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National Review
National Review
5 Feb 2025
Andrew Stuttaford


NextImg:The Corner: Peak Oil, You Say?

Rumors of the energy ‘transition’ have been greatly exaggerated.

The Norwegian oil company Equinor is publicly quoted, but its majority owner is the Norwegian state, which means that it is unusually vulnerable to political pressure. In 2018, it changed its name from the stolid, say-what-it-is Statoil to the fluffier Equinor. Bad sign!

In the company’s magazine a year or two later, it was reported that the name change was CEO Eldar Sætre’s “most emotional decision ever.” Norwegians are who they are.

The change, though, was “important and right.” Uh-oh:

Although “Statoil” was a good name ever since its creation in 1972, the world and the company were in the midst of an enormous change. In 2018, Statoil was more than just a state-owned oil company. The plans for the future encompassed much more than fossil energy.

The choice fell on a name that describes something more than oil. The name hints at a desire to help shape the future and to be competitive in a society with lower emissions. Not least, the name points to values and about where the company comes from.

The Equinor name is divided in two: The first part originates from words such as “equal”, “equality”, and “equilibrium”. This reflects values ​​such as equality and balance. The second part signals a company proud of its Norwegian origins that wants to use this actively in its positioning. . . .

In addition to being a significant supplier of energy – especially through the export of gas to Europe – Equinor is now positioning itself within offshore wind, solar energy, hydrogen and carbon capture and storage. This diversity of businesses reflects a company in continuous change – and shows why it was important and correct to change the name.

Uh-oh.

In November 2023, I took a look at how “Equinor” was doing, only to be shocked, shocked to discover that its adventure in diversification had entered into a rough patch. I argued:

Statoil Equinor would do better to split the company in two, one focused on oil and gas, the other on renewables. Given renewables’ glorious future, and the outperformance and low risk that would come with an inevitable high ESG rating, the spin-off would surely be able to attract the capital it needed, especially if the state retained a pro rata stake in the spin-off (the Norwegian state owns 67 percent of Equinor’s shares). Meanwhile the stand-alone oil and gas company could be run as, well, an oil and gas company, investing or returning capital in accordance with its view of those markets, rather than ploughing some of its earnings (which ultimately belong to its shareholders) into very different businesses with very different rates of return.

The company’s experience in the North Sea was of some assistance in developing offshore wind, but not by enough to justify large-scale diversification into that field, and yet that’s what it continued to do. Bad luck, taxpayers! Bad luck, minority shareholders!

As I noted last May, when the company was excitedly talking about projects off the U.S. East Coast (uh-oh):

 A nominal 12–16 percent equity return sounds fine, until compared with the company’s overall return on equity (not apples to apples, but it gives an idea) of around 23 percent. Quite why Equinor is pouring money into a business that gives a subpar return ought to be a mystery, but it says something — nothing good — about the impact of stakeholder capitalism, ESG (and, in this case, Norwegian energy politics) that it is not.

But then, what’s this?

From today’s Financial Times:

The Norwegian state-backed energy group that dropped oil from its name as part of a push into renewables is pivoting back to fossil fuels in the hunt for shareholder returns.  Equinor, renamed from Statoil in 2018, said on Wednesday that it was planning to increase production of fossil fuels and halve its spending on renewables, with chief executive Anders Opedal saying it was aiming to “create shareholder value for decades to come”.

Under its new targets, the company plans to produce 2.2mn barrels of oil equivalent a day by 2030, 10 per cent higher than previous expectations. It lowered its target for renewables capacity to 10GW-12GW from a previous target of 12GW-16GW. Investment in renewables and other low-carbon technology between 2025 and 2027 will be cut to $5bn, down from about $10bn previously, excluding project financing.

This is as it should be. Companies should focus on shareholder return. Equinor insists that it still aims to hit net zero by 2050. We’ll see. In October, it announced that it had bought a 10 percent stake in Ørsted, the world’s largest offshore wind developer. It was, the company argued, a cheaper way of building capacity in wind. The price Equinor paid averaged DKK 398.5 per share. The stock is now trading at DKK 290.

The FT’s Rachel Millard and Ian Johnston observe that Equinor is following the lead set by Shell and BP, which have scaled back their plans to move away from hydrocarbons “under pressure from shareholders to keep providing oil-and-gas-level returns.”

How odd. Advocates of ESG and stakeholder capitalism keep insisting that diversification away from fossil fuels is what investors want . . .

Many state or government-controlled institutions, such as (some) state retirement systems, may feel that way, but those make little effort these days to pretend that they are putting pensioner or taxpayer interests first. Others, especially investors in oil and gas companies, feel rather differently. How strange.

I’m old enough to remember when ESG promoters were warning of the dangers that hydrocarbons might be become “stranded assets,” of no or only limited value. For a number of reasons that was not likely to be the case any time soon. Besides, forecasting “peak” oil, gas, and even coal has never been a precise science.

Under the circumstances, it was interesting to read in the FT that Vitol, the world’s largest independent energy trader, said this week that global demand for oil would not fall until at least 2040. OPEC has a still later date (2045), and the U.S. EIA estimates 2050. The climatists at the International Energy Agency are sticking with 2030, but even that is followed by a plateau.

These forecasts are just additional reminders that the energy “transition” has been wildly exaggerated. The vast investments in renewables have, at great cost, helped meet additional energy demand, but hydrocarbons still account for 80 percent of world energy consumption.