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The Odd Couple of the Energy Transition: The Case of Chevron and ExxonMobil

By Gerard Kreeft

An early depiction of John D. Rockefeller, founder and president of Standard Oil.

Standard Oil, founded by the world’s first oil tycoon, John D. Rockefeller, was broken apart in 1911 by the Supreme Court of the United States, guilty of having captured too much of the country’s oil market. Today, Rockefeller’s company has two heirs, ExxonMobil and Chevron, who stand unrepentant and sullen at the back of the courtroom of international opinion. Shareholders have found the company’s executives guilty of mismanagement of and of squandering assets—a far cry from Rockefeller’s business genius. My, how the mighty have fallen!

Both ExxonMobil and Chevron continue to maintain their blind faith in oil. Meanwhile, other oil majors have moved on. Yes, those companies’ books are still filled with oil and gas projects. But their future, they have determined, will be greener, more innovative—and highly profitable, which is certainly in the best tradition of John D. Rockefeller. They will profit from the new market demand and the new market greed: green solutions. The direction of the energy transition is not in doubt. Only the timing is uncertain.

Yet is there a business case to be made for ExxonMobil and Chevron? Has the Russian-Ukraine conflict, which has driven oil and gas prices to an all-time high, given both companies a reprieve and a get-free card? A pyrrhic victory or a new business opportunity?  Will $100 oil and exhaustion of spare production capacity give the industry a new lease on life?

The share price of both companies is of critical importance to the world’s investors. Whether a company is an oil company or an energy company seems to matter little to the investor community. Instead, the clarity of the message is key.  That is why only Chevron, with the exception of Equinor, is on track to make 2022 the 35th consecutive year with an increase in annual dividend payout per share, maintaining its value. Of the oil majors, BP, ENI, ExxonMobil, Shell, Repsol, and TOTALEnergies, have been industry laggards between 2018 and 2022. Among that crowd Chevron and especially Equinor stand out very positively.

 During this 5-year period the share price of the oil majors is as follows:

  • ENI down 20 percent
  • BP is down 18 percent
  • Repsol remains flat
  • Shell is up 2 percent
  • TOTALEnergies up 4 percent
  • ExxonMobil up 10 percent
  • Chevron’s stock up 41 percent, and
  • Equinor up 106 percent.

These results highlight the importance of projecting a clear corporate message. The worst performing share prices are the European supermajors—BP, ENI, Shell, Repsol and TOTALEnergies—who have tried to leaven their massive interests in hydrocarbons with a dash of renewables. There is sufficient evidence to illustrate that renewables are only a second-tier after-thought.

TOTALEnergie’s capital expenditures for the period 2022-2025 is anticipated to be between $13Billion-$16Billion per year: 50 percent  ($6.5Billion-$8Billion) on hydrocarbons and only 25 percent ($3.25Billion-$4Billion) on renewables.

Shell’s capital expenditures follow a similar path. Of a total of some $21-$23Billion at least 35 percent is devoted to hydrocarbons. Renewables and energy solutions $2-$3Billion or approximately 10 percent of the total expenditures budget.

Yet Chevron’s New Energies division, established in 2021, is pledging to spend $10Billion through 2028—about $2Billion per year, or 12.5-14 percent of Chevron’s projected capital budget. Certainly within the range of what TOTALEnergies and Shell are spending on renewables.

Yet the best performer by far is Equinor, the company that has executed the most dramatic pivot away from hydrocarbons and towards new energy technologies. By 2030 the company will have more than 50 percent of its capital spending dedicated to renewables.

Should European energy companies make their pivot to low carbon solutions a major priority much in the tradition of Equinor? Would Chevron be a willing participant or would it simply double down to ensure its hydrocarbon future?

A key scenario could be a good bank/bad scenario in which the oil companies—BP, ENI, Shell, Repsol and TOTALEnergies — create separate entities in which renewables and hydrocarbons are spun off to create real shareholder value. This will also create real business opportunities for both Chevron and ExxonMobil. Will $100 oil and exhaustion of spare production capacity be enough to hasten such a scenario?

The real litmus test is the contrast between the performance of the share price of the oil majors and the Dow Jones Industrial Index: between July 2017 and June 2022 the Dow rose 44 percent (21,414 to 30,775) while the oil majors, with the exception of Equinor, have under-performed dramatically.

 Chevron: the present situation

Mike Wirth, Chevron’s Chairman and CEO recently revealed that two-thirds of Chevron’s total production of 3Million barrels of oil will in  2025, come from just two projects: Tengiz in Kazakhstan and the Permian Basin in the United States will each yield 1Million BOEPD. Not exactly diversity of supply.

The company’s market cap is approximately $290Billion. Chevron’s positive image is largely because of its dividend track record: the company has increased dividend payouts for 35 consecutive years.

Chevron management, nonetheless, has suffered important setbacks  at the company’s Annual General Meetings in both in 2021 and 2022.  Over the objections of management, 61 percent of shareholders voted in 2021 for a proposal to encourage the US company to reduce its emissions.  At the 2022 annual shareholders meeting, 39 percent  of shareholders voted for a resolution asking the company to provide quantitative information how a net zero by 2050 will affect key components of Chevron’s financial position, including potential impairments, remaining asset lives and asset retirement obligations.

The company’s new energy division is focusing on the following areas:

  • Renewable natural gas products;
  • Renewable fuel products;
  • Hydrogen production;
  • Carbon capture and storage.

Will Chevron shareholders see Chevron’s new energy division as a new direction or mere symbolism? Certainly, Europe’s supermajors-BP, Shell, and TOTALEnergies-who have a dash of renewables, have seen their share prices remain stagnant. Is the alternative simply to double down and follow the hydrocarbon route? And hive off their renewable divisions?

The company has indicated that over the next 3 years it will spend some $10.5-$12.5Billion yearly in the USA, mostly in the Permian Basin and Gulf of Mexico. This means that at least 75 percent of Chevron’s total capital budget over that period is pledged for the U.S. market.

Outside the USA, Chevron will spend $3.5Billion, or 70 percent of its international budget, to develop its Tengiz asset in Kazakhstan, with the remaining $1.5Billion spent elsewhere. This is not promising for Africa, where Chevron has major operations stretched across the continent, including major projects in Angola, Equatorial Guinea, and Nigeria that have received limited funding in order to bankroll Tengiz. Putting so many of its eggs in the Tengiz basket could be a strategic vulnerability: if Tengiz output falls short, Chevron’s market performance will suffer, potentially dramatically.

 ExxonMobil: the present situation

Once seen as the oil and gas industry leader, ExxonMobil is now in uncharted waters. Its biggest challenges are legal, not the search for oil and gas. ExxonMobil’s management has been forced to accept three new board members, nominated by Engine Number 1, a small but very influential investor, and court challenges that have the potential to derail its deep-water Guyana projects.

Surely, the court decision in the Netherlands ordering Shell to cut its CO2 emissions by 45 percent by 2030 compared to 2019 levels is a decision being followed closely by the courts in Guyana and the boardroom of ExxonMobil. After all, ExxonMobil’s upstream activities in the Netherlands and the UK are joint ventures with Shell.

ExxonMobil has written down between $17–$20Billion in impairment charges and is capping capital spending at $20-$25Billion per year through 2027, a $10Billion reduction from pre-pandemic levels. Its market capitalization is now $360Billion, up from its October 2020 lows of $140Billion.

Researchers from the IEEFA (Institute for Energy Economics and Financial Analysis) recently reported that ExxonMobil invested $61.5Billion on US upstream capital projects from 2013 through 2021, only to report $5.3Billion in cumulative losses (see below).

To meet the green challenge, ExxonMobil has unveiled a plan to build one of the world’s largest carbon capture and storage (CCS) projects along the Houston Ship Channel in Texas. The project would cost $100Billion and would capture and store 100Million tons of CO2 per year. The emissions saved would be equivalent to removing one out of every twelve cars on US roads, the company says. ExxonMobil is proposing to build infrastructure to capture its own CO2 emissions as well as those from power plants, oil refineries, and chemical plants in the Houston area.

To succeed, the project requires major public funding and the introduction of a price on carbon in the US. ExxonMobil says the project could be fully operational by 2040.

ExxonMobil has recently unveiled its energy transition strategy. Some 150 measures were announced, including hydrogen and biofuel initiatives. Over the next six years, the company plans to invest more than $15Billion in lower-emission initiatives, including large-scale projects to lower greenhouse gas emissions, a significant share of which will be directed toward its low carbon solutions business.

The Business Case for ExxonMobil

 Hiccups in the energy transition—particularly spiking prices due to the war in Ukraine—have given ExxonMobil and Chevron a reprieve with shareholders and an opportunity to re-evaluate their strategies. They have responded by dumping low return assets and consolidating others. ExxonMobil has for example sold many of its African operations. Seplat Energy PLC has in Nigeria now has taken over the assets of Mobil Producing Nigeria Unlimited (MPNU), formerly owned by ExxonMobil, for a purchase price of $1.2Billion. Savannah Energy has taken over all of ExxonMobil’s upstream and midstream assets in Chad and Cameroon.

Instead, the company is focusing on high value assets. Two examples:

 Guyana:ExxonMobil has sanctioned four projects in the 26,800 square km Stabroek Block off the Guyana coast. Discovered in 2015, Stabroek boasts reserves of more than 11Billion BOE. The Liza-1 well, the first well on the Stabroek Block, was drilled to 5,433 m in 1,742 m of water.

Liza Phase 1 is producing approximately 130,000 barrels oil per day; Liza Phase 2 is steadily ramping up to its capacity of 220,000 barrels oil per day; and the third project, Payara, is expected to produce 220,000 barrels oil per day. The fourth project, Yellowtail, is expected to produce 250,000 barrels oil per day.

This adds up to 820,000barrels of oil per day. ExxonMobil has a 45 percent share in the project, so it will be accruing 369,000BOPD from Guyana which will be one of its largest sources of crude oil from its portfolio of oil production. ExxonMobil must pray that Guyana stays politically stable and not decide to make substantial changes in terms of their production sharing agreements.

Mozambique:The Rovuma LNG project contains more than 85 TCF (trillion cubic feet) of natural gas. ExxonMobil will lead the construction and operation of all future natural gas liquefaction and related facilities, while ENI will continue to lead the Coral floating LNG project and all upstream operations.

ExxonMobil and its partners are jointly optimizing development plans and determining technical milestones such as final investment decision (FID) and startup timing accordingly.

 The Business Case for Chevron


The Caspian Region, particularly Kazakhstan, has been a key frontier for Chevron since the break-up of the Soviet Union. Tengiz, Kashagan and Karachaganak were all major projects taken on at great risk, but they garnished great financial wealth which in turn generated cashflow for the majors to develop projects around the globe, including Africa.

This is about to change. WoodMackenzie is predicting that, by 2030, annual capital spending on upstream oil and gas projects in the Caspian Region will drop 50 percent from its 2018 peak of $20Billion.

Most of the largest pre-FID (Final Investment Decisions), both brownfield and greenfield, do not generate an  IRR(Internal Rate of Return) above 20 percent, Woodmac explains. Tax issues, cost overruns and project delays are key constraints. Add carbon neutrality to the mix and you have the ingredients for a perfect storm.

When the Soviet Union broke up in the early 90s and Kazakhstan emerged as a new oil province, Chevron was seen as an ambassador of US goodwill. Chevron’s prize was operatorship of Tengiz (50 percent) and ExxonMobil gained a 25 percent share. Chevron also has an 18 percent share in the large Karachaganak Gas Field. ExxonMobil has a 16.81 percent share of the troubled Kashagan Project.

What once was a sign of great wealth—Kazakhstan’s oil riches—could turn sour very quickly. Both Chevron and ExxonMobil, key developers of Kazakhstan’s prosperity are also the two key oil majors lacking any serious decarbonization and energy transition plans. While this is most relevant for the Caspian, it is also a warning for Africa where both companies have major projects.

Expiry date for the Tengiz concession is 2033. What will happen then? Given the huge costs, highly sulfur-based oil and low chance of carbon neutrality, Tengiz could become a vast stranded asset.  To date Shell has abandoned two Kashagan projects in Kazakhstan because of high costs. Tengiz was for most of its duration Chevron’s crown jewel, providing cash to developing assets elsewhere including Africa. Given Chevron’s current strategy it can only hope that Tengiz can continue to squeeze out more oil.

 Permian Basin

What assurances do we have that Chevron’s Permian Basin adventure will fare better than that of past shale operators?

In a 2021 March report, the Institute for Energy Economics and Financial Analysis (IEEFA), found that 30 producers generated $1.8Billion in free cash flows in 2020 after slashing capital spending by $20Billion from the previous year.

“Last year’s positive free cash flows were only possible because shale companies cut their capital spending to the lowest level in more than a decade,” said Clark Williams-Derry, IEEFA energy finance analyst and co-author of the report. “Restraining capital spending could help the fracking sector generate cash, but low levels of investment also undermine the industry’s prospects for growth.”

Since 2010, the 30 companies examined by IEEFA had reported negative free cash flows totaling $158Billion.

“The positive free cash flows pale in comparison to the industry’s accumulated debt loads.”

The 30 shale producers owe almost $90Billion in long-term debt, and the reductions in capital expenditures are unlikely to ensure that the industry grows[1].

What can we anticipate?

Both Chevron and ExxonMobil will continue looking for ways to cut exploration and development costs. Consolidation and cost saving measures could be much more drastic as both companies are increasingly worried about decreasing asset values at a time when shareholders are demanding an increase in their share price and steadily growing dividends.

How long can Chevron afford to keep increasing its dividend while its assets continue to dwindle in value? Will Chevron’s New Energy budget be drastically increased to offset the decreased value of its hydrocarbon assets or will its renewable division simply remain window dressing?  Chevron could borrow a page from Equinor’s new energy strategy. Equinor will be spending more than one-half of its capital spending on low carbon energy by 2030 to become a leader in offshore wind technology. This message is not lost on the investor community and it benefited the Equinor share price which has enjoyed a surge of 119 percent in the last 5 years.

Can ExxonMobil get its house in order so that its share price will not continue to flounder? Will its projects in Mozambique and Guyana continue to support and help develop the company’s strategy in the future? The company’s low carbon solutions are at present ill-defined and lacking clarity.

Oil companies face a growing paradox: the need to merge their activities because of the diminishing value of their asset base; and a reluctance to do so because of huge regulatory hurdles. Instead, at the project level, we can anticipate combined project services such as joint drilling campaigns and operational matters. A pertinent example is the creation of  Azule Energy, a joint venture in Angola in which BP and ENI have combined their operations.

If European companies can get their houses in order in a good-bad bank scenario, Chevron and ExxonMobil could see a merging of sorts, certainly at the project level.

What scenario would John D. Rockefeller follow? No doubt he would follow the money, examining critically the energy scenarios of both companies and would find their plans wanting. No doubt he could unveil green solutions that would be the envy of the rest of the sector, both because of their innovativeness and profitability.

 Gerard Kreeft, BA (Calvin University, Grand Rapids, USA) and MA (Carleton University, Ottawa, Canada), Energy Transition Adviser, was founder and owner of EnergyWise.  He has managed and implemented energy conferences, seminars and university master classes in Alaska, Angola, Brazil, Canada, India, Libya, Kazakhstan, Russia and throughout Europe.  Kreeft has Dutch and Canadian citizenship and resides in the Netherlands.  He writes on a regular basis for Africa Oil + Gas Report, and contributes to IEEFA (Institute for Energy Economics and Financial Analysis). His book The 10 Commandments of the Energy Transition is being published this July.





















ACWA Power led Consortium to Build 1,100MW of Wind Power Plants in Egypt

Saudi owned ACWA Power has led a consortium of companies to sign a project agreement to develop a 1.1GW wind project in Egypt, at an investment value of $1.5Billion.

The consortium, comprising Hassan Allam Holding, will work together during the development phase to complete the site studies and secure the financing of this facility.

Located in the Gulf of Suez and Gabal el Zeit area, this wind project is the largest single contracted wind farm in the Middle East region and one of the largest onshore wind farms in the world.

“The project will be designed to use state-of-art wind turbines with blade heights of up to 220 metres, which helps in achieving the best use of the designated land plots in the most efficient way”, ACWA claims in a statement.

“When complete, the project will mitigate the impact of 2.4Million tonnes of carbon dioxide emissions per year and provide electricity to 1,080,000 households.

The signing ceremony of the agreement took place at the headquarters of the Egyptian General Authority for Investment and Free Zones, Cairo, in the presence of Mohamed Shaker El-Markabi, Egypt’s Ministry of Electricity and Renewable Energy; Majid Bin Abdullah Alkassabi, Saudi’s Minister of Commerce; Issam bin Saad bin Saeed, Minister of State and Cabinet member for Shoura Council affairs; Hala Al Said, Egypt’s Minister of Planning and Economic Development; Mohamed Abdel Wahab, CEO of the General Authority for Investment and Free Zones “GAFI”; Osama Asran, Egypt’s Deputy Minister of Electricity and Renewable Energy; Gaber Desouky, CEO of the Egyptian Electricity Holding Company (EEHC);. Amjad Saeed, Advisor to the Minister; Eng. Sabah Mashali, Chairman of the Egyptian Electricity Transmission Company; Mohammed El Khayat, Chairman of New and Renewable Energy Authority; and Mohammad Abunayyan, Chairman of ACWA Power.

“This milestone wind project falls within the framework of the Egyptian government’s strategy to diversify its energy sources and leverage the country’s rich natural resources, especially in renewable energy”, The statement by ACWA adds. “The 1.1GW wind project confirms Egypt’s commitment in spearheading the use of renewable energy sources to reduce the impact of carbon emissions produced by conventional energy sources, as Egypt gears up to host the United Nations Climate Conference (COP 27) in November 2022, the foremost international forum to discuss countries’ efforts in addressing climate change”.


Angola Receives a $2Billion American Support for Solar Projects in Four Provinces

U.S. firm AfricaGlobal Schaffer (Washington, DC), in collaboration with U.S. project developer Sun Africa (Miami, Florida), signed a contract with the Government of Angola to develop a $2Billion solar project in four southern Angola provinces.

The project will include solar mini-grids, solar cabins with telecommunications capabilities, and home power kits. In addition to supporting up to $1.3Billion in U.S. exports, the project will help Angola meet its climate commitments, including generating 70% carbon-free power by 2025, a statement in a factsheet from the US White House says.

The Angola facility is heavily supported by the U.S. Department of Commerce and the Export-Import Bank of the United States (EXIM).

It is one of several projects targeted by $200Billion being mobilized by the US government from the private sector in the context of the Partnership for Global Infrastructure (PGII)  launched by the G7 leaders “to deliver quality, sustainable infrastructure that makes a difference in people’s lives around the world, strengthens and diversifies our supply chains, creates new opportunities for American workers and businesses, and advances our national security”, says the White House fact sheet.

The Angolan solar project fits into the first of the four priority pillars through which the US will execute the PGII. That pillar involves: tackling the climate crisis and bolstering global energy security through investments in climate resilient infrastructure, transformational energy technologies, and developing clean energy supply chains across the full integrated lifecycle, from the responsible mining of metals and critical minerals; to low-emissions transportation and hard infrastructure; to investing in new global refining, processing, and battery manufacturing sites; to deploying proven, as well as innovative, scalable technologies in places that do not yet have access to clean energy.


Mozambique Prepares Tender for Auction of Solar Power Generation in Four Districts

Mozambique’s Energy Regulatory Authority (ARENE) will, by the end of July 2022,  launch a tender to find strategic partners interested in developing solar power generation projects in Lichinga, Niassa Province, and Manje, Tete Province.

Each of the proposed solar power plants will have the capacity to generate 30 megawatts.

The tender will be part of the government’s Renewable Energy Auctions Programme (PROLER).

The public presentation of the environmental pre-feasibility study is scheduled for June 29, 202, so is the definition of the scope and terms of reference and consultation of all parties interested and affected by the project.

Launched in September, 2020, as part of the promotion of increased electricity generation capacity in the country, PROLER was developed by the Ministry of Mineral Resources and Energy with the support of the European Union.

By launching auctions under a public tender regime, the Mozambican government hopes to confer transparency and competitiveness on the renewable energy sector, thereby attracting the best possible national and international investors.

The Vikings are coming…the Vikings are coming!

By Gerard Kreeft

The modern Viking—in this case Norway—in actual fact continues its warring ways like that of historic times. Not with the sword but with the strength of Norway’s abundant oil, natural gas, hydro-electrical power and offshore wind energy. The country’s bounteous natural resources coupled with a small population of only 5.5Million people has resulted in Norway being anointed with one of the highest per capita incomes in the world.

Norway is Europe’s second-largest oil and gas producer behind Russia.  It is playing a major role in helping the European Union shift away from reliance on Russian fuel after Moscow’s invasion of Ukraine.

The Norwegian sovereign wealth fund, built on the back of oil and gas profits, has over $1Trillion in assets, including 1.4% of global stocks and shares, making it the world’s largest sovereign wealth fund.

The Norwegian state’s participating interest is split in two parts. The first is linked to Equinor, the state hydrocarbon firm. The second is linked to the state’s direct financial interest (SDFI) in the petroleum industry. The SDFI system is a fund into which the surplus wealth produced by Norwegian petroleum income is deposited.

The purpose of the fund is to invest parts of the large surplus generated by the Norwegian petroleum sector, mainly from taxes of companies but also payment for licenses to explore for oil as well as the state’s direct financial interest and dividends from Equinor which is 67% owned by the state. The fund now has started dumping its shares in oil and gas companies and instead prescribing renewables to ensure it’s on the right side of history.

Yet the term ‘green’ has, since the Russian-Ukraine conflict, been given a serious re-think. Natural gas is now considered relatively green. Norway is, of course, more than happy to ensure that Norwegian natural gas can be substituted for Russian gas and thus ensure that Norway’s sovereign wealth fund continues to grow and Equinor in turn, has the funding required to ensure its future green growth.

The Greening of Natural Gas

While Norway can continue its green journey, the legitimacy of greening natural gas has ramifications far beyond the Norwegian Treasury. Christian Ng, Research & Stakeholder Engagement Leader, Debt Markets, described in a recent IEEFA (Institute for Energy Economics and Financial Analysis) how green has achieved a green status.

 The key question according to Ng is “how do we ensure that green-branded businesses and products are true to label and deserving of green energy finance?”[1] According to her, green taxonomies play an important role.

“A taxonomy is a system for categorizing things based on their scientific characteristics. A green taxonomy specifies business activities that are low-emitting and environmentally sustainable, and therefore eligible for green finance. In the energy space, this typically refers to renewables like solar, wind and geothermal. It also specifies the environmental criteria, such as emissions thresholds, that the activity must satisfy to qualify for the green label.”

For banks and investors, Ms. Ng continues, “a taxonomy provides the parameters for what they can and should invest in if they want to call it a green investment. Wanting certainty that they are investing in clean and sustainable technologies; they rely on taxonomies to guide them.

“Therefore, a key role of green taxonomies is to efficiently channel and unlock new pools of capital towards proven, environmentally clean and sustainable assets, to address the global climate crisis.”

Ng argues that both Europe and China have developed a common ground taxonomy: a comparison exercise of their respective taxonomies to identify commonalities and differences. The European and Chinese approach is a counter measure to taxonomies tailored to national or regional contexts which in terms of methodology, metrics and technical criteria can differ significantly from market to market, leading to comparability issues for capital providers.

Within this debate natural gas has become a key issue.   According to Ng in October 2021 the South Korean government added LNG to its near-final green taxonomy. Likewise, in November 2021 the European Commission signaled that the EU is considering a role for natural gas as part of its green taxonomy.  Other Asian markets have indicated similar intensions meaning gas or LNG would qualify for green bonds and loans under these taxonomies.

Yet China, according to Ng, has indicated that its long-term policies exclude fossil fuel electricity projects, sending the right signals to the market.  The precedent was set in 2015. Then China’s first green taxonomy categorized “clean coal” as a green project that qualified for the issuance of green bonds, drawing widespread criticism. No doubt the 2015 incident sent China a signal to take green more seriously.

In the short-term China has chosen natural gas as the fuel of choice. In 2020 China created PipeChina, an overarching national gas pipeline company to rationalize and distribute natural gas on a country-wide basis. PipeChina is the most visible sign that China sees natural gas in the short term as a fuel of choice if it is to achieve its goal of CO2 neutrality by 2060 or earlier. China has at present 22 LNG import terminals and plans to construct 24 more by 2025.

Another piece of the puzzle is international financial participation. Ng indicated that Yi Gang, the governor of the People’s Bank of China, …” stressed that government funding alone would not be sufficient for China to meet its net zero goals – forecast to require an estimated $22Trillion from 2021 to 2060 – and therefore, market participants must be encouraged to step in and fill the gap”.

In other words, multi-lateral funding will become a necessity. The Chinese approach is based on two premises:

1.) In the short-term natural gas as its fuel of choice; and

2.) In the long-term be prepared to move towards cleaner, low carbon fuels (wind and solar) in order to achieve green financing.

The green debate continues over two key issues:

1.) Whether natural gas should be seen as sustainable, and

2.) If gas has a role in decarbonizing the economy, should it be seen as a green investment?

Ng concludes: “If gas-fired power is recognized as green, Environmental, Social and Governance (ESG)-focused investors may find themselves inadvertently backing the high methane and carbon fuel and risk being accused of greenwashing. This in turn risks undermining investors’ trust and the purpose of green taxonomies.”

Two powerful groups have opposed the inclusion of natural gas in any taxonomy system:

1.) The UN-backed Net-zero Asset Owner Alliance, which represents about EUR 9Trillion of investment; and

2.) The European Sustainable Investment Forum (EUROSIF), a pan-European sustainable and responsible investment association.

The Chinese can take heart and be assured that in the short-term their natural gas and LNG imports will be given a green stamp. And be further assured that they have a favorite position staked out to develop a future low-carbon world.

The Norwegian Challenge

According to the Norwegian Petroleum Association (see below), Norway produced in 2020, 22% of Europe’s natural gas demands. Additionally, two-thirds of Norway’s total gas resources is still to be produced. No doubt in the short-term natural gas exports from Norway to Europe will be substantially raised.

A very recent example of Norway’s importance to the UK is that Equinor and UK-based Centrica agreed for Norway to provide an additional 1billion cubic metre (bcm)/year to the UK under Equinor’s existing contract with Centrica, lifting the total volume above 10bcm annually.  Typically, Equinor exports up to 22bcm /year of natural gas to the UK which covers more than 25% of the UK’s gas demand.  Helge Haugane, Equinor’s senior vice president, Gas & Power said that “In a period with a challenging political and macro-economic environment with strong demand for natural gas, we at Equinor are doing what we can to export as much gas as possible to the market”.

The greening of natural gas will help strengthen Equinor’s twin pillars of natural gas and its growing offshore wind portfolio. Will this provide Equinor the financial depth and ability to achieve maximum leverage for both pillars?

Equinor’s offshore wind portfolio is pledged to grow to 12–16 GW of installed capacity by 2030. Renewables will receive more than 50% of capital investments by 2030. Yet there is severe competition from a number of key European new energy players.


  • ENGIE based in France: In 2021 the company spent more than $11Billion on investments across a broad swath of sectors, including solar, wind (on and offshore), hydro plants, biogas, and developing gas and power lines, and will have 50 GW of global renewable installed capacity by 2025.
  • Enel based in Italy: The company’s strategic plan outlines total investments of $231Billion and tripling renewable capacity to 154 GW by 2030.
  • Ørsted based in Denmark: By 2030 the company will have an installed capacity of 50 GW of renewable power.
  • Iberdrola based in Spain: From 2020–2025, the company will be spending $165Billion on renewable energy and has a pending target of 95 GW of installed wind capacity.
  • RWE based in Germany: By 2030 RWE will have 50 GW of installed wind and solar capacity.
  • Vattenfall based in Sweden: In the Nordic countries, Vattenfall has low emissions, with practically 100% of the electricity produced based on renewable hydro power and low-emitting nuclear energy.

Equinor has chosen a series of joint ventures to develop its offshore wind portfolio. The first, Dogger Bank, heralded to become the world’s largest offshore wind farm, is being developed together with SSE Renewables based in the UK. Located in the North Sea, the project will produce some 3.6 GW of energy, enough to power 6Million households. More recently, Eni has purchased a 20% stake in the Dogger Bank A & B Project.

The second is Equinor’s Empire Wind and Beacon Wind assets off the USA’s east coast. In September 2020 it was announced that BP was buying a 50% non-operating share, a basis for furthering a strategic relationship. The two projects will generate 4.4 GW of energy.

Clarity of message

No doubt the Equinor share price is enjoying the message being sent out: that the company will be spending more than one-half of its capital spending on low carbon energy by 2030 to become a leader in offshore wind technology. While the investor community may see the low carbon strategy as a clear incentive, the obvious benefit is the simple clarity of the message.

Whether a company is an oil company or an energy company seems less important. That is why aside from Equinor, Chevron, which is on track to make 2022 the 35th consecutive year with an increase in annual dividend payout per share, has maintained its value. Of the oil majors—BP, ENI, ExxonMobil, Equinor, Shell, Repsol, and TOTALEnergies— have been industry laggards between 2018 and 2022 whereas Chevron and especially Equinor stand out very positively.

Table 1: Stock market prices of majors 2018-2022(NYSE)

Year Repsol BP Shell ENI TOTAL Energies Chevron ExxonMobil Equinor
2018 $17 $43 $69 $35 $58 $128 $87 $23
2022 $15 $29 $53 $28 $49 $157 $85 $34

Note: Values based on January 5, 2018 and April 29, 2022

During these five years, Repsol’s stock is down 12%, BP’s stock is down 33%, Shell is down 23%, ENI down 20%, TOTALEnergies down by 16%, and ExxonMobil remained flat, whereas Chevron’s stock rose by 23%, and Equinor up 48%.

The question remains whether Equinor can continue to maintain its twin portfolio—offshore wind and natural gas—under one roof. For sure, Europe will require much more Norwegian natural gas in the near future. Will the additional funding from European gas revenues be enough to provide its offshore wind division the necessary economies-of-scale to compete with Europe’s new energy companies? Will Equinor’s offshore wind energy division be spun off to create yet more shareholder value? If so then our modern Vikings could open a second economic front in the ongoing battle of the energy transition.

Gerard Kreeft, BA (Calvin University, Grand Rapids, USA) and MA (Carleton University, Ottawa, Canada), Energy Transition Adviser, was founder and owner of EnergyWise.  He has managed and implemented energy conferences, seminars and university master classes in Alaska, Angola, Brazil, Canada, India, Libya, Kazakhstan, Russia and throughout Europe.  Kreeft has Dutch and Canadian citizenship and resides in the Netherlands.  He writes on a regular basis for Africa Oil + Gas Report, and contributes to IEEFA (Institute for Energy Economics and Financial Analysis). His book The 10 Commandments of the Energy Transition is being published this June.


Nigerian Firm, Greenage, Gets Half a Million Dollars to Expand Solar Component Manufacture

Shell-funded impact investment company, All On has announced a $500,000 investment in Greenage Technologies Power Systems Limited to fund the construction and expansion of its charge controllers and inverters manufacturing facility in Enugu State in South-Eastern Nigeria.

Ogechukwu Uchechukwu, Co-founder and Head of Business Development, Greenage Technologies, says the support will help the company reduce the cost of solar energy components through local manufacturing. “This investment will help Greenage realize its aim of becoming Africa’s largest solar electronics manufacturers by doubling its existing manufacturing capacity for inverters, charge controllers, and the possibility to assemble lithium-ion batteries,” he explains.

The funding is a mix of equity and convertible debt that should enable Greenage to expand its manufacturing business through the acquisition and development of a new factory and fund its working capital needs – enabling it to meet the increasing demand for locally manufactured solar systems components.

“We are proud to close another transaction to enhance the localization of the solar supply chain,” notes Wiebe Boer, CEO of All On. “Through this investment All On is lowering the proportion of solar components imported into Nigeria. This investment is at the core of our commitment to investing in youth-driven Nigerian companies like Greenage to accelerate the sector’s growth and contribute to closing the energy access gap.”

Greenage was a USADF/All On Off-Grid Energy Challenge winner in 2018, receiving $100,000 to fund the installation of solar systems in over 40 households and businesses.

All On concludes in the statement: “This additional funding is an indication of All On’s growing confidence in the company’s vision to play an increasingly important role within the Nigerian renewable energy value chain as a manufacturer of solar energy system components”.


European Commission May Classify Lithium as Toxic

By Victor Ponsford, Rystad Energy  (

A potential European Commission (EC) act to classify lithium as a Category 1A reproductive toxin in the fourth quarter of 2022 could undermine the European Union (EU)’s attempt to create and support a domestic battery materials supply chain. The EU currently relies heavily on imports of lithium to supply its nascent electric vehicle (EV) production sector and the classification may increase its reliance on other regions, at a time when the union is focused on energy security and reducing emissions. Europe has announced plans to expand lithium battery-grade Li Carbonate production from nothing today to 8.3% of global production by 2025, according to Rystad Energy research. Europe has similar ambitions for lithium hydroxide, which is crucial for long-range EV batteries. Even without the potential decision by the EC, it will still fall well short of closing the estimated 218% deficit gap in lithium hydroxide processing that Europe is facing by the end of 2030, according to Rystad Energy research.

The European Chemicals Agency (ECHA)’s Risk Assessment Committee (RAC) at the end of 2021 published its opinion that it agreed with French proposals to classify three lithium salts as Category 1A reproductive toxicants. It determined that lithium carbonate, lithium hydroxide and lithium chloride should be classified under the Classification, Labelling & Packaging (CLP) Regulation as substances that may damage fertility and unborn children. It also agreed that the substances may harm breastfed children.

Initial proposals were presented to the EC on March 23 and 24, 2022 and are now under review and consultation, with the EC set to publish its first draft of the act between October and December. EU member states can still object to these proposals through the summer.

While the classification would not stop lithium usage, it is highly likely that it would have an impact on at least four stages in the EU lithium battery supply chain: lithium mining; processing; cathode production; and recycling. Several administrative issues, risk management and restrictions could hit each of these fledgling industries in Europe, which would drive up costs.

European LiOH Processing Demand and Supply Balance

“Should the European Commission take this decision, it may undermine the EU’s energy security and net zero goals, in addition to increasing costs for the domestic EV market. The EU is a global regulatory powerhouse, so any decision to classify lithium as Category 1A toxicant in the world’s largest single market will be keenly studied by regulators elsewhere. Industry hates regulatory uncertainty, so the longer it takes for a ruling, the more it will delay existing and significant investment decisions. This is more than a technicality; the impact could be far-ranging and wide,” says James Ley, Senior Vice President, Analysis.

Implications for EV production

A drawn-out permitting process for new mining operations in Europe has already been highlighted at recent industry events as one of the main barriers to new mining projects ramping up quickly. Both lithium carbonate and hydroxide are critical to the battery raw material supply chain, with the bulk of new EV battery chemistries containing lithium. This potential ruling comes at a time when the EU is itself scrambling to build and establish local lithium supply chains. The permitting issue has repeatedly been highlighted at recent industry events as one of the main barriers to new mining projects ramping up quickly in the EU.

There is also further risk of potential projects losing local community support for building lithium mines and processing operations. Additional concerns could arise if the pending decision ends up slowing down the injection of further and much-needed new investment into the EU lithium mining and processing industries. Rystad Energy is aware of at least one new proposed lithium hydroxide processing operation that is now withholding its investment decision pending the outcome of the EC’s final resolution.

Industry seeks clarity

The lithium industry is urging the EC to reassess the RAC’s initial opinion. They also argue that the three lithium salts cannot be considered in the same light and that there is significant doubt as to the applicability of the read-across to lithium hydroxide due to its corrosive properties. An inappropriate classification of lithium salts would create business uncertainty, which would have numerous implications for future investment.

Other countries outside the EU may reach a different conclusion on the classification, gaining a competitive advantage. The UK, for example, will propose its own classification by 30 June – meaning processing investments proposed for an EU member could instead be shifted to the UK, depending on the ruling taken in London.



In S.A’s Latest, Scatec Leads the Pack of Renewable Energy Builders

By Sully Manope, in Windhoek

Norway’s Scatec, the most aggressive renewable energy developer in Africa, has just taken on more.

It has signed power purchase agreements (PPAs) for three solar projects with storage in the Northern Cape Province of South Africa. The deal is part of the Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP).

The solar power plants, to be built in a town called Kenhardt, will provide 150 MW of dispatchable renewable energy from 5am to 9.30pm, based on a hybrid installation of 540 MWp of solar PV capacity and 1.1 GWh of battery storage.

These are the first projects developed under the country’s RMIPPPP, which is different from the Renewable Energy Independent Power Producer Procurement Programme (REIPPP).

The objective of the RMIPPPP, launched by the Department of Mineral Resources and Energy (DMRE) on the 23rd of August 2020, was to fill South Africa’s current short-term supply gap, alleviate the electricity supply constraints and reduce the extensive utilisation of diesel-based peaking electrical generators. The Determination for the RMIPPPP was gazetted on the 7th of July 2020.

The agreements Scatec signed call for financial close to be achieved by July 30, 2022, which is 60 days from the signature date. “Once financial close has been reached, Scatec will start construction of the projects”, the company says in a statement. “This unique solar and storage project signifies change within Africa’s renewable energy landscape and will be one of the largest renewable energy and storage projects in the world,” explains Scatec CEO Terje Pilskog.

Scatec will own 51% of the equity in the project with H1 Holdings, our local Black Economic Empowerment partner owning 49%. Scatec will be the Engineering, Procurement and Construction provider and provide Operation & Maintenance as well as Asset Management services to the power plants. The Standard Bank Group is acting as lead arranger and debt provider alongside a lender group including British International Investment and they will provide non-recourse project financing to the projects.

How the contract came about

“Due to the emergency nature of the RMIPPPP, the objective is to procure energy from projects that are near ready”, the DMRE says in a statement. “The timelines from the release of the Request For Proposals (RFP) in the market to bid submission and then again from preferred bidder stage to financial close was designed to be short to ensure that electricity could be connected to the grid as soon as possible. The RMIPPPP will allow for a phased grid connection, incentivising early power”.

DMRE says that “the connection timelines will not allow for any deep strengthening of the grid and the qualification criteria will therefore facilitate projects where grid capacity is available and do not require any deep grid works. The RMIPPPP will provide for long term power purchase agreements up to 20 years.





The African Tango: the case of Tullow and Capricorn

By Gerard Kreeft

2050—the date that the IEA(International Energy Agency) deemed that oil and gas projects would no longer be feasible—continues to take its toll. The latest example is the proposed merger of Tullow and Capricorn. Is this a case of asking  one of the last available girls, who has not yet found a dance partner, to tango with you?  Or a final bad choice–remaining on the sidelines and listening to the music as people continue to tango towards a 2050 deadline.

The Tullow-Capricorn merger has promised to become a prime mover in the African oil and gas landscape. Is this the case? In the past a key role of oil and gas independents was predictable: allowing the majors to farm-in to their projects and then be rewarded handsomely. Or in some cases independents carrying out the exploration for the oil majors  Now this has changed. The oil majors are instead re-calibrating their project strategies–re-aligning, consolidating and merging  their Africa assets reflecting a checkered landscape. Some examples:

  • In Angola BP has merged its upstream activities with Eni to form Azule Energy, which could become a model for other African countries.
  • Much of TotalEnergies’ hydrocarbon budget will be devoted to low-cost, high-value projects are the goal. Squeezing more value out of  various African assets to ensure a prolonged life cycle. A prime example is TotalEnergies’ Mozambique LNG project, which is expected to cost $20Billion and produce up to 43 million tons per annum.
  • Shell indicated that it will reduce its upstream division to nine core hubs—Permian, the Gulf of Mexico, United Kingdom, Kazakhstan, Nigeria, Oman, Malaysia, Brunei and Brazil.

The legacy of the oil majors in Africa is not pleasant reading. According to Toyin Akinosho, publisher of the Africa Oil + Gas Report, African oil and gas revenues have financed the energy transition in the rest of the world, but not in Africa: “. . . the oil majors are funding clean energy from the balance sheet of dirty oil.”[1]

In the meantime, there is sufficient evidence to suggest that new entrants are filling the void. Seplat Energy PLC is, in Nigeria now about to take over the assets of Mobil Producing Nigeria Unlimited(MPNU), a subsidiary of ExxonMobil, for a purchase price of $1.2Billion. Prior to the Seplat Energy deal  already twenty-five private companies in Nigeria were producing nearly 400,000BOPD (barrels oil per day).

What has previously happened in the North Sea  is now occurring in Sub-Sahara Africa.  Jason Bordoff, Co-Founding Dean of the Columbia Climate School, Founding Director of the Center on Global Energy Policy, and Professor of Professional Practice in International and Public Relations at Columbia University SIPA, recently indicated  that private equity companies are turning their attention to assets being aborted by the oil majors. Private equity now accounts for 10% of all North Sea production, up from virtually 0% in 2014. Bordoff concludes that Chinese banks have also shown an ability to fill these investment slots.[2]

The Case of the Newlyweds

Tullow Oil

Tullow Oil, long seen as a pioneer African oil and gas explorer, has in the last 3-5 years been forced to focus only on reducing its huge debt load. In December 2019 CEO Paul McDade stepped down because the company had to write off $1.2Billion, resulting in a halving of its share price, and a cancellation of any possible dividend. The company share price was 220 pence on 5 January 2018 and on 1 June  2022 it had been reduced to only 55 pence per share price. A four-fold reduction!

The debt also was accumulated because of missed production predictions from its flagship operations in Ghana. The company also suffered setbacks in Uganda, Kenya and Guyana. In 2020, in order to raise cash, Tullow sold all of its Uganda assets to TOTALEnergies for $575Million.

In 2021 the company produced 59,000BOPD: 42,000BOPD from its Jubilee and Ten fields in Ghana and an additional 16,000BOPD from non-operating assets in Gabon and Ivory Coast.

Capricorn Energy

In spite of the deal being dubbed as the merging of two equals, Capricorn is being taken over by Tullow. Capricorn, in spite of its various concessions, has a very tenuous existence. Capricorn Energy’s sole production of some 36,500BOEPD is coming from its Western Desert asset which it bought from Shell.

The Shell connection also takes us to India. The Rajasthan asset was bought by Cairn from Shell  and discovered in 2004. At the time this was the largest onshore discovery in India for more than 25 years with the potential to provide more than 30% of India’s daily crude oil production.

Cairn Energy sought to raise capital for its India subsidiary Cairn India in order to further develop the Rajasthan block. Subsequently Vedanta Resources purchased a majority stake of  Cairn India. The Indian government demanded a retrospective tax demand,  a tax dispute that lasted seven years and was finally settled by arbitration. The Government of India  was required to pay Cairn/Capricorn a final payment of $1.06Billion. This payment has helped keep Capricorn afloat. What is puzzling is why did Cairn Energy sell its stake in India? True the company received $8.48Billion for its majority stake in Cairn India. That money became the basis for new exploration adventures. Would it not have been more profitable to grow Cairn India as a  business?

Capricorn may now have exploration rights in the UK, Egypt, Israel, Mauritania, Mexico and Suriname but adds little to the company’s value at a time when oil and gas assets have a diminishing value.

Finally, the Capricorn share price om 5 January 2018 was 266 pence, and on 1 June 2022 was 202 pence.

Some Final Considerations

Tullow Oil’s CEO Rahul Dhir is presiding over an unlikely collection of exploration commitments and rights. True the new company has promised production of some 125,000BOEPD by 2025 which it will certainly need in order to  further reduce debt and develop its exploration assets. Will the new company have the fiscal muscle to further develop these assets? Whether the oil majors will want to farm-in is questionable. Certainly, they will unlikely pay the super prices of the past.

On a short-term basis it is imperative that the Tullow-Capricorn company unveil its future development strategy.  How will it, for example, finance the Billions that are required for the ‘Value Maximization Plan’ to develop the Tano Basin in Ghana? Similar questions can also be raised about other potential development projects.

There is the matter of the sharp decline of the Tullow share price which is now only one-quarter of its 2018 value; the Capricorn share price, although depressed compared to 2018, still demonstrates  a stronger valuation than that of Tullow. This could prove to be a bad omen for the two partners.

Finally,  can CEO Rahul Dhir put together a plan so that the new entity can grow its business. Perhaps Dhir may realize that he still has unfinished business from his tenure at Cairn India. After all he was Cairn India’s Managing Director from its IPO(Initial Public Offering)in 2006 until 2012. Surely, he has an extensive track record of lessons learned which could prove to be invaluable in the months ahead.

Gerard Kreeft, BA (Calvin University, Grand Rapids, USA) and MA (Carleton University, Ottawa, Canada), Energy Transition Adviser, was founder and owner of EnergyWise.  He has managed and implemented energy conferences, seminars and university master classes in Alaska, Angola, Brazil, Canada, India, Libya, Kazakhstan, Russia and throughout Europe.  Kreeft has Dutch and Canadian citizenship and resides in the Netherlands.  He writes on a regular basis for Africa Oil + Gas Report, and contributes to IEEFA(Institute for Energy Economics and Financial Analysis). His book ‘The 10 Commandments of the Energy Transition ‘is being published this June.

Savannah Inks Agreement for 500MW Solar Energy in Chad

By McCullum Juba, our Central Africa Solar Energy Correspondent, in Ndjamena

Two projects involved: first sanction expected in 2023

British independent, Savannah Energy has signed an agreement with the Ministry of Petroleum and Energy of the Republic of Chad for the development of up to 500 megawatts of renewable energy projects supplying electricity to the Doba Oil Project and the towns of Moundou and Doba in Southern Chad, and the capital city, N’Djamena.

A signing ceremony was held on May 30, 2022 in N’Djamena, attended by the Chadian Minister of Petroleum and Energy Djerassem le Bemadjiel, Mark Matthews, the UK Ambassador to the Republic of Chad, Sarah Wilson, Deputy Head of Mission at the British Embassy N’Djamena, Chad, and Andrew Knott, Chief Executive Officer of Savannah.

Centrale Solaire de Komé

The first Project Savannah has agreed to develop comprises an up to 300 MW photovoltaic solar farm and battery energy storage system (“BESS”) located in Komé, Southern Chad (the “Centrale Solaire de Komé”). This Project is being developed to provide clean, reliable power generation for the Doba Oil Project and the surrounding towns of Moundou and Doba. In doing so, it will displace existing hydrocarbon power supply resulting in a significant reduction in CO2 emissions and provide a supply of clean, reliable electricity on a potential 24/7 basis to the surrounding towns of Moundou and Doba (which currently only have intermittent power access). The expected tariff for the electricity generated from this Project is expected to be significantly less than that being paid for the current hydrocarbon-based power generation in the region. At 300 MW, the Centrale Solaire de Komé would be the largest solar project in sub-Saharan Africa (excluding South Africa) as well as constituting the largest battery storage project in Africa. Project sanction for the Centrale Solaire de Komé is expected in 2023 with first power in 2025.

Centrales d’Energie Renouvelable de N’Djamena

The second project covered by the Agreement involves the development of solar and wind projects of up to 100 MW each to supply power to the country’s capital city, N’Djamena (the “Centrales d’Energie Renouvelable de N’Djamena”). A significant portion of this project is anticipated to benefit from the installation of a BESS, potentially enabling the provision of 24/7 power supply. At up to 200 MW, the Centrales d’Energie Renouvelable de N’Djamena would more than double the existing installed generation capacity supplying the city and increase total installed grid-connected power generation capacity in Chad by an estimated 63%. Savannah expects the cost of power from the Centrales d’Energie Renouvelable de N’Djamena to be lower than existing competing power projects, which are currently primarily hydrocarbon-based. Project sanction for the Centrales d’Energie Renouvelable de N’Djamena is expected in 2023/24 with first power in 2025/26.

Savannah expects to fund the Projects from a combination of its own internally generated cashflows and project specific debt.


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