BP, Shell Renewable Invest Cuts Make Business Sense

Recently, BP slashed 2009 investment in its alternative energy and other non-core business units by almost 30% and Shell says it will make no significant new investments in wind or solar power in the future. Both are maintaining steady investment in oil and gas exploration.

“In the short term, I can understand where they’re coming from,” said Philip Wolfe, chief executive of the U.K. Renewable Energy Association. “The comparative economics have moved against renewables.”
“When (capital expenditure) is under pressure, it’s one of the first things to get dropped,” said NCB Stockbrokers analyst Peter Hutton. “The fact that they have cut back so sharply suggests that investment so far has not remunerated as they expected it to.”

BP has invested $2.9 billion in its alternative energy division since its 2005 launch, 4.2% of total capital investment. Shell has spent about $1.5 billion, or 1.5% of total investment over that period.

Despite this, their daily output of renewable energy is less than one-tenth of 1 percent of their oil and gas production.

BP and Shell are among the top 10 U.S. wind power generators, but in energy terms their output is equivalent to just a couple of thousand barrels of oil per day, the size of a single, very small oil field.

BP’s is one of the world’s largest manufacturers of photovoltaic solar cells,but the output of its factories is equally insignificant in comparison with its oil and gas wells.

In other words, neither company has moved “Beyond Petroleum,” as BP’s current advertising slogan puts it.

Wall Street Journal (through Google News)<