The Greening of the European

Petroleum Industry
Atle Midttun 1, Marina Khanieva, Magne Lia, Eivind Wenner 2

Abstract
This article analyses the European petroleum industry’s climate engagement over the two first

decades of this century. It studies strategic visions and business models, alongside revenue streams

and investment patterns, in the five largest European petroleum companies. The analysis shows how

the European petroleum majors, starting from ‘climate negligence’, gradually moved into ‘clean

petroleum’ and ended up with visions of ‘net zero’ transition out of oil and gas, while revenue streams

remained almost exclusively petroleum-based. It displays how the gap between economic realities and

professed climate strategy responds to contradictory signals from politics and markets. While

European politicians stepped up expectations for radical CO2 reduction, markets supported petroleum.

Companies therefore adjusted climate-strategic visions to political pressure for legitimacy, while

adapting commercial practice to profits from oil & gas markets. Finally, we demonstrate how policy

and markets could be better realigned. For example, the EU’s Green Deal, in tune with declining costs

of renewables and rapidly increasing CO2 prices, presents interesting paths towards profitable

greening. Early moves from pioneering petroleum companies demonstrate that it can be done.

However, greening European energy production is not enough. Climate effects will only come if

consumption follows suit.

1
Corresponding author: atle.midttun@bi.no

2 Credit Author Statement

• Atle Midttun: Conceptualization, Methodology, Formal analysis, Investigation, Data Curation, Visualization, Writing - original draft, review & editing, Funding
acquisition
• Marina Khanieva: Investigation, Data Curation
• Magne Lia and Eivind Wenner Formal analysis, Visualization, Data Curation, Investigation

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1 INTRODUCTION

1.1 BACKGROUND

The climate crisis has heaped pressure on the fossil industry to undertake a ‘green transition’, and

European policymakers – as climate policy front-runners – have been at the helm of this development.

Following a long trajectory of global climate conferences, from Rio in 1992 to Kyoto in 1997 to

Copenhagen in 2009, Paris in 2015 and Glasgow in 2021, climate concerns have steadily intensified

year by year. The lingo is now ‘net zero’ CO2 in two or three decades which is also trickling down

into the fossil industry itself.

At the same time, markets have rewarded European gas and oil players. Petroleum is still massively

dominant in European transport markets, and gas continues to be a prime source of heating and

electricity generation. In addition, gas and oil prices have bounced back after Covid vaccination,

giving petroleum companies record profits.

In this situation, petroleum companies have found themselves torn between radicalized EU greening

policies on the one hand, and petroleum-stimulating markets on the other. Predictably, they have

responded with a combination of green strategic rhetoric while reaping revenue from petroleum-

focused business practice.

1.2 OBJECTIVES

Our objective is to shed light on petroleum industry’s responses to signals from markets and politics,

particularly when the signals go in different directions. By studying the evolution of climate related

business strategic vision and commercial practice in the five largest European petroleum companies

over the first two decades of the 21st century, we attempt to show how they meld green strategic

repositioning with visionary and motivational communication. We display how they have tried to

mobilize acceptance and support from political stakeholders, while responding to European climate

policy front-runnership.

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At the same time, however, it has been clear that market realities are tying the companies to

traditional petroleum operations. This is where they get their dominant revenue streams, and where

many financial investors expect return on their capital. Against this background the paper discusses

ways to align policy with markets and business strategies in order to foster green transition.

1.3 CONTRIBUTION TO THE ENERGY POLICY LITERATURE

The study contributes to the energy policy literature in several ways. It shows how policy

implementation in a major energy sector is critically dependent on avoiding contradictory

asymmetries between policies and market signals. Policy without market-moving capacity risks

becoming stranded or provoking accusations of hypocritical greenwashing on the part of the industry.

This paper argues that there is a need for market-forcing follow-up of ambitious policies in order to

trigger serious business reactions. Otherwise, one may see fine formulations but little action.

To this we may add the importance of court interventions in implementing green transition. The paper

shows how the courts have become a novel factor for pushing for consistency between politics and

market implementation. As courts press policymakers to engage in market-forcing implementation to

support their climate goals, they reduce the discrepancy between policy goals and market realities,

thereby enhancing the opportunity for businesses to align visions of climate strategy with commercial

practice.

However, the climate effects from transition out of petroleum, we argue, will only be realised when

they are reinforced by a parallel shift of consumption out of carbon, thus avoiding surface ‘greening’

through asset swaps without CO2 reduction.

2 BACKGROUND AND LITERATURE REVIEW

In a historical overview article on the oil industry and decarbonization, Marten Boon (2019) has

outlined the evolution of climate policy in the US and Europe and the oil industry’s responses over

more than a quarter of a century. He shows how the oil industry first reacted with climate scepticism,

but then gradually adopted more ‘climate friendly’ positions, spearheaded by Shell and BP. However,

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despite European climate policy activism, Boon argues the continued growth of fossil fuel demand,

the industry’s vested interests, and the voluntary nature of climate governance have resulted in the

industry taking very little meaningful action to achieve decarbonization.

2.1 THE MANAGERIAL PERSPECTIVE

Boon’s critical analysis of both markets and politics is challenged by a number of studies in the

environmental management tradition that advance a more optimistic view. Much of this literature puts

the business case of environmental engagement, pointing out how, in various ways, industry may

stand to gain commercially from it. Studies by Hart (1995) and Russo & Fouts (1997), for example,

highlight the relation between proactive environmental strategies and enhanced competitive

performance. Similarly, The World Business Council for Sustainable Development (WBCSD),

founded by business leaders in 1992, argued for a sustainable business case that was eco-efficient and

produced win-win outcomes.

The environmental management literature falls in line with a strong trend of corporate social and

environmental responsibility (CSR) from the late 1990s onwards. The fact that CSR and sustainability

have penetrated into most business disciplines is an indicator of their significance. Accordingly, the

business case has been argued in terms of strategy (Porter and Kramer (2011), stakeholder

participation (Freeman 1984), accounting (Elkington), finance (Emerson 2003), marketing (Kotler et

al. 2010), logistics (Barrientos et al. 2011) etc.

However, while CSR and sustainability may add green and prosocial elements, they are far from

sufficient to achieve massive green transition on their own. Some sustainability pioneers may find a

business case for driving radical green transition. Still, for companies serving mainstream markets the

pure business case won’t be enough to provide the incentives for green transition (Midttun 2022).

2.2 THE CIVIL SOCIETY PERSPECTIVE

The EU’s climate front-runnership has indeed been strongly supported by a vibrant civic engagement,

which has also targeted petroleum industry. As argued by Lazarus and Asselt (2018), climate activists

are increasingly focusing on the supply side of the fossil fuel economy and protesting against new

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fossil fuel supply infrastructure (Piggot 2018). Civil society organizations such as Climate Action

Network Europe, Friends of the Earth Europe, Greenpeace Europe, WWF’s European division and

many more are strongly engaged in ending the fossil era in Europe.

While having only indirect access to power, civil society may nevertheless exert powerful influence.

The British-Australian political scientist, John Keane, has gone so far as to speak of a novel channel

for bottom-up “monitory democracy” (Keane 2013), where, empowered by digital communication,

watchdog groups, CSOs, and local communities subject government and business to scrutiny. Such

civic pressure from environmental stakeholders is likely to have wielded a strong pressure on the

European petroleum industry to consolidate its green profile.

2.3 THE POLICY PERSPECTIVE

The intimate ties between public policy and business strategy have been widely recognized in the

public policy and political economy literature on the oil industry and its climate challenge. Comparing

US and European companies, Skjærseth & Skodvin (2001), as well as Levy and Kolk (2002), argue

that persistent differences between oil companies’ climate strategies have more to do with the

differences between the US and European policy context than with company-specific factors.

In the US, in spite of climate-friendly initiatives under Democratic leadership like the Clinton-Gore

presidency, climate policy initiatives were curtailed by strong opposition in Congress following active

lobbying from fossil-fuel industry. Such lobbying was central to Congress effectively blocking

climate policy by a unanimous vote – the Byrd-Hagel resolution – in the Senate in 1997 (Levy and

Kolk 2002).

The EU, on the other hand, pressed by a vibrant civic engagement, pushed ahead with an ambitious

climate policy. Skjærseth and Skodvin (2001) argue that through the increased use of rules based on a

qualified majority and more involvement by the European Parliament in decision-making, the EU was

less accessible to oil-industrial lobbying than the US government. Furthermore, they point out that the

change in EU climate policy from taxes to burden-sharing, renewables and flexible mechanisms

diminished European companies’ resistance to greenhouse gas measures. The development of market-

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based emission trading in the EU, following on from Shell and BP’s voluntary initiatives, has also

served to build industrial support.

That said, prominent international regime scholars have also emphasized the role and influence of

corporate actors in international environmental policy (Levy et al. 1995), to which we may add the

civic dimension which complicates matters even further. The challenge facing the European green

front runner policy position – inspired and pressured by an energetic climate-focused civil society – is

that strong regulatory follow-up has, until recently, failed to keep pace. The European petroleum

industry has therefore met with high policy ambitions, but limited market-forcing regulation.

2.4 FACTORS SHAPING THE EUROPEAN OIL AND GAS INDUSTRY’S CLIMATE ADAPTATION

To sum up, the previous perspectives point to two central factors shaping the European petroleum

industry’s climate adaptation: 1) EU climate policy front-runnership and 2) market conditions for

petro-industrial operations. The first factor, stimulated by civic mobilization, pushes for green

transition at the visionary strategic level, while the second continues to reward business as usual at the

commercial level. As this article shows, the petroleum industry has responded by embracing both,

leaving it in an inconsistent position (figure 1): On the one hand, it has undertaken a dramatic

strategic refocusing firstly towards clean petroleum and subsequently beyond, aiming at net zero CO2

emissions. On the other hand, it has continued to pursue business operations very much as usual, with

very moderate plans for major change.

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Figure 1: Factors shaping the European oil and gas industry’s climate adaptation
Source: Authors

This article presents and analyzes the contradictory position that European petroleum industry now

finds itself in and suggests policy approaches and business strategy advances out of the dilemma.

3 METHODOLOGY

Our study of European petroleum majors adapting to contradictions between European front runner

climate politics and commercial/economic market signals entails bringing together data/information

on the four dimensions of the model: 1) refocusing of strategic visions as seen through letters to the

shareholders; 2) petroleum-business operation as seen through quantitative indicators; 3) market

conditions for petro-industrial operation as seen through indexes and price indicators, and 4) EU

climate policy front-runnership as seen through policy documents and civic initiatives. To cover this

wide span, the article adopts a mixed method approach, where the different methodological angles

complement each other.

REFOCUSING OF STRATEGIC VISIONS SEEN THROUGH LETTERS TO SHAREHOLDERS

The review of corporate climate strategic visions through the first two decades of the 21st century is a

central part of this inquiry. At its core we have examined top managements’ letters to shareholders in

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annual reports, supplemented by other top-level communication in the five largest European

petroleum companies during the 20 year period. These letters/statements represent high-level strategy

statements, signaled at the top level of the firm. Since they appear in four out of five companies, they

provide a general basis for comparative analysis. For Total, which does not have letters from top

management in its annual reports, we have instead analyzed their brief strategy section.

The review is undertaken as a narrative interpretative analysis, drawing on a number of inspirations

(Bruner 1993, Lotman 1990, Witoszek 2020). The narrative lens frames the letters to shareholders as

examples of stories telling both the senders and the recipients what they are and where they are going.

That is to say it focuses on the petroleum company’s presentation of itself and its strategic outlook for

the future, with a particular emphasis on the climate challenge.

The diachronic analysis, examining the letters over a 20-year period, allows us to identify novel

emergent narratives or counter-narratives, and the way they are fitted into the dominant story, to

finally become solidified as the new main story.

For interpretative contextualization, the narrative analysis of top managements’ strategic visions

draws on the literature review and works in synergy with the discussions on policy, economic

organization and markets in this article.

We document the evolution of the petroleum industry’s visions of climate strategy through

authoritative quotes from CEOs and Board chairs in their letters to the shareholders of each company.

However, given the constraints of the article format, we can only selectively include typical

statements in the main text. Supplementary documentation from the other companies in our analysis is

given in the appendix.

3.2 THE COMPANIES

The scope of the article is limited to the five largest European oil and gas companies in order to keep

the analysis within manageable boundaries and yet provide an overview of the dominant strategic

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picture in Europe. Shell, Total, BP, Equinor and Eni are all major companies with market

capitalization and revenue streams from close to 200 billion USD down to around 50 billion (table 1).

With the exception of Equinor – which is dominantly engaged offshore from its home base in Norway

–the European petroleum-majors hold their reserves and operations around the world, reflecting the

colonial pasts of their home countries (table 1 last column)

Table 1
The European oil and gas majors and two green front runners
COMPANY MARKET REVENUE DEPOS RELATIVE LOCATION OF HYDROCARBON
CAP (1) STREAM ITS/ GAS RESERVES (5)
Bill Usd (2) RESER SHARE 2020 (4)
Bill Usd VES (3)
Bill Boe
Shell 181.56 180.5 9 52 % Dominantly in Asia (45%), South
America (11%), Canada, USA,
Oceania and Africa
Total 138.01 140.7 12 50 % Dominantly in Russia, Nigeria, UAE,
Norway
BP 97.62 198.9 18 45 % Dominantly in the Middle East (25%),
CIS (15%) (6)
Equinor 89.92 45.8 6 54% Dominantly in Norway (72%) + US,
Eurasia, Americas (excl. US) and
Africa
Eni 51.73 51.3 7 52% Dominantly in Asia (46%) Oman,
Russia, UAE and Vietnam; Africa
(38%) Kenya and South Africa; and
Europe (12%), Norway
Ørsted 46.81 11.76 (7)
Neste 39.1 13.24 (8)
Sources:
(1) Value today; (2) Annual reports 2020; Statista 2022; (4) and (5) Annual report 2020; (6) CIS 2022;
(7) 2020 figures: 50,151 mill DKK = 7,596 mill USD (currency conversion at 1 DKK = 0.15USD
(8) 2020 figures: 11,751 mill Euro = 13,246 mill USD (currency conversion at 1 Euro = 1.13 USD)

In addition, two climate pioneer ex-petroleum companies – Ørsted and Neste – are brought in as

benchmarks (Ørsted 2021; Neste 2021). These two companies are interesting and relevant because,

departing from wholly petroleum-based feedstock, they have managed to move into the renewable

energy economy at impressive scale and success. The fact that they have succeeded in reinventing

themselves as respectively offshore wind and biofuel companies – though for Neste with a

considerable remaining hydrocarbon base – has given them prominence on green business rankings3.

3
Ørsted is ranked seventh on the HBR list referred to as “the Top 20 Business Transformations of the Last
Decade”. It's the only energy company included in the list, and the only European company in the top 10.
Among the other top 20 are companies such as Amazon, Microsoft, and Netflix (referred to on Ørsted’s

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3.3 QUANTITATIVE INDICATORS OF PETROLEUM BUSINESS OPERATION

The qualitative textual analysis at the basis for our analysis of the companies’ strategic visions is

complemented by a quantitative analysis of their industrial climate-related commercial practice

focused on data from annual reports, combined with available statistical information from open

sources.

To indicate the actual ‘greening’ in practice, we have calculated the share of revenue from “green

engagements” compared with revenue from petroleum activities. With the exception of Eni it is so

marginal that, in 2020, the companies did not feel the need to single it out as a separate item. We have

also included investment plans for renewable energy production as an indicator for operative climate

strategy going forward. In addition, we have included profit margins to indicate the relative

attractiveness of the European petroleum majors benchmarked against normal industrial profit based

on EBITDA margin4 (for further details see Annex).

3.4 MARKET CONDITIONS FOR PETRO-INDUSTRIAL OPERATION

To indicate the relative petroleum-friendliness of markets relative to ‘green’ energy, we have

compared the average share price development of our five European petroleum majors to Erix, the

European green index. Furthermore, we have benchmarked the petroleum majors to European

industry in general, as represented by the MSCI industry index for Europe (for further details see

Annex).

3.5 EU CLIMATE POLICY FRONT-RUNNERSHIP

To document the EU’s front-runner role, the article reviews numerous communications of goals, plans

and negotiating positions, as well as literature explaining the EU’s front-runnership. In addition to the

homepage). In 2021 Neste was declared the world's fourth most sustainable company on the Global 100 list.
Inclusion on the list marks the company’s 15th consecutive appearance on the Global 100 list; it has been
included on the index continuously for longer than any other energy company in the world.
Although they are smaller than the five European petroleum majors with only around 15% (Ørsted) and 24%
(Neste) of Eni’s revenue, Ørsted and Neste have been warmly received in the capital markets, with a market
capitalization of respectively 90% and 75% of Eni’s, 47% and 40% of BP’s (table 1).

4
The EBITDA margin is a measure of a company’s operating profit as a percentage of its revenue. The acronym
EBITDA stands for earnings before interest, taxes, depreciation, and amortization.

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policy documentation, we have also included recent civic engagements through European court

interventions pushing for climate front-runnership in the EU’s largest economy, Germany, as well as

in the EU’s largest petroleum company, Shell.

3.6 OUTLINE

The evolution of strategic visions in the five largest European petroleum companies – a core element

of our study – is reported in the following section on the evolution of the petroleum industry’s

business strategy. The other three elements in our analysis are brought directly into the discussion

section and further documented, where necessary, in the appendix.

4 EUROPEAN PETROLEUM MAJORS GOING GREEN

4.1 THE TRADITIONAL PETRO-INDUSTRIAL NARRATIVE

The petroleum industry constitutes one of the major industrial clusters of the 20th century. It

encompasses a complex value chain of upstream, midstream and downstream operations (figure 3)

each with their own operational peculiarities, organizational sub-story and financial flows.

The upstream segment consists of exploration, development, and production of oil and gas. The

midstream segment of the oil and gas business concentrates on the processing, transportation, and

storage of crude oil and natural gas. At the end of the petroleum value chain, the downstream segment

of the oil and gas industry includes the refining of crude oil into consumable products and the

marketing of these products to commercial or retail end users.

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Figure 2

The traditional narrative of the petroleum majors5

The European petroleum majors started the 21st century with the basic petro-industrial narrative as a

strategic focus and a core anchor for their activity. This comes across in several vision statements and

top management messages.

Shell, for instance, started the millennium flagging performance excellence both in upstream

exploration and production and in the downstream refining and marketing segments. This was clearly

reflected in the company’s “vision” in the 2005 annual report (Shell AR, 2005):

The objectives of the Shell Group are to engage efficiently, responsibly and profitably in oil,

oil products, gas, chemicals and other selected businesses and to participate in the search for

and development of other sources of energy to meet evolving customer needs and the world’s

growing demand for energy.

5
Authors’ drawing, building on presentations of the petroleum industry in Eni’s 2018 annual report, p 7.

12
Another example is Total which proclaimed similar anchoring in the broad petro-industrial narrative,

accompanied by growth strategies across the board (Total AR, 2006), to:

• grow its hydrocarbon exploration and production activities throughout the world….

• develop and adapt its refining system and consolidate its position in the marketing

segment in Europe, while expanding its positions in the Mediterranean basin, the African

and the Asian markets;

• grow its petrochemicals business, particularly in Asia and the Middle East, while

improving the competitiveness of its operations in mature areas

Similar statements were made across the European petroleum industry (see further documentation in

the appendix). The strategic ambition of European oil-majors at the turn of the millennium was, in

essence, clearly to integrate the value chain, expanding efficient exploration, production, refining and

retailing of hydrocarbons. International oil companies such as Shell, BP, Total and Eni all benefitted

from access to petroleum resources in former colonies, while Statoil emerged primarily as a vehicle to

exploit Norwegian offshore resources. However, they all shared ambitions to extend and control the

integrated value chain, and to develop scale and scope for synergies and efficient operation.

4.1.1 MERGERS AND ACQUISITIONS THAT CONFIRMED THIS PATTERN

Major mergers at the turn of the century cemented the petro-industrial architectural design. To

mention just a couple: The British Petroleum merger with Amoco in December 1998 consolidated the

integrated petroleum company in one of the largest mergers to date (Corlay and Huby, 1999). Total’s

merger with Belgian PetroFina, and subsequently with Elf, represented another set of mega-mergers

consolidating the petro-industrial architecture (Total AR 2012).

These mergers were made to gain synergies, scale and scope in a steadily consolidating petroleum

market. However, they were also driven by a desire for presence in the whole chain, which

characterized petro-industrial strategizing at the time.

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4.2 CLEAN PETROLEUM: ACCOMMODATING CLIMATE INTO THE PETRO-INDUSTRIAL

NARRATIVE

In the second decade of the 21st century, the petroleum industry – and its traditional narrative – came

under increasing strain. The pressure for taking fossil fuels out of the economy trickled down from an

increasingly sustainability focused European environment, as the EU consolidated its role as a climate

front-runner and exerted mounting pressure on fossil-based industries to lower CO2 emissions (EC a

nd). The Commission reflects attitudes from many of the oil & gas industry’s core stakeholders,

including political parties and civil society organizations.

The response from the European petroleum industry came in terms of a clean petroleum agenda. As

announced in the annual reports of the European petroleum majors, this included decreasing flaring,

reducing methane, and increasing the relative weight of gas in the portfolio in order to shrink CO2

levels. It also included adding on biofuel, carbon capture and sequestration, as well as appending

minor engagement in renewables like wind and solar to the portfolio as indicated in green boxes and

circles in figure 3.

Figure 3

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The clean petroleum narrative6

Large parts of the clean petroleum narrative were compatible with the petro-industrial framing, in so

far as these changes were supposed to adjust it to lower CO2 emissions without attacking its petro-

industrial core. The parts that pointed in an alternative direction, such as renewables and biofuel, were

kept at a low level and barely affected the core business.

To take Eni as an example, the Chair’s/CEO’s letter to the shareholders in 2014 flagged reduction of

flaring as a major initiative to green their petroleum production:

In the future, we will pursue ambitious targets, especially in reducing greenhouse gas

emissions where we are planning for a 50% reduction in gas flaring in the next four years and

for optimizing water reuse. (Eni AR 2014)

In the 2017 letter, the targets for the reduction of flaring were stepped up and methane emissions were

added:

In the upstream business, we have designed initiatives to achieve the ambitious 2025 targets

of zero flaring gas, corresponding to a reduction of 43% from 2014 baseline of the emissions

per barrel produced and 80% of the fugitive emissions of methane. (Eni AR 2017)

In the same letter Eni also announced increased focus on biofuels.

Like Eni, Shell also bought in to the ‘clean petroleum’ agenda through engagement in biofuels and

carbon capture and storage.

However, the main operative engagement for ‘clean petroleum’ was Shell’s turn towards gas:

Natural gas, the cleanest burning fossil fuel, is central to our long-term business strategy.

Shell is a major supplier of natural gas that powers homes and businesses………When used to

6
Authors’ drawing, building on presentations of the petroleum industry in Eni’s 2018 annual report, p 7.

15
 displace coal in electricity generation, it could reduce CO2 emissions by about half.

Chairman’s letter (Shell AR 2012)

By linking Shell’s climate strategy strongly to gas, the company created a sustainable link between

the overarching petro-industrial framework and the climate challenge. At least for the medium term,

gas could be promoted as a ‘transition fuel’ allowing power generators to abandon more CO2

intensive alternatives, such as coal and diesel.

Similar statements were made across the European petroleum industry (see further documentation in

the appendix)

4.2.1 THE CLEAN PETROLEUM BUSINESS MODELS

The clean petroleum business models mostly leave the fossil fuel-based value chain intact, with green

cleansing added on to limit CO2 emissions in petroleum exploration and production. Even as late as

2020, the revenue streams of the European petroleum majors were almost completely petroleum-

based, with little sign of renewables playing any substantial role (table 2). Eni, the only company

reporting on renewables, derived only 0.3% of its revenue from this source.

Table 2 Revenue Streams for European Petroleum Majors

BP (USD billion) Shell (USD billion)

Upstream 34.2 Integrated gas 33.3
Downstream 163.0 Upstream 6.7
Other Business & Corporate 1.7 Oil Products 128.7
Chemicals 11.7
Total 198.9 Total 180.5

Total SE (USD billion) Equinor (USD billion)

Exploration and production 5.0 Exploration and production 11.9
Norway
Integr. Gas, Renewables & Power 15.6 E&P International 3.5
Refining & Chemicals 56.6 E&P USA 2.6
Marketing & Services 63.5 Market. Midstr. & Process 44.9
Other 0.4
Eliminations -17.5
Total 140.7 Total 45.8

Eni (USD billion)*

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 Exploration and production 15.5
Gas & LNG 8.1
Refining, Markeing & Chemicals 28.8
EGL 6.9
Power 2.2
Renewables 0.16
Total 51.3
*Reported in Euro, 1 Euro = 1.142 USD (avg 2020)

Source: Company annual reports 2020.

The transition to gas, which was also central to the clean petroleum business model, apparently fared

better. However, after a successful shift in the first decade of the 21st century, the gas-transition

ground to a halt and the second decade saw little or no further development (table 3). Paradoxically,

this slowdown happened as the ‘clean petroleum’ rhetoric intensified.

Table 3: Transition to gas among European petroleum majors

Relative Shell BP Total Equinor Eni

share of gas
production
2000 45% 42% 38% 20% 34%
2010 56% 50% 46% 51% 53%
2020 52% 45% 50% 54% 52%
Source: Rystad Energy, UCube (nd)

The reduction of flaring has had some effect on CO2 emissions, particularly in countries like Norway

and the UK because of mandatory policy, but the effect of renewables was more or less symbolic, as

indicated in the subsequent figure 4.

The most striking greening effect in the petroleum industry took place by the addition of biofuels

promoted through mandatory public policy. In 2008 the EU had a share of biofuel in transport fuels of

close to 4% (EEA 2017) with considerably higher levels in countries like Slovakia, Germany, Austria,

France and Sweden. This primarily affected the downstream part of the value chain (refineries and

retailing).

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R&D engagements in carbon capture and storage/utilization (CCS/U) – and so-called blue hydrogen7

– gradually also became part of the clean petroleum agenda, but only at the research level, with

implementation postponed to a distant future.

4.3 RADICAL TRANSITION TO ZERO CARBON

Following the ratification of the Paris agreement in 2016, BP, together with other European petroleum

companies, moved from climate-adjusted ‘business as usual’ strategies towards accepting the need for

more comprehensive transformative action. In 2019 and 2020 European petroleum majors thus

announced transformative re-orientation that openly challenged the traditional petro-industrial

overarching narrative, and in some cases explicitly replaced it.

Replicating EU policy goals, European petroleum majors took on board zero CO2 emissions by 2050,

and thereby declared a moratorium on their traditional core business a few decades down the line.

BP’s announcement came in spring 2020, and the others soon followed suit.

In BP’s 2019 annual report, both the chairman of the board and the CEO announced the change of

direction in euphoric terms:

We enter a new decade with a new company purpose: to reimagine energy for people and our

planet. We have also set a new ambition: to become a net zero company by 2050 or sooner,

and to help the world get to net zero. … BP is now set for a future that is different to its past

(Chairman’s letter, BP AR, 2019)

Similar visions of a major shift out of petroleum came from the other petroleum majors. Equinor’s top

management declared that:

7
Blue hydrogen is when natural gas is split into hydrogen and CO2 either by Steam Methane Reforming (SMR)
or Auto Thermal Reforming (ATR). The CO2 is captured and then stored.

18
 … The biggest transition our modern-day energy systems have ever seen is underway, and

Equinor is well positioned for the changes that need to take place… (Chair’s letter, Equinor

AR, 2019).

And Shell followed suit:

Shell has set challenging emissions targets. In 2020, we announced our target to become a

net-zero emissions energy business by 2050 in step with society. (Chair’s Message, Shell AR,

2020)

Similar declarations by the other petroleum majors followed (see further documentation in the

appendix), and it is interesting to note that even East-European petroleum companies, PKN Orlen

(Poland) and MOL group (Hungary) jumped on the bandwagon in repositioning themselves for green

transition – in the Polish case way ahead of the government:

PKN ORLEN is the first oil company in Central Europe to declare an aspiration to achieve

emission neutrality by 2050 (PKN ORLEN 2020).

MOL Group’s future plans target to be in line with the European Union’s Green Deal ambitions

to become a net zero CO2 emitter by 2050 on all scopes (MOLGROUP 2021 nd)

4.3.1 ORGANIZATIONAL REALIGNMENTS

Re-narrating the petroleum industry out of the traditional petro-industrial architecture towards climate

compatibility was not only a matter of strategic re-orientation, but also of industrial organization.

In BP the radical transition was seen as “Reinventing BP”:

This performance is even more remarkable given that we have been carrying out the most

extensive reorganization in bp’s 112-year history. We have retired the upstream/downstream

business model that has served bp very well. (CEO letter, BP AR, 2020).

Also in Eni we see a reorganization out of the traditional overarching petroleum narrative:

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 ….. in June 2020 we reshaped Eni’s organization by setting up two new Business Groups:

Natural Resources, which will maximize the value of Eni’s Oil & Gas upstream portfolio from

a sustainable perspective, with the objective of reducing its carbon footprint by scaling up

energy efficiency and the development of projects for the capture and storage of carbon

dioxide…. (Chair & CEO Letter, Eni AR, 2020).

Similar statements were made across the European petroleum industry (see further documentation in

the appendix).

4.3.2 COMPENSATORY COMPROMISES

The petroleum majors have, however, cushioned their radical transition by interim arrangements

designed to assure investors of continued economic returns. Total, for instance, has been cautiously

guarded and has integrated the net zero strategy into a wider production context:

Total’s strategy aims to transform itself into a broad energy company by profitably growing

energy production from LNG and electricity, the two fastest growing energy markets ……The

execution of a profitable growth strategy in these promising businesses (gas, renewables &

power) is helping to achieve the Group’s ambition to get to Net Zero by 2050 together with

society (Business overview, Total AR, 2020).

Likewise, Shell’s top management sought to balance its zero-emission ambitions with revenue-

generating conventional production. The company explicitly pointed out that this revenue is necessary

to finance the green transition:

We already have the kind of portfolio that other companies are trying to build. We can invest

where we will be competitive, for example, in integrated power, hydrogen and low-carbon

biofuels. We will also continue to supply oil and gas because the world will need both for

years to come. Our Upstream business will help give us the financial strength to invest in low-

carbon sources of energy (Chair’s Message, Shell AR, 2020).

In Equinor the balance was clearly established by a declared engagement for growth in petroleum:

20
 Equinor continues to optimise the oil and gas project portfolio, with new projects to be

sanctioned in 2021-2022 having an average breakeven oil price of around USD 30 per barrel.

Based on this competitive portfolio, Equinor expects production growth in oil and gas

(Chair’s Message, Equinor AR, 2020)

Analogous statements were made across the European petroleum industry (see further documentation

in the appendix)

4.3.3 CONTRADICTORY LOGICS

While ‘clean petroleum’ was somehow consistent with the narrative of petroleum industry as a green

sub-story, net-zero greening clearly transcends it. Taken seriously this transformative ambition

presupposes radically new roles for the petroleum industry going forward. As yet, however, the net-

zero transition outlook remains a recipe for contradiction between two mutually exclusive logics – a

logic based on the traditional petro-industrial narrative on the one hand and a radical vision of green

transformation on the other, and where investment in emergent green initiatives is so low they are

nowhere near bridging the two.

One indication of the contradiction is that the shift from oil to gas, announced under the ‘clean

petroleum’ agenda has not been reinforced under the net zero transition outlook. The gas share from

2020 is at best only marginally increased, but more often decreased or constant in planned production

for 2030 and 2040 (table 4):

Table 4: Transition to Gas Among European Petroleum Majors Looking Ahead

Relative Shell BP Total Equinor Eni

share of gas
production
2030 52% 46% 47% 51% 52%
2040 54% 47% 46% 50% 52%
Source: Rystad Energy UCube (nd)

Furthermore, the renewables portfolios are more or less symbolic, and are envisaged to be minimal for

the coming planning horizon (10-15 years) in the 2020 annual reports. The renewables investment

21
plans announced are between 20 and 50 GW. As shown in figure 4, this entails only between 1.5%

and 3.5% of total energy production.

Figure 4: Projected Installed Renewable Energy Production as Share of Total Production (b)

Source: Company annual reports, Rystad Energy UCube (2021)

For details on calculations, see Annex 1

Even if it is ramped up somewhat – Equinor has, for instance, adjusted its goal of 12-16 GW installed

capacity from 2035 to 2030 – the limited engagement in renewables is paralleled by extensive

investments in petroleum assets, according to the traditional petro-industrial narrative. While

proclaiming green transition the companies have still been launching large petroleum investments. In

2018, BP bought U.S. shale oil assets worth $10.5 billion (New York Times 2018). Equinor acquired

large shares in conventional exploration fields in Eastern Siberia (AR, 2020), while Shell acquired a

50 percent interest in three Colombian deep-water oil and gas blocks in 2020 (Offshore Engineer,

2020). And these are just a few examples.

22
The dominant petroleum revenue streams have apparently created a lock-in that prevents

consolidation of an integrated green transition for European petroleum majors for decades to come.

As previously indicated in table 2, renewables are still – in 2021 – too insignificant to be specified,

and the revenues are heavily related to the classic petro-industrial business models.

5 DISCUSSION

The contradiction between European petroleum industry’s green strategy proclamations and its

massive reliance on petroleum revenue, is, as we have seen, striking. At the core of this inconsistency,

we have shown, are contradictory signals from politics and markets. While the EU took an early

policy front-runner role, and thereby started exerting political and normative pressure for green

transition, market-forcing policy implementation lagged behind. European market signals therefore

remained far more conducive to business as usual.

We have shown how, caught between a rock and a hard place, the petroleum industry attempted to

respond simultaneously to contradictory demands from politics and markets – green refocusing at the

strategic visionary level to align with political and civic expectations, and very much petroleum

business as usual at the operative level, responding to market signals. The continued expansion in

petroleum, while half-way preparing for a transition to green energy, has deepened the dualism, and

the European petroleum industry thereby finds itself being torn, with a fragmented narrative and

inconsistent practice.

23
5.1 THE PRESSURE OF EUROPEAN FRONT-RUNNERSHIP

It is easy to understand why the European petroleum industry felt compelled to adjust its strategic

visions to policy. The pressure from European front-runnership has been massive, at the level of

goals and proclamations, and it has escalated over time. It started as early as the 1990s, when the EU

responded swiftly to the first summary report of the Intergovernmental Panel on Climate Change

(Conference of Parties 1, 1995) and European leaders agreed to stabilize greenhouse gas (GHG)

emissions of the European Community at 1990 levels by 2000. Then at the climate summit in Kyoto

in 1997 the EU pushed strongly for setting quantitative GHG emission targets, committing to

substantive reduction during the commitment period 2008-2012.

The green signals from politics were stepped up as the EU continued to build its front-runner position.

In 2007 the EU launched three targets, referred to as “20-20-20 by 2020”, including a target on GHG

emissions, renewable energy and energy efficiency (EEA 2021). The climate ambitions were further

tightened in 2014 when the European Commission agreed on a new target framework for 2030, where

the targets were scaled up considerably to include a 40% GHG reduction (EC 2021).

Except for biofuel, where the EU gradually pushed for increasing admixture shares at the petrol pump,

the lofty goals were not translated into operative market-forcing implementation compelling the

petroleum industry to initiate – and sustain – a green transformation. The EU front runner climate

policy had therefore placed the European petroleum industry under a strong normative pressure, but

without a corresponding push for market-driven implementation. This normative pressure for green

transition was backed up by even stronger ambitions from civil society stakeholders, such as from the

more than 170 member organizations of the European Environmental Bureau (EEB, 2021)

In this situation the petroleum industry apparently felt compelled to respond by adjusting its strategic

visions, as indeed both institutional theory (DiMaggio & Powell, 1983) and stakeholder theory

(Freeman, 1984) would lead us to expect. The pressures of EU climate front-runnership were simply

impossible for managerial leadership to ignore, likewise the strong climate engagement by civil

society. However the response was primarily verbal, and lacked follow-up in concrete business

practice.

24
5.2 THE PRESSURE FROM THE MARKETS

Business practice followed the markets, which sent a far less compelling message to the petroleum

industry when it came to green transition. Stock markets valued the European petroleum industry

higher than general industry (figure 5). In other words, financial investors favoured petroleum over

other stocks. Green stocks, which saw an investment boom just before the financial crisis, then fell

dramatically and stayed low throughout the following decade.

Figure 5: Share value of petroleum companies compared to industry and green energy

Sources: Refinitiv Eikon, (nd a).

The underlying profitability figures point in the same direction (figure 6). Except for a brief period

from 2014 to 2015, and under the Covid pandemic, the petroleum industry (purple solid line) has been

more profitable than European industry in general (blue solid line). The spread among the petroleum

companies (dotted lines) has, however been large, with Equinor at the top and BP at the bottom.

25
Figure 6: EBITDA Margin of petroleum companies compared to industry

Sources: Refinitiv Eikon (nd b) 8

In a further stimulus to the petroleum industry the emission trading markets failed to boost green

transition, in spite of promising political intentions. For a long time, the EU emission (ETS) trading

was flooded with “grandfathered” emission quotas and failed to tighten ambitions as surplus quotas

accumulated after the financial crisis downturn. Prices thereby remained so low that the ETS had little

effect on green transition. Only in 2019 did the quota prices get up to a range where they were starting

to make a difference (20-30 Euro per ton; see figure 7).

8
for further details see Annex

26
Figure 7: EU Carbon Permits (EUR/ton CO2)

Source : https://tradingeconomics.com/commodity/carbon

5.3 HYPOCRISY AS A RATIONAL SOLUTION

The combination of strategic proclamations of green transformation and revenue flows and

investment patterns that are still overwhelmingly petroleum-based has been understandably

characterized as a hypocritical greenwashing:

The oil industry’s PR game has improved but there’s nothing new about their proposals which

in reality are about perpetuating Europe’s addiction to oil imports (William Todts, in Simon,

2020).

Seen in the context of the European front runner policy and even stronger civic greening demands,

one would have expected that more concrete action would be taken. Even judged by the petroleum

industry’s own strategic proclamations, business practice was falling behind. After all “clean

petroleum” had been on the agenda since the early 2000s. Furthermore, one would have expected

more radical investment plans for renewable energy accompanying the “net carbon 2050”

proclamation than were announced. The commitment to 3% of energy production in renewables by

2035 – the most ambitious goal proclaimed across the five petroleum majors in their 2020 reports –

27
was hardly anything to brag about. The petroleum majors have apparently paid lip service to

policymakers and civic stakeholders by adopting pro-climate strategy ambitions, but at the same time

have postponed implementation as long as market signals failed to pull in the same direction. In other

words, corporate hypocrisy could be seen as a rational solution to contradictory demands from

markets and politics, and justified as a response to what might be termed a political hypocrisy, where

lofty policy goals are declared but not followed up by market-forcing implementation.

6 CONCLUSION AND POLICY IMPLICATIONS

The misalignment of markets and politics represents an unstable incongruence, both for companies

and policymakers. Two solutions present themselves. The first is a novel strategic vision of moving

out of petroleum markets while aligning with green policy. The second is to complement the

European front runner policy vision with stronger market forcing regulation. While the first lays the

initiative with business, the second relies on politics spearheading green transition.

6.1 BUSINESS MOVING OUT OF PETRO-MARKETS AND ALIGNING WITH GREEN POLICY

The first way out has already been pursued by two smaller Nordic petroleum companies over the last

decade: Danish Ørsted (the Danish Oil and Gas Consortium, DONG) and Finnish Neste (formerly

Neste Petroleum)

Ørsted went through the transition from petroleum to renewables in three major steps. In a first step it

broadened beyond a narrow focus on petroleum into becoming a generic energy company through

several acquisitions of electricity companies. Following a period of parallel expansion of petroleum,

coal, and renewable assets, the company turned towards strong green transition, divested its petroleum

portfolio and concentrated on renewables. In a third step it started divesting its downstream electricity

business in order to fully focus on upstream offshore wind9.

9
Documentation of Ørsted’s strategic transformation, seen through the lens of top management’s strategic
communication, is given in the appendix.

28
The second case, Neste, started out as a Finnish petroleum refiner, but then turned itself into a multi-

feedstock bio-refiner with advanced engagements in various bio-feedstocks, and also crossed over

into the circular economy with waste-based refining. The company has kept up its petroleum refining

– drawing extensively on Russian oil – and retailing as part of its business model, thereby bridging the

fossil and renewable energy spectrum10. However, the renewable products were considerably more

profitable than the petroleum products and brought in €1,334 million as opposed to the oil products

which amassed only €50 million (Neste 2022)11 .

The green transition of Ørsted and Neste has been remarkable, not only in what they have achieved in

a limited time frame, but also because it has resulted in extraordinary value creation. As can be seen

from figure 8, since Ørsted was listed on the Copenhagen stock exchange in 2016 both it and Neste

have enjoyed significantly better share price development than their former petro colleagues.

10
Neste’s evolution from petroleum to biofuel, seen through the lens of top management’s strategic
communication, is given in the appendix.
11
https://www.neste.com/releases-and-news/investors/nestes-financial-statements-release-2021

29
Figure 8: The Five Largest Petroleum Companies Compared to Neste and Ørsted

Sources: Refinitiv Eikon, (nd c)

Profit levels followed the same pattern (figure 9). While the five petroleum majors saw falling return

on average capital employed (ROACE) from 2011 to 2014, Ørsted and Neste started increasing

profitability from 2012 and have experienced growth rates way above the petroleum majors since

2014/2015. However, both Neste and particularly Ørsted initially lagged behind their competitors.

Furthermore, they were both handicapped in terms of the petro-industrial narrative. Neste lacked

upstream engagement, while Ørsted was a small player facing declining production from saturated

Danish oil and gas reserves. Economic downturn and petro-industrial limitations may therefore have

prompted them to undertake radical green transition.

Figure 9: Return on Average Capital Employed (ROACE)

Sources: Company Annual reports 2010-2020.

6.2 POLICY MOVING FROM RHETORIC TO IMPLEMENTATION

The other way to align business realities with European climate front-runner ambitions lies in market-

forcing regulation. The European Union has recently stepped up its market-forcing efforts. On 14

July 2021, the European Commission revised several pieces of EU climate legislation, setting out the

ways in which it intends to reach the Union’s ambitious climate targets under the European Green

30
Deal, including an intermediate target of an at least 55% net reduction in greenhouse gas emissions by

2030 (European Commission, 2021).

A major tool in the EU’s market-forcing strategy has been to boost the European emission trading

scheme. This scheme was designed to be a cornerstone in EU’s green transition, but for a long time

provided very low carbon prices. The changes signalled in the 2021 directive proposal, however, gave

it stronger teeth. A major factor in this regard is the doubling of the rate of reduction of allowances

handed out each year. This supplements an expansion of the EU ETS to cover maritime transport, and

the introduction of emissions trading for buildings and road transport. Combined with the post-

vaccine economic upsurge, the market-forcing strategy has fostered a massive rise in European carbon

prices (ETS) through 2021 (figure 10).

Figure 10: EU Carbon Permits (EUR/ton CO2) in 2021

Source : https://tradingeconomics.com/commodity/carbon

6.3 A NEW GREEN BOOM?

Complementing the mounting pressure against fossil fuels from rising emission prices is a new

upsurge in the market value of green investments. While the Covid-pandemic represented a massive

downturn of the economy, the post-vaccine upturn has boosted green stocks (figure 11). Should these

31
market signals prevail, there would – together with the heightened CO2 prices – finally be strong

pressure for aligning petro-industrial economic practice with the companies’ radical strategy

proclamations and EU front runner policy. The increasing competitiveness of renewable technologies

(IEA 2020), may consolidate this development. At the same time, a takeoff in electric mobility in

pioneering countries12 poses both a threat to the major market for petrol, but also an opportunity for

new green business.

Figure 11: European Renewable Energy (ERIX) Total Return

Source: ERIX, Investing.com13

Nevertheless, the green transition still has major systemic challenges to overcome. Increasing shares

of variable renewables in the energy mix increases the volatility of electricity prices and thereby

12
In Norway more than 56% of cars sold in 2020 were electric, in Iceland 19%, the Netherlands 16%, and
Sweden and Switzerland around 12% (EEA,b). And policy is moving. Norway will end the sale of fossil cars in
2025, the UK in 2030, and EU policy is to sell only 100% emission-free cars by 2035.
13
https://www.investing.com/indices/european-renewable-energy-tr

32
diminishes their value14. A future low-carbon system is therefore dependent on flexibility and storage

options; a necessary innovation frontier in the green transition.

6.4 THE FINANCIAL PRESSURE

Against the backdrop of novel green market signals, but partly also stimulating them, financial

institutions have stepped up green engagement and thereby portend a potential future distaste for

carbon investments. Most recently pro-climate finance has been aligned in The Glasgow Financial

Alliance for Net Zero (GFANZ, 2021) which was launched in April 2021 by Mark Carney, the UN

Special Envoy for Climate Action. The alliance has brought together over 450 financial firms across

45 countries responsible for assets of over $130 trillion.

However, the GFANZ is only the culmination of a wave of initiatives – among others counting the

industry-led, UN-convened Net-Zero Banking Alliance (UN Environment Programme, 2021), and the

Task Force on Climate-related Financial Disclosures (TCFD, 2021) – which highlight the financial

system’s exposure to carbon-related assets and the climate-related risks they represent.

In addition, there is the EU Taxonomy15, an important enabler to scaling up sustainable investments

and implementing the European Green Deal.

Together with other directives the European Green Deal aims to stimulate serious greening at several

levels. Firstly, it sets a standard with respect to the ‘green profiling’ of commercial actors, a

benchmark many customers and investors may come to require. Secondly it obliges large companies

to disclose how far their activities meet the criteria set out in the EU Taxonomy.

Thirdly, the Taxonomy Regulation requires member states and the EU to use the EU Taxonomy as the

basis of labels for green corporate bonds or financial products (EU 2022).

14
The IEA has estimated that photovoltaic energy loses its value by as much as 25% as its share approaches
40%, whilst gas CCGT is valued at more than 130% because of its flexibility 14 (IEA & NEA 2020).
15
The Taxonomy is a classification system that translates the EU’s climate and environmental objectives into
specific criteria for green investments, projects and technologies, thereby avoiding greenwashing.

33
Taken together, the emerging interplay between green policy, green finance and green business

strategy will likely intensify the pressure for green transition.

6.5 CIVIC FORCING THROUGH COURTS

Finally, we cannot neglect civil society organizations as drivers of green transition, both through their

role in pressuring governments and through their direct engagement with petroleum firms. In an

innovative strategic move, civil society organizations have taken both governments and companies to

court. In March 2021 they pressured the German government to step up its climate-policy

implementation as the German constitutional court found that national climate law neglected the

fundamental rights of future generations, obliging the federal government to upgrade reduction targets

for the coming decade. Germany, the EU’s largest economy, thereby had to step up its implementable

greening policy ahead of the European Green Deal. A recent decision of the Hague District Court has

also directly instructed the petroleum industry, by ordering Royal Dutch Shell PLC to reduce its

emissions by 45% by 2030 (Gottlieb, 2021). In this way, courts have contributed to tightening the

alignment of policies and commercial realities, thereby incentivizing both governments and

enterprises to walk the talk.

6.6 RESOURCEFUL ACTORS

The two Nordic front-runner examples show that while there are strong lock-ins to a fossil trajectory,

petroleum companies can be resourceful actors if pressed by consistent market signals for change. After

all, the petroleum industry represents one of the largest industrial clusters of the modern economy and

can draw on large financial resources, advanced technological competences, and high capability for

complex project management. These are resources that may be deployed for green transition.

Some of the most obvious business models for green transition for petroleum industry, building on

existing resources and capabilities, include transition to biofuel, blue hydrogen with CCS/U, and green

electricity, anchored in various parts of the petroleum-value chain, as summarized in figure 12.

34
Figure 12: Business Models for Radical Transition – Superimposed on the Classic Petro-industrial

Narrative16.

However, should the petroleum majors resolutely follow in the two green front-runners’ footsteps,

scarcity problems might arise and demand new technological solutions. Massively scaling up biofuel

may depend on new synthetic feedstock17, or more robust treatment of organic waste, including residue

from forestry. Massive scaling up of wind, especially offshore, would appear possible but only with

extensive grid development and novel breakthroughs in system stabilizing elements, such as batteries

and hydrogen. Yet, blue hydrogen necessitates substantial development of infrastructure for transport

and storage

However, the three generic models for green transition of the petroleum industry represent only some

of the most obvious alternatives in a process that will surely involve further experimentation, as indeed

16
Authors’ drawing, building on presentations of the petroleum industry in Eni’s 2018 annual report, p 7.
17
Synthetic fuels, substituting diesel and jet fuel, can be produced from different feedstock, converting biomass
to liquid, coal to liquid or gas to liquid. Hydrotreated vegetable oils (HVO) are of a similar nature. Di-Methyl
Ether (DME) is another synthetic fuel produced from fossil or biomass resources via gasification, requiring
moderate engine modifications. Synthetic fuels can be distributed, stored and used with existing infrastructure
and existing internal combustion engines. They thus offer a non-disruptive option to replace oil-based fuels,
with the prospect of further improved system performance with engines specifically adapted to synthetic fuels.
(EC 2011)

35
envisaged by leading consultancy agencies (KPMG, 2021; Agosta, A., Boccara, G., Giorgio Bresciani,

Browne, N., et.al., 2021). In line with modern industrial outsourcing, the petroleum industry counts

numerous supplier companies that may see new green opportunities to enhance their positions as

industrial players. Furthermore, as the green transition introduces new technologies, materials and

supply chains, we may see extensive industry slippage between the petroleum sector and a number of

other sectors that are in the process of creating a new industrial landscape.

Such industrial innovation indicates that, while the two first decades of the 21th century have seen the

build-up of contradictory tensions between radical green proclamations and continued petro-industrial

business practice, green transition may actually become a reality. This is, however, dependent on a

consistent alignment of lofty policy goals with market-forcing regulation. Recent moves in policy

implementation in Europe signal a move in this direction.

Furthermore the scale and timing might also be an issue as the European petroleum majors strive for

green transition. A massive sell-off of oil and gas assets by the European petroleum majors might

flood the markets and undermine the price. Yet oil and gas companies with portfolios largely located

outside Europe may solve their greening dilemma by separating out new green energy units that carry

their European brand, but continue their oil and gas operations as separate companies under new

names, with their home base in petroleum-friendly environments.

Climate effects do, therefore, not come with the greening of European petroleum industry alone.

European petroleum companies may clean their balance sheets by divesting petroleum assets to foreign

companies or to less profiled brands that go under the political radar18. But the emissions remain as the

assets continue to be operated, or the petroleum is supplied from abroad. Significant CO2 reductions

will only materialize if European energy consumption follows suit.

However, as Europe’s share of global CO2 emissions currently counts less than 8% of the world’s total

(EEA 2020) the onus of climate mitigation now lies with other regions such as Asia and the Middle

18
For instance, Shell in 2017, sold North Sea assets to Chrysaor, backed by Harbour Energy, an investment
vehicle of EIG Global Energy Partners. Subsequently, Engie sold its exploration and production business,
including North Sea assets, to Neptune Energy Group (Reuters 2021).

36
East. And although green rhetoric is emerging there also, actual market-forcing regulation seems far in

the future.

ACKNOWLEDGEMENTS

Funding: This work was supported by the AFINO project: (Responsible Research and Innovation in

Norway) under the Research Council of Norway.

We are grateful to Martina Mercellova, Douglas Wall, Benjamin Vik and Denis Zakamulin for

valuable help in providing additional data and preparing references and layout for the reviewed

version of this article. We are also grateful to Mathew Little for language editing.

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41
ANNEX

1. NOTES ON QUANTITATIVE INDICATORS OF PETROLEUM BUSINESS

OPERATION

1.1. Revenue Streams

Among the five largest European majors, Eni is the only company that reports on revenue from

renewables. For the other companies, it is so marginal that, in 2020, they did not find it relevant to

single it out as a separate item.

Equinor states in its 2020 annual report (AR) that it will only start reporting separate financial data

from renewables in Q1 2021.

The Shell AR 2020 has no mention of financial reporting on renewables.

Total’s AR 2020 amalgamates financial data on renewables within the “Integrated Gas, Renewables

& Power” segment, making it impossible to see revenue from renewables. However in its Q1 filing in

2021 the company states that renewables business brought in $148 million, out of $7.3 billion in

company earnings (about 2%) (Quartz 2021).

BP integrates financial data on renewables in the “Gas & low carbon energy” segment, making it

impossible to see revenue from renewables (AR 2020).

1.2. Renewable energy share

The renewable share relative to total energy production is calculated from (1) the petroleum

companies’ reported plans for GW capacity and reported GWh renewable production volumes in 2020

(2) Rystad Energy’s – a leading petroleum consultant/research group – estimates for petroleum

production and (3) IEA conversion equivalents. The estimated future GWh renewable production

figures are based on 2020 capacity efficiency, although these efficiency levels might increase. All

42
indexes are based on Refinitiv Eikon, (2021b). Data sample: BP L, EQNR.OL, RDsa.AS, TTEF.PA,

ENI.MI, ERIX. Retrieved from: Eikon.thomsonreuters.

Renewable energy production volumes relative to total energy production are calculated based on (1)

the petroleum companies’ reported plans for GW capacity and reported GWh renewable production

volumes in 2020, (2) Rystad Energy’s estimates for petroleum and (3) IEA conversion equivalents.

The estimated future GWh renewable production is based on 2020 capacity efficiency, although these

efficiency levels might increase.

Example calculation of Equinor’s 3.52% relative renewable production in 2035:

Variables:

GW capacity 2020 = 0.75 GW

GWh Renewable Production 2020 = 1 662 GWh

Equinor’s GW capacity goal 2035 is 12-16 GW, Average = 14 GW

Increase in GW capacity from 2020 to 2035 = 18.67 times higher

Estimated annual barrels of petroleum production (boe) in year 2035 = 535.7 million

1 tonne of oil equivalent (toe) = 7.33 boe

1 million toe (Mtoe) = 11 630 GWh

Calculations:

Estimated renewable GWh production in 2035: 1 662 GWh*18.67 = 31 024 GWh

Mtoe petroleum production converted to GWh: 73.1 Mtoe*11630 = 850 000 GWh

Renewable GWh production relative to total energy production:

31 024 GWh / (31 024 GWh + 850 000 GWh) = 3.52%

1.3. Estimation of EBITDA Margin for European Petroleum Majors and European
Industry (figure 6)

43
MSCI top 10 constituents (NOV 30, 2021) are taken from the MSCI Europe Index

https://www.msci.com/documents/10199/88634e3e-19ce-4475-92b5-a62472321cd8 (retrieved:

09.12.2021)

Data for the following companies are taken from Eikon (nd) Retrieved 09.12.2021

MSCI top 10: Siemens, Schneider Electric, Airbus, Abb, Relx, Deutsche Post, Vinci, DSV, Experian,

Atlas Copco.

Petroleum companies: Equinor, Royal Dutch Shell, TotalEnergies, Eni, BP.

EBIDTA-Margin

𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑏𝑒𝑓𝑜𝑟𝑒 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑎𝑛𝑑 𝑡𝑎𝑥 + 𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛 + 𝐴𝑚𝑜𝑟𝑡𝑖𝑧𝑎𝑡𝑖𝑜𝑛

𝐸𝐵𝐼𝐷𝑇𝐴𝑚𝑎𝑟𝑔𝑖𝑛 =
𝑇𝑜𝑡𝑎𝑙 𝑅𝑒𝑣𝑒𝑛𝑢𝑒

Necessary data points are retrieved from Eikon in time series (09.12.2021). We first calculated the

EBIDTA margin for each company in the MSCI Europe Industrials Index. After that we took the

average of these as displayed in the curve: “MSCI-European Industry Index (Average)”. Each

company is weighted equally. The five European petroleum majors are evaluated in a similar way and

the “average” is the average of these.

All calculations are based on quarterly data. The file is named ‘EBITDAmargin_all_quarterly.png’

EBITDA excludes effects of capital expenditure and capital structure as well as tax jurisdictions. It

provides a clearer view of the company’s underlying profitability and how it can generate free cash

from its operations. EBITDA is thus preferred over EBIT for companies invested in tangible or

intangible assets as it excludes the subjective costs of depreciation and amortization.

44
2. ADDITIONAL QUOTES ON PETROLEUM INDUSTRY GOING GREEN

The following quotes complement those included in the article so that all five petroleum majors are

covered. Quotes are given for each of the three stages of climate adaptation.

2.1. The traditional petro-industrial narrative

As previously mentioned, the strategic ambition of European oil-majors at the turn of the millennium

was, in essence, clearly to integrate the value chain, expanding efficient exploration, production,

refining and retailing of hydrocarbons. Here are quotes from the three petroleum companies not

included in the main text.

Equinor

But we are more than the NCS (Norwegian Continental Shelf). We have moved into promising

petroleum provinces world-wide. Strong positions have been established in the global oil

market, the European gas market and the retail sectors in Scandinavia, Ireland, Poland, and

the Baltic states. We have become a valuable brand. …

We will deliver what we promise. That means a focus on efficiency and profitability. On

capital discipline. On new commercial opportunities, at home and abroad. (Equinor/Statoil

2000 AR CEO letter)

Eni

Eni’s Mission statement: We are a major integrated energy company, committed to growth in

the activities of finding, producing, transporting, transforming and marketing oil and

gas…….. (2009 Annual Report)

45
 We delivered on our targets, positioning the Company for future growth. In E&P, we are

strategically focusing on giant projects in the world’s fastest-growing oilproducing areas,

namely Iraq and Venezuela. We entered new, high-potential areas like Ghana, and signed a

number of framework agreements in our core regions of Russia, the Caspian Sea (Kazakhstan

and Turkmenistan) and Africa. In G&P, we completed the acquisition of Distrigas and the

reorganization of our regulated businesses in Italy. We strengthened our long-standing

strategic partnership with Gazprom, celebrating its 40th year of activity in 2009. We plan to

continue developing joint projects in the sectors of upstream and natural gas markets. (2009

AR, letter to the shareholders)

BP

As I write this letter, the market value of the company remains significantly

lower than it was before the incident. Our 10-point plan shows our belief that the

company can realize improved returns for shareholders. The plan sets out what

you can expect from us, and what you will be able to measure, over the next

three years.

• First and foremost, you will see a continuing, relentless focus on safety and risk management.

• You will see the company play to its strengths – exploration; managing deepwater activity;

giant fields; gas supply chains; our world-class downstream business; and our capabilities in

developing technology and building relationships.

• You will see a company that is simpler and more focused as a result of a major divestment

programme.

• You will see a company that is organized effectively and applies its standards consistently.

• You will see more visibility from us on our individual businesses.

• You will be able to measure the effects of active portfolio management, as we invest more in

our areas of strength and generate cash through further divestments.

• You will be able to measure the contribution of new upstream projects with higher margins,

as they come onstream over the next three years.

46
 • You will be able to measure operating cash flow, which we expect to be around 50% higher

by 2014.

• We plan to use around half of the increased cash flow for investment and half for other uses

including increased distributions to shareholders.

• And finally, you will be able to measure balance sheet strength.

CEO’s letter to shareholders, AR 2011 (following the Deepwater Horizon accident)

2.2. The clean petroleum narrative

As previously mentioned, large parts of the clean petroleum narrative were compatible with the petro-

industrial framing, in so far as these changes were supposed to adjust it to lower CO2 emissions

without attacking its petro-industrial core. The parts that pointed in an alternative direction, such as

renewables and biofuel, were kept at a low level and barely affected the core business.

Here are quotes from the three petroleum companies not included in the main text.

BP

BP saw gas as the most tangible element in the petroleum industry’s climate mitigation. And other

European petroleum majors soon concurred. In addition, BP, along with other petroleum majors,

stepped up its climate rhetoric following the Paris accord. In the company’s 2015 annual report, the

CEO actively engaged with the Paris climate agenda, arguing for a price on carbon and pledging to

engage with the UN in a petro-industrial climate initiative:

We also joined with BG Group, Eni, Reliance, Repsol, Royal Dutch Shell, Statoil and Total to

call on the UN and governments to put a price on carbon so that business and consumers of

energy can better work within frameworks that are clear ……(BP AR 2015)

Nevertheless, and in line with other petroleum majors, BP had just a couple of years earlier affirmed

its allegiance to the petro-industrial framing and stressed the need for a balanced approach:

47
 Oil will continue to be BP’s prime focus, and we aim to extend our extraordinary track record

in finding and developing new resources. (Chairman’s letter, BP AR 2012)

Equinor

The Norwegian state oil company Equinor (previously Statoil) followed much the same path as its

European petroleum peers towards clean petroleum. Its engagement in carbon reduction and

sequestration since the mid-1990s in the Sleipner West field in the North Sea gave it a special

opportunity for greening. Equinor could therefore anchor part of its ‘clean petroleum’ response in

lowering carbon in the world’s first commercial CO2 storage project (MIT 2016).

Responding to the climate challenge and preparing Statoil for a low carbon future is an

integrated part of our strategy. Concrete actions to reduce greenhouse gas emissions in the

operations have been implemented, and steps have been taken to build a more resilient

portfolio…. Chairman’s letter (AR 2016):

“High value, low carbon” is at the core of our sharpened strategy. We believe the winners in

the energy transition will be the producers which can deliver at low cost and with low carbon

emissions. CEO’s Letter (AR 2016):

Total

Total trod much the same path as the other petroleum majors, although the discord between its

conventional petroleum framing narrative and the emerging pro-climate agenda was more openly

communicated, as evidenced by its 2011 annual report.

TOTAL’s activities lie at the heart of the two biggest challenges facing the world now and in

future: energy supply and environmental protection. The Group’s responsibility as an energy

producer is to provide optimum, sustainable management of these twin imperatives (Total AR,

2011)

48
Summing up both its ecological sustainability and its energy for development pledges, in 2016

TOTAL launched its ambition to become “the responsible energy major” which thereafter became a

core vision for the company:

TOTAL’s ambition is to become the responsible energy major by contributing to supply to as

many people as possible a more affordable, more available and cleaner energy (Total AR,

2018)

2.3. Radical transition to zero carbon

As mentioned earlier, in 2019 and 2020 European petroleum-majors thus announced a transformative

re-orientation that openly challenged the traditional over-arching petro-industrial narrative, and in

some cases explicitly replaced it. Replicating EU policy goals, European petroleum majors took on

board zero CO2 emissions by 2050.

Here are additional quotes from the three petroleum companies not included in the main text.

Eni proclaimed that:

Eni is strongly committed to continue to play a key role in sustainability and innovation,

supporting social and economic development in all our activities. Today we are taking another

step forward in boosting our transformation. We commit to the full decarbonization of all our

products and processes by 2050….. (Introduction to the strategy section, from the CEO, Eni

AR 2020)

Equinor

Equinor is preparing for a future that will be different from the past. We aim to be a leading

company in the energy transition and to build the energy industry of tomorrow. (AR 2020,

CEO’s letter)

Total

49
 Energy is at the heart of one of the major challenges of the 21st century: to preserve the

planet threatened by climate change while enabling the majority of humanity to escape from

poverty. In this sense, energy is inseparable from the major global challenges of sustainable

development………

On May 5, 2020, TOTAL announced its climate ambition by 2050: to achieve carbon

neutrality (net zero emissions), from the production to the use of the energy products sold to

its customers (Scopes 1, 2, 3), together with society. (AR 2020)

2.3.1.Ccompensatory compromises
Quotes from the two petroleum companies not included in the main text.

Eni

While flagging green transition in 2050, Eni’s top management is still relying on business as usual

and increasing petroleum portfolios for economic performance:

Exploration, one of our main growth and value generation drivers, achieved excellent results

in 2020. Despite the reduction in capital expenditure of about 50%, we discovered 400

mmboe of new resources, at a competitive cost of 1.6 $/barrel. The activities focused on near-

field exploration in order to ensure fast contribution to cash flows. In this context, we made

several near-field discoveries in Egypt, Tunisia, Norway, Algeria and Angola, in this latter

the Agogo appraisal well has estimated 1 bboe in place, that will allow us to extend the useful

life of the FPSO of operated Block 15/06. Important results were also obtained in frontier

exploration basins with the Mahani gas and condensates discovery in the onshore of the

Emirate of Sharjah (UAE).(AR 2020, Letter to Shareholders from Chair and CEO)

BP

Although proclaiming green transition by 2050, BP is focusing on competitiveness and the value

creation from its hydrocarbons portfolio:

50
We are now more centralized, more agile, and better integrated. This enables us to maximize

value creation in a rapidly evolving market through economies of scale, and by exploiting

synergies and driving continuous improvement in operational performance. We are now

organized around four business groups. Production & operations is the operating heart of the

company – and is focusing our resilient hydrocarbons portfolio on value. Customers &

products is growing our convenience and mobility offers for an increasing number of

customers. Gas & low carbon energy is growing to help meet rapidly increasing clean energy

demand. Innovation & engineering acts as a catalyst, opening up new and disruptive business

models and driving our digital transformation (AR 2020, CEO Letter)

51