- Despite a £430m government-backed green transition loan, the Wood Group’s oil business grew by 17% in 2022, while its renewable businesses saw a 35% decline in revenue.
- Shell and BP have revised their emission reduction targets, reducing their ambitions to cut fossil fuel production.
- Without meaningful pushback and with no clear commitment to phase out fossil fuels, achieving substantial progress at COP28 seems unlikely.
Ahead of COP26 in Glasgow, Aberdeen-headquartered Wood Group signed the first-ever government-backed green transition loan. The £430m ($541m) loan for the engineering and consultancy firm was designed to drive the transition away from fossil fuels and support thousands of green jobs.
“Wood has already made great strides in repositioning its business for a low-carbon future,” trumpeted the then international trade secretary Liz Truss who announced the deal.
Majority guaranteed (80%) by UK Export Finance, Wood committed to increasing its clean growth portfolio and significantly reducing its GHG emissions over the five-year tenure of the facility.
Even though Wood’s chief executive, Robin Watson, said at the time there was unstoppable momentum to the energy transition, the company appears to have done its best to shut it down.
An investigation last week by the Guardian newspaper and investigative journalism organisation Point Source found the company had grown its upstream oil and gas business while cutting its interest in renewables.
This was thanks, in part, to a two-year multi-million dollar contract signed with Saudi Aramco – the world’s largest polluter – in December 2021. Wood’s oil business grew by 17% to $3bn last year, while at the same time, it slashed its renewable businesses so that revenues plummeted by 35% to $222.8m in 2022.
While pressure groups are calling for the loan to be re-examined, experience suggests that Wood Group is unlikely to suffer much of a fallout.
Oil be back
Indeed, sustainability is starting to feel quite dated, very 2021. After several years of flying the green flag, there is a sense the fashion for addressing climate change has passed.
Over the past few months, both Shell and BP have scaled back ambitions to cut the production of fossil fuels.
In February, BP’s chief executive, Bernard Looney, rolled back on commitments to cut the energy company’s Scope 1 and Scope 2 emissions by 2030, from 35–40% to 20–30%.
As long expected, its energy rival, Shell, will now do the same. Widely flagged ahead of its capital markets day – an investor event this week – chief executive Wael Sawan will bin its targets to reduce oil output by 1–2% a year.
The company has quietly been pulling back from sustainability for the past few months. It has cut a number of offshore wind, hydrogen and biofuels projects, seemingly nervous about their profitability. For the same reason, it will exit its home retail energy businesses due to poor returns. Its businesses in the UK, Germany and the Netherlands had previously been seen as central to the energy transition.
Sawan, who took over in January, has made it very clear that he has little truck with transition.
“I am of a firm view that the world will need oil and gas for a long time to come. As such, cutting oil and gas production is not healthy,” he said in a recent interview.
In an article in the Telegraph, Adam Matthews, chief responsible investment officer at the Church of England Pensions Board ($5bn AUM), said, “We have lost confidence in the direction of the company.”
It is unlikely to make much of a difference.
A greenwashing exercise?
Earlier this year, Capital Monitor argued that it made no sense to shut the petrostates out of the sustainability conversation. But hopes are evaporating around this year’s COP28 meeting in Dubai, with concerns that it won’t be anything other than a PR exercise in greenwashing. To paraphrase an infamous saying: When one climate change sceptic sits down with nine sustainability experts, and no one leaves… you have ten climate change sceptics around the table.
Research published last week by Corporate Europe Observatory and Corporate Accountability warned how the oil majors have been flooding climate talks with lobbyists.
Since the Paris Agreement was signed at COP21 in 2015, the five oil and gas majors – Shell, BP, ExxonMobil, Chevron and TotalEnergies – have brought 403 lobbyists to the UN climate talks to push their agenda.
They are unlikely to receive any kind of pushback from Sultan Ahmed al-Jaber, minister of industry and advanced technology of the UAE, chief executive of state oil giant Abu Dhabi National Oil Company (Adnoc) and president of this year’s meeting, who has been trying to polish his image by any means possible.
His team has been accused of greenwashing his Wikipedia entry to emphasise his support of sustainability and to remove details of oil deals, and it has been reported that legions of fake accounts on Twitter have been set up to support of al-Jabr enthusiastically.
To be fair, any pretence of sustainability at Adnoc had always been slight. The group has committed to reducing the intensity of only its operational greenhouse gas emissions by 25% by 2030, saying it is heading towards net-zero emissions by 2050.
It doesn’t even publish a sustainability report. More to the point, in November last year, Adnoc brought forward the group’s oil production capacity expansion to 2027 with a $150bn investment.
Writing for the Abu Dhabi-based National newspaper over the weekend, Mahmoud Mohieldin, the UN climate change high-level champion for Egypt and executive director at the International Monetary Fund, called for “ambition and resolve” to deal with the social implications of the energy transition.
It misses the point. At no moment did he mention cutting oil production.
This week, CDP revealed that we are already too late. The global non-profit showed just 52% of FTSE 100 companies are on track to meet their emissions reduction targets. This is not enough to reduce emissions to limit warming to 1.5°C.
As long as COP28 remains in the hands of a fossil fuel chief executive and there is no agreement on whether the phaseout of fossil fuels will be on the agenda, there is no hope for anything other than hot air.
[Read more: Oil engagement: Shutting out the petrostates won’t help]
