Adds detail throughout
Norway's state-controlled Equinor has outlined plans to increase investment in renewable energy but said it still expects its oil and gas production to grow in the medium term.
In today's strategy update detailing plans to accelerate its transition to a lower-carbon future, Equinor set a goal for renewables and low-carbon solutions to account for over 50pc of its annual investment by 2030, compared with just 4pc last year. The company has also brought forward a target to reach 12-16GW of installed renewables capacity by 2030 from 2035.
It expects the unlevered internal rate of return on its renewables projects to reach 4-8pc, down from a previous target of 6-10pc, but said offshore wind projects in the UK and US could be as high as 12-16pc. The degradation comes as a result of the current market situation and increased competition in mature markets, but Equinor is targeting emerging markets to be at the higher end of the range, chief executive Anders Opedal said today.
Equinor has also set a target to develop its carbon capture and sequestration (CCS) capacity to 15mn-30mn t/yr of CO2 storage by 2035.
Activist pressure on oil firms to accelerate their energy transition plans was highlighted last month when a Dutch court ruled that Shell must sharply reduce its CO2 emissions this decade. Environmentalists say absolute emissions reduction targets will force companies to sell some of their oil and gas assets, delay or cancel hydrocarbon projects or significantly rap up carbon offsets. They argue that targets to bring down carbon intensity — the level of emissions produced per barrel of oil and gas — give firms room to continue growing oil and gas output by adding clean energy projects into the mix.
Equinor has adopted the latter approach. Its strategy already included becoming a net-zero business by 2050. Now it has introduced shorter-term ambitions to reduce its carbon intensity by 20pc by 2030 and by 40pc by 2035.
Equinor has dropped its earlier, explicit guidance to deliver average oil and gas production growth of 3pc/yr until 2026, but said it still sees a rise in oil and gas output in the medium term.
"We are on track towards 3pc annual average production growth towards 2026 based on the portfolio we have, but we no longer have a volume guiding in 2026 as we will focus more on value creation than a volume target," an Equinor spokeswoman said.
New projects coming on stream by 2030 will have an average breakeven oil price of below $35/bl and a payback time of less than 2.5 years, it said.
"In the longer term, Equinor expects to produce less oil and gas than today recognising reducing demand," Opedal said without elaborating. "Significant growth within renewables and low-carbon solutions will increase the pace of change towards 2030 and 2035."
The firm has decided to increase its next quarterly cash dividend to $0.18/share from $0.15/share, but this is still below pre-pandemic levels of $0.27/share. The dividend will grow annually and will be typically announced at fourth-quarter results, Opedal said. Equinor has also introduced a new share buy-back programme of around $1.2bn/yr from 2022, starting with $600mn in the second half of 2021.Last year's oil price collapse forced Equinor to scrap a $5bn buy-back programme that it launched in 2019.
