Oil Giant Total Pledges Renewable Power Push
September 30 2020 - 3:44PM
Dow Jones News
By Sarah McFarlane
Total SA pledged to ramp up its spending on renewable energy and
reduce its dependence on petroleum, the latest move by a major oil
company toward cleaner power.
The French company said Wednesday that it plans to spend $3
billion a year on renewables by 2030, about 20% of its annual
investment budget and up from $2 billion this year. Over the same
period, it said it also plans to reduce its sales of oil products
such as gasoline and diesel by 30%, while increasing its sales of
natural gas, electricity and biofuels.
Overall, Total said its energy production was set to grow by a
third in the coming decade. Of that, roughly half would come from
liquefied natural gas and the other half from electricity -- mostly
from growth in solar and wind power.
"We are also convinced that this is the right direction," Chief
Executive Patrick Poyanne told investors at an event detailing the
company's plans.
However, he also said Total would remain committed to its core
oil and gas business. "We consider that maintaining an oil and gas
business is a foundation of the transformation, because it will
provide to us the cash flow that we need."
The move comes as Total expects oil demand to peak by 2030 as
demand for electricity and LNG rises.
Total's green investment plans are similar to those outlined by
rival BP PLC earlier this year, although on a slower time
frame.
BP intends to increase its low-carbon investments to 20% of its
budget by 2025 and cut its oil-and-gas output by 40% in the coming
decade. The British company has also said it plans to increase
renewable-power output.
Major oil companies have said that the coronavirus pandemic
could speed up the transition from fossil fuels toward low-carbon
energy, which has been under way for several years amid concern
about global warming. The pandemic has sapped demand for oil,
hitting prices and corporate profits.
In response, these companies have cut their workforces, written
down the value of their assets and, in the case of Royal Dutch
Shell PLC and BP, cut dividends.
Total has resisted taking some of these measures. On Wednesday,
Mr. Pouyanne said the company intended to maintain its dividend and
didn't plan to lay off staff.
Mr. Poyanne said he hoped the shift into renewables would boost
the company's valuation, and that its dividend would help
differentiate Total from other majors making the move. Oil stocks
have fallen out of favor in recent years, while renewable energy
companies have fared better.
However, some investors say they're concerned that oil companies
might damage profits by moving into areas like wind and solar
because they lack experience, competition is rising and returns are
typically lower. Total said it expects its renewable-energy
projects to generate returns of 10%, below its target of 15% given
last year. The industry benchmark for returns on oil and gas
projects is around 15%.
Oil companies have struggled to attract investors amid
uncertainty over the speed and timing of the transition to
low-carbon energy. The pandemic has exacerbated that slump, with
shares in the world's oil majors taking a beating this year.
However, Total's stock price has fared better than its peers,
down about 14% over the past three months, compared with drops of
over 20% for other majors.
Write to Sarah McFarlane at sarah.mcfarlane@wsj.com
(END) Dow Jones Newswires
September 30, 2020 15:29 ET (19:29 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
TOTAL (NYSE:TOT)
Historical Stock Chart
From Aug 2024 to Sep 2024
TOTAL (NYSE:TOT)
Historical Stock Chart
From Sep 2023 to Sep 2024