Oil companies scaling back operations indicates a notice to investors
In a world increasingly conscious of climate change, the oil and gas sector is navigating a delicate balance between financial returns and sustainability. According to the annual flagship report from Accela Research, released this week, the sector is adopting a pragmatic dual approach, investing in low-carbon projects while also strengthening traditional oil and gas capabilities.
BP, ranked second-last in Accela's transition league table, is one of the companies re-energizing oil and gas production. This move comes as the sector's oil and gas production is expected to rise by about 10% by the end of this decade, not to meet energy security needs, but to sustain high distributions to investors.
However, the trend is not uniform across the industry. Eni, for instance, has maintained its biofuels expansion while other majors are retreating. Eni has completed a plant in Sicily and three more are underway elsewhere, demonstrating a commitment to low-carbon investment with comprehensive emissions targets.
The oil and gas sector's strategy of prioritizing distributions over investment can only be sustained for so long. As cycles turn and underinvestment catches up, companies risk being unprepared when decarbonisation inevitably accelerates again. Investors need to make it clear that near-term distributions must be balanced against disciplined reinvestment in scalable and long-term low-carbon projects.
Accela Research is debuting an investor portal this year to provide essential information on the oil and gas majors' transition to net-zero emissions. Rohan Bowater, the co-founder and lead oil and gas analyst at Accela Research, emphasizes the need for investors to ensure that they, and the companies they're invested in, don't get left behind in the transition to net-zero emissions.
Investment priorities in 2025 include capital discipline and low-carbon projects. While total capital expenditure growth is modest, spending on low-carbon projects like carbon capture, utilization and storage (CCUS) and hydrogen is growing, led especially by Middle East national oil companies.
Clean energy investments globally exceed fossil fuel spending, with $2.2 trillion going to clean energy (including renewables and low-carbon tech) versus $1.1 trillion for fossil fuels in 2025, marking a notable shift in capital flows. Solar and electricity infrastructure investments are surging, but that growth is uneven across sectors and regions.
Some majors, like BP, are scaling back on renewables investments and re-energizing oil and gas production to balance near-term financial returns with longer-term sustainability goals amid economic and geopolitical uncertainty. Early financial returns from the transition to low-carbon energy are helping some of the majors maintain their transition credibility.
TotalEnergies, for example, has achieved respectable margins from combining renewables with flexible, dispatchable assets like gas peakers and battery storage. Offshore wind has underperformed, resulting in justifiable alterations to business strategy, while hydrogen and CCS continue to receive billions in capex despite remaining speculative bets with few signs of commercial success.
TotalEnergies is leading its peers in both ambition and delivery, allocating around 28% of its capex to low-carbon projects. Strategic flexibility is central to the oil and gas firms' approach, adopting a hybrid strategy that maintains fossil fuel production efficiency while preparing for future energy system decarbonization via tech integration and emerging fuels like hydrogen.
In conclusion, the oil and gas sector in 2025 is characterised by a pragmatic dual approach—prudently expanding low-carbon investments but also strengthening traditional oil and gas capabilities to remain competitive, manage risk, and ensure cash flow in a complex and uncertain global energy landscape. This explains why companies like BP are recalibrating their renewables ambitions downward while simultaneously ramping up oil and gas production efforts.
The oil and gas sector continues to invest in low-carbon projects, such as carbon capture, utilization, and storage (CCUS) and hydrogen, demonstrating a commitment to sustainability alongside traditional oil and gas capabilities. In contrast, some companies, like BP, are focusing on re-energizing oil and gas production to balance short-term financial returns with long-term sustainability goals.
Investors need to prioritize low-carbon projects in 2025 while ensuring that the companies they're invested in don't neglect capital discipline, as the sector's strategy of prioritizing distributions over investment can only be sustained for so long. This includes supporting renewables investments and preparing for decarbonization, as underinvestment in low-carbon projects could leave companies unprepared for the future.
