Protesters at Marble Arch in London demonstrate against the Energy Intelligence Forum (EIF) summit, a gathering between Shell, Total, Equinor, Saudi Aramco, and other oil giants, being held in central London. Picture date: Thursday October 19, 2023. (Photo by Jonathan Brady/PA Images via Getty Images)
PA Images via Getty Images
Over the past 20 years, the story seemed straightforward. Big Oil would gradually become Big Energy. Over time, oil majors would use their balance sheets, engineering expertise, and global project-management skills to build wind farms, solar projects, hydrogen hubs, carbon capture networks, and renewable power businesses.
Big Oil did make major investments in renewables. And that transition is still happening in parts of the energy sector. But among the oil majors, the strategy has become far more selective.
The latest example is Equinor. The Norwegian energy company recently dropped its target of having 10 to 12 gigawatts of installed renewable energy capacity by 2030. Instead, it is shifting toward a broader power strategy that includes renewables, gas-fired power, storage, and trading.
Equinor is not saying renewables have no future. It is saying that a pure renewable-capacity target no longer fits the company’s view of profitable growth.
That is the bigger story across the sector. Big Oil is not backing away from renewables because the energy transition has stopped. It is backing away because many renewable projects have not delivered the returns investors expect from oil majors.
Equinor’s decision is notable because the company had been one of the European majors most closely associated with offshore wind. It once talked about becoming an offshore wind major. Now it is reframing the business.
The company still expects power production to rise sharply by 2030. But the metric has changed from renewable capacity to power generation, and the business now includes gas-fired generation, storage, and trading. Equinor also said only about 10% of capital expenditures will go toward its power business.
The reason is not hard to understand. Offshore wind became more expensive. Interest rates rose, supply chains tightened, equipment costs increased, and project economics deteriorated. In that environment, a capacity target can become a liability, because it encourages companies to build megawatts even when the returns do not justify the capital.
Equinor’s revised strategy is a reminder that oil companies are not utilities. They do not exist to build renewable capacity for its own sake. They exist to allocate capital where they believe they can earn attractive returns.
BP provides the clearest example of the shift. It is also worth remembering that BP has gone down this road before. More than two decades ago, the company tried to recast itself around the slogan “Beyond Petroleum,” a branding effort meant to signal that BP saw its future as broader than oil and gas.
That earlier effort never transformed the company. BP remained, first and foremost, a major oil and gas producer. But the slogan captured a recurring tension inside the industry: how does a company built on hydrocarbons position itself for a future in which demand growth, policy pressure, and investor expectations are all changing?
Under former CEO Bernard Looney, BP made one of the industry’s most ambitious attempts to answer that question. The company set out to reduce oil and gas production and rapidly expand low-carbon businesses. For a time, BP seemed to be trying to redefine itself faster than most of its peers.
That strategy has now been substantially reversed. BP has increased planned annual oil and gas investment while cutting planned transition spending. The company has also moved away from earlier plans to shrink oil and gas production and has targeted higher output by 2030.
BP also agreed to sell its U.S. onshore wind business, which included 10 operating wind assets. The message is clear. BP is trying to rebuild investor confidence by focusing on businesses where it believes it has stronger returns and a clearer competitive edge.
This does not mean BP has abandoned low-carbon energy. But the company is no longer trying to convince investors that it should be valued like a fast-growing renewable developer. It is returning to the language of cash flow, returns, divestments, and disciplined capital allocation.
Shell has followed a similar path, though its retreat has been more selective than dramatic.
The company has cut jobs in low-carbon businesses, scaled back parts of its hydrogen effort, exited some offshore wind projects, and reviewed strategic options for renewable assets in India. At the same time, Shell has leaned harder into liquefied natural gas, upstream production, and trading.
That fits Shell’s strengths. Shell is one of the world’s dominant LNG players. It has deep expertise in global energy trading. It understands large-scale oil and gas projects, shipping, storage, and commodity markets.
By contrast, the renewable power business can look very different. Solar and wind projects often resemble infrastructure investments. They may offer stable cash flows, but returns can be compressed by competition, regulation, tax-credit structures, and rising financing costs. Those projects may be attractive to utilities, infrastructure funds, or pension-backed investors. But they may not always satisfy shareholders who buy oil majors for higher-return energy exposure.
That is one reason the “Big Oil becomes Big Renewables” story was always too simple. The skill sets overlap in some areas, especially offshore engineering. But the economics are not the same.
TotalEnergies is the important counterexample.
Unlike some peers, TotalEnergies has continued to build a large integrated power business. It has targeted 100 to 120 terawatt-hours of electricity generation by 2030, up from 41 terawatt-hours in 2024. It has also pursued renewable projects in markets where it has broader energy relationships, including oil and gas investments.
TotalEnergies is not ignoring returns, but its model may be more disciplined precisely because it is not simply collecting renewable assets everywhere. The company has focused future renewable development on key markets and has shown a willingness to sell assets where holdings do not fit its strategy.
That may be the model that works better for oil majors: not a wholesale conversion from oil to wind and solar, but an integrated energy strategy where power, gas, trading, and renewables support each other.
In other words, the companies that succeed may not be the ones with the biggest renewable-capacity targets. They may be the ones that can connect generation, customers, storage, trading, and fuel supply into a profitable system.
It is important not to confuse Big Oil’s retreat with a collapse in renewable energy.
Global clean-energy investment remains enormous. Solar, wind, batteries, grids, nuclear, efficiency, electrification, and low-emission fuels continue to attract far more capital than they did a decade ago. The International Energy Agency has estimated that low-emissions energy investment is running at roughly twice the level of fossil-fuel investment.
So, the conclusion is not that the energy transition has failed. It is just proof that the transition is more complicated than many early forecasts suggested.
Renewables are growing. But ownership, capital costs, subsidy structures, power prices, interconnection queues, and supply chains are all key considerations. And for publicly traded oil companies, shareholder expectations must be considered.
A renewable project that makes sense for a regulated utility or infrastructure fund may not make sense for an oil major trying to compete for capital against deepwater oil, LNG, refining, chemicals, or share buybacks.
The oil majors entered renewables with real advantages: large balance sheets, engineering talent, project-management experience, and political relationships. But they also faced real disadvantages.
Renewables are often lower-margin businesses. A high-quality solar or wind project can be attractive, but it may not match the returns available from a successful oil and gas development.
Renewable projects are also more sensitive to interest rates. When rates were near zero, long-duration infrastructure cash flows looked more attractive. When rates rose, the economics changed.
Competition is also intense. Oil companies are not the only players with capital. Utilities, private equity firms, pension funds, infrastructure funds, and specialized renewable developers are all competing for projects.
Finally, oil companies are judged by investors who often want cash returns, dividends, buybacks, and capital discipline. Those investors may not reward a company for building renewable capacity.
Big Oil’s renewable retreat is not really a story about renewables failing. It is a story about capital discipline returning.
The energy transition is still underway, but it will not be a straight-line replacement of oil companies by renewable divisions inside those same companies. Some oil majors will build meaningful power businesses. Some will focus on LNG, trading, carbon capture, hydrogen, or biofuels. Others will stay closer to their traditional strengths.
That may disappoint those who expected oil companies to lead the transition. But it should not surprise anyone who follows capital allocation.
Companies tend to move toward businesses where they have an advantage and can earn acceptable returns. For Big Oil, that still often means hydrocarbons, especially oil, gas, and LNG. In power, it may mean selective participation rather than an all-in bet on renewable capacity.
That is the tension now shaping Big Oil’s strategy. The majors are not abandoning the future. They are becoming more selective about which parts of the future they want to own.
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