Analysis | Foreigners invest more in energy transition

The formal participation of oil companies was not allowed at the Climate Summit, COP26. To participate in the main climate event in the world, the organizers determined that the companies had climate goals consistent with the emergency pointed out by the latest scientific evidence on climate change.

Also read: Article | The oil is theirs

This decision takes place amid the growing level of social, political and financial pressure to which these companies are subject to move forward in decarbonising and reducing the environmental impact of their activities.

A more recent example of this was the announcement by Shell committing to halve its carbon dioxide emissions by 2030, compared to 2016 levels, a day after the Third Point fund’s appeals for the Anglo-Dutch company to end its stance inconsistent in climate action. Similar situations have occurred with all the oil majors, especially since 2020.

The year was marked by unprecedented promises made by the big oil companies. BP was the first among its peers to announce its ambition to zero carbon emissions by 2050. Shell, TotalEnergies and Equinor soon followed suit.

However, the scenarios that companies outline for the coming years do not signal the exit of the oil and gas business in the short or medium term.

And climate action commitments have been seen as far short of what is actually needed to curb global warming. Meanwhile, the urgency of concrete measures in the face of the climate crisis is an undisputed point among scientists, as is the need to change the global energy matrix, as shown in the latest report by the Intergovernmental Panel on Climate (IPCC, its acronym in English).

The International Energy Agency pointed out that, for the objectives of the Paris Agreement to be achieved, it is necessary to stop new oil and gas projects and outlined a series of measures to be taken into account by governments and the sector, such as the increase energy efficiency and investment in renewable energy sources and carbon capture and storage mechanisms.

In October, the agency warned in its annual report that not only promises announced by governments would result in just 20% of the reduction needed by 2030 to achieve zero net emissions by 2050, but also that turmoil in global energy markets is expected. .

Facing up to climate challenges and advancing and implementing possible solutions have a fundamental role to play in the oil industry.

It is true that part of the decarbonization movement of oil companies is carried out to maintain access to investments in the face of pressure from shareholders, in addition to the fact that low-carbon businesses represent financial opportunities. It is also evident that this is a process that has a complex transition and adaptation character and will lead to new configurations of the energy sector at national and international levels.

Given all sorts of socio-economic and geopolitical implications, and the essential role of the large international oil companies in financing this transition process, the actions of these companies need to be on the radar.

energy transition

In the meantime, Brazil has taken on an important role in the energy transition initiatives of large oil companies. With varied strategies, they have been betting on diversifying their portfolios and expanding investments in the renewable and natural gas segment, which has been considered a transition fuel.

Following this path and aiming at the integration of its businesses in Brazil, Shell has stood out. Recently, the company launched Shell Energy in the country, responsible for the national portfolio of generation and commercialization of electric energy and decarbonization, and announced that it plans to invest R$ 3 billion in projects in renewable sources, such as solar and wind, and thermal fuels supplied to gas in Brazil by the end of 2025.

Read more: COP26 negotiations reach an impasse: who will pay for the consequences of climate change?

Altogether, the Anglo-Dutch company has projects under development with an installed generation capacity exceeding 2 GW. One of them is the construction of the Aquarii solar plant, in Minas Gerais, with a capacity of 190 MW, made possible in partnership with Gerdau. In the wind segment onshore, the company intends to invest in business acquisitions in the country, while it studies to enter the wind market offshore. In the biofuels area, the company has been developing business since 2011 through Raízen, a joint venture between the company and the Cosan Group.

Shell also intends to expand its activities in the gas segment, with an increase in production in the pre-salt and thermoelectric generation using gas, in addition to importing liquefied natural gas (LNG). As an example, in its portfolio, it already has the construction of the Marlim Azul thermoelectric plant, in Rio de Janeiro, offering a total installed capacity of 565 MW and with planned future expansion. The plant will start operating in 2022 and will be the first thermal plant in the country operated by a private company to be supplied with gas from the pre-salt.

In October, Galp announced its entry into the Brazilian solar energy market, with the acquisition of two photovoltaic solar projects in Bahia and Rio Grande do Norte, with capacities of 282 MWp and 312 MWp, respectively. The Portuguese company declared that it will invest US$300 to US$400 million in renewable energy in Brazil, with a view to developing a portfolio of 4 GW of renewable energy in Latin America by 2030.

In the gas segment, Galp intends to start selling natural gas produced in the country in 2022 and is also evaluating projects to import LNG into the country, to supply the electricity system. It is worth mentioning that its total oil and gas production is highly concentrated in Brazil, with significant stakes in large pre-salt exploration and production projects.

TotalEnergies joins these companies in the search for an integrated operation in Brazil as it invests in energy transition initiatives. The French company invests significantly in the gas and electricity segment, while, in the generation of renewable energy, it operates through Total Eren. It already has 300 MW of solar and wind projects in operation or under construction in Brazil.

BP has renewable energy projects underway in Brazil, with a portfolio in biofuels, bioelectricity and solar energy. Highlights, since 2019, the British company has been operating the bp Bunge Bioenergia joint venture, the second largest in the national sugar-energy sector, with 11 plants across the country, with a production capacity of more than 1.8 billion liters of ethanol , 1.4 million tons of sugar and export of 1,300 GWh of energy to the electricity grid. Through the Opla joint venture, BP also operates an ethanol storage and distribution terminal.

In the solar energy segment in Brazil, the company has 2 GW in projects at different stages of development through joint venture Lightsource bp. In the gas segment, the company is participating in the construction of the largest natural gas thermoelectric park in Latin America, located in Porto do Açu, in Rio de Janeiro, and will be the exclusive LNG supplier for the two plants in the park, which will have 3 GW of installed capacity.

Equinor, in turn, entered the Brazilian renewable energy market in 2018, investing in solar generation in Brazil through the purchase of a stake in Scatec Solar, the largest in the segment in Norway, operator of the Apodi Complex, in Ceará. The project has a capacity of 162 MW and was the first solar plant in Equinor’s global portfolio. Within the pillars of its business plan, the Norwegian company also intends to invest in the installation of offshore wind farms in Brazil and in expanding the value chain in the Brazilian gas sector.

It is inevitable to note that Petrobras, meanwhile, is disinvesting in the renewable energy and gas segments, abdicating its strategic position in the Brazilian market.

Amidst the emergence of the climate crisis, while uncertainties are multiple, it is more than certain that the movements of these large international companies will need to be accounted for when we think about the energy transition in Brazil, the future of the energy sector in the country, and, for consequently, issues related to national energy security.

*Isadora Coutinho holds a Master’s Degree in International Strategic Studies from the Federal University of Rio Grande do Sul (UFRGS) and a researcher at the Institute for Strategic Studies in Oil, Natural Gas and Biofuels (Ineep).

**This is an opinion piece. The authors’ view does not necessarily express the newspaper’s editorial line Brazil in fact.

Edition: Mariana Pitasse

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