Return to Returns

Power, renewables and low-carbon that compete with oil & gas

𝙒𝙝𝙖𝙩 𝙘𝙖𝙪𝙜𝙝𝙩 𝙢𝙮 𝙖𝙩𝙩𝙚𝙣𝙩𝙞𝙤𝙣? The emphasis on “returns” from Shell and Chevron executives during their earnings calls last week as they discussed opportunities in power, renewables and low-carbon that compete with traditional oil and gas assets.

𝙒𝙝𝙮 𝙞𝙩 𝙢𝙖𝙩𝙩𝙚𝙧𝙨? The sea change in energy, toward reliability and affordability in addition to sustainability. That is translating into a returns driven shift in investment, where assets that provide reliability and flexibility are drawing capital and competing with traditional oil & gas opportunities.

Mike Wirth of Chevron noted that “Building power to sell into the grid and just generate merchant power is probably not going to deliver returns competitive with our portfolio. But high reliability at scale offering that's delivered rapidly is something that's in high demand from customers right now” and that these investments in their new power venture with Engine No.1 and GE Vernova “have to deliver competitive returns”.

Meanwhile, Sinead Gorman of Shell noted their shift towards “flexible power assets” like batteries and combined cycle gas, while highlighting impairments from walking away from some offshore wind and hydrogen projects as examples of “real discipline”.