In a surprising twist, the oil majors are recalibrating their investment strategies away from renewables due to low returns.According to BloombergNEF's most recent analysis of investment trends in the energy transition, the oil and gas sector is shifting its focus to clean molecule technologies.

According to BloombergNEF, a shift in investment trends is becoming evident in the energy industry, specifically in the oil and gas sector. Traditionally, there had been a trend towards investment in renewables and electrification as part of decarbonization efforts.

In addition, historically, renewables dominated low-carbon investment in this sector, however, BloombergNEF also analyzes that, in 2023, this investment in renewables and electrification declined for the second consecutive year.

In contrast, there is growing interest in low-carbon molecular technologies, such as carbon capture and storage, renewable fuels and advanced materials, from the oil and gas industry.  This is due to a number of factors, including supportive policies, greater synergy with existing oil company operations and the search for assets with higher returns.In short, the industry is shifting its focus from renewables to technologies that will enable them to reduce carbon emissions from their existing operations.

Source: BloombergNEF
 

The leaders in this adoption of clean molecule technologies are primarily in North America, with the United States and Canada leading the way. Policy plays a crucial role in this transition, with tax credits, financing opportunities and tighter regulations driving oil companies to explore these low-carbon technologies. 

Flagship companies such as BP and Shell are leading this shift with accelerated investment in clean molecules. Lower returns from renewable energy projects have been cited as possible factors behind this strategy adjustment.

However, TotalEnergies stands out for its strong commitment to expanding its renewable energy portfolio. Despite the general trend in the sector, this French oil company is still aiming to build an integrated energy business with a footprint across the entire electricity value chain.

Source: BloombergNEF

This shift reflects a significant evolution in the strategy of the oil majors, which are transforming their focus from "big oil" to "big energy", prioritizing clean molecule technologies over traditional renewables.