 00:28:54,800 Speaker 2: base an investment decision. Neither Bloomberg Finance LP nor any 567 00:28:54,840 --> 00:28:58,040 Speaker 2: of its affiliates makes any representation or warranty as to 568 00:28:58,080 --> 00:29:01,520 Speaker 2: the accuracy or completeness of the contained in this recording, 569 00:29:01,600 --> 00:29:04,160 Speaker 2: and any liability as a result of this recording is 570 00:29:04,200 --> 00:29:05,320 Speaker 2: expressly disclaimed.