Equinor\u2019s capital gains in renewables came from \u201cfarm downs,\u201d i.e. the selling of assets at various stages of development to new owners. (Another term for farm down is \u201casset rotation,\u201d which I discussed last week.) Equinor divested a 50% interest in two U.S. offshore wind projects and a 10% interest in two U.K. offshore wind farms. While asset rotation is slowing down in the power utility sector, it seems to be working fine for Equinor.<\/div>\n<\/div>\n
More interesting than the farming down itself is who Equinor is farming down to: two other European oil majors! BP Plc\u00a0is buying into the\u00a0U.S. projects, and Italy\u2019s Eni SpA is buying into the\u00a0U.K. projects\u2014or in other words, BP and Eni are paying Equinor for the privilege of taking on the earlier stages of developing offshore wind.<\/p>\n
Therein lies the challenge for Big Oil\u2019s energy transition plans. Equinor\u2019s way to benefit from renewable-energy assets is, essentially, to put in the early work of developing them\u2014and then reap the cash benefits of selling them to others.<\/p>\n
<\/div>\n
Importantly, early wind development is more time-dependent and expertise-dependent than it is capital-dependent. Equinor\u2019s U.S. wind assets are the result of its success in the country\u2019s\u00a02018 offshore-lease auction, when it won stakes with a bid of $135 million. In its latest earnings statement, the company says BP paid $1.2 billion for those same assets, netting the Norwegian company $1 billion on the deal.<\/p>\n
Equinor is a special creature in a few ways. First, one of the reasons it could be an early developer of U.S. offshore wind is that it has decades of experience developing and operating offshore oil and gas assets. Other oil majors (in particular BP) can claim the same expertise, but Equinor seems particularly adept at it.<\/p>\n
Second, the company is two-thirds owned by the Kingdom of Norway, with Norway\u2019s Government Pension Fund Global, also known as\u00a0Norges Bank, owning another 3.59% of the company via\u00a0Folketrygdfondet, which is authorized to invest 85% of its funds in\u00a0Norwegian companies. Not only is the government a particularly patient and committed shareholder, it also has a hand in its portfolio companies\u2019 strategies. The Folketrygdfondet \u201chas an interest in an orderly transition in line with the Paris Agreement\u201d and expects that its portfolio companies \u201cintegrate climate change considerations into policies and strategy.\u201d<\/p>\n
So to recap: Norway reinvests its state-oil company\u2019s revenues back into said oil company, while also helping drive said oil company\u2019s energy transition strategy. As Equinor\u2019s first-quarter results show, all of this effort and coordination has made it possible for an oil company to get half its revenues from renewable energy, at least for now. Other oil majors reaching for that same brass ring will have their work cut out for them, certainly\u2014and may continue to resort to buying assets from each other in their quest to get there.<\/p>\n
Nathaniel Bullard is BloombergNEF’s Chief Content Officer.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"Last week a raft of oil majors released their first-quarter results, with companies like Royal Dutch Shell Plc\u00a0showing a return to pre-pandemic profit levels. At the same time, some of the majors…<\/p>\n","protected":false},"author":1,"featured_media":5575,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8,22],"tags":[46,48,57,68,76,77,82,86,87,90,96,99,103,107,109,111,113,137,139,146,148,160,174,183,184,201,202,209,222,230,232,233,244,246,249,256,262,263,267,277,279,280,285,288],"class_list":["post-5557","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-clean-energy","category-oil-gas","tag-aramco","tag-athens","tag-baroudi","tag-carbon","tag-climate","tag-climate-change","tag-co2","tag-cyprus","tag-decarbonising","tag-democracy","tag-doha","tag-eastmed","tag-egypt","tag-embargo","tag-emissions","tag-energy","tag-energy-peace","tag-gas","tag-gazprom","tag-greece","tag-greenenergy","tag-international-maritime-disputes","tag-lebanon","tag-maritime-boundaries-east-mediterranean","tag-maritime-disputes","tag-offshore","tag-oil","tag-opec","tag-pollution","tag-poverty-alleviation","tag-putin","tag-qatar","tag-rosneft","tag-roudi","tag-russia","tag-saudi","tag-solar","tag-solar-power","tag-straddling-hydrocarbons-reserves","tag-total","tag-trump","tag-turkey","tag-unclos","tag-usa"],"_links":{"self":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts\/5557","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=5557"}],"version-history":[{"count":0,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts\/5557\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/media\/5575"}],"wp:attachment":[{"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=5557"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=5557"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=5557"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}