Page 226 - ΝΑΥΤΙΚΑ ΧΡΟΝΙΚΑ - SEPT 2025

Hydrocarbons vs renewables

In recent years, the profitability scale This is illustrated by an S&P Global Com-
has clearly tipped in favour of oil and gas modity Insights analysis, which examines
projects, to the detriment of solar and wind ones. the average return on capital depending
Energy companies can reap far greater profits on the type of investment (oil & gas versus
from hydrocarbon extraction projects, a fact RES) for the period 2010-2023. Accord-
that is leading them to revise their strategies. ing to the analysis, oil and gas companies
reached an average return on capital of
11% in 2023, compared to -8% in 2020.
During the same period, the average return
on capital for RES companies remained
consistently low at around 2%.
Looking at average returns on capital
over time, it’s clear that investments in
oil and gas projects are subject to signifi-
cant fluctuations. This volatility increases
the sense of uncertainty and makes it
harder to forecast returns, thus raising
the investment risk. In contrast, renew-
able projects, while offering lower returns,
exhibit greater stability, making them
a more predictable investment option.
Commenting on the findings, Mark Vivi-
ano, CFA at the energy investment firm
Kimmeridge, noted: “Looking at relative
shareholder returns, the message is clear.
they should reassess their strategies and The market wants energy companies to
allocate more capital to fossil fuels. focus on their core competencies. That
doesn’t mean abandoning the energy
The case of BP transition; on the contrary, it simply means
A telling example is BP, which in 2020 being realistic about it”.
committed to reducing its oil and gas
production by 40% by 2030, while Facing a critical challenge
accelerating the development of RES. The renewed interest in fossil fuels high-
However, five years later, in February lights one of the most critical challenges
2025, BP revised its priorities, cutting facing energy companies today.
its planned investments in RES by $5 Climate change poses risks that have been
billion and increasing its annual fossil escalating for decades. According to the
fuel spending to $10 billion. scientific community, every fraction of a
This represents a 180-degree shift in the degree in global temperature rise – caused
company’s strategy, aimed at increasing by fossil fuels – exponentially increases
its profits and attracting more investors. both the intensity and frequency of phe-
In this context, the energy giant recently nomena such as heatwaves, wildfires,
announced its largest oil discovery in droughts, storms, and loss of biodiversity.
25 years, in the offshore “Bumerangue” At the same time, companies are being
block off the coast of Brazil. This discov- called to meet investor demands by con-
ery is a significant step toward BP’s goal tinuously improving their profitability lev-
of producing 2.3–2.5 million barrels of oil els. Yet, investors still expect meaningful
equivalent per day by 2030. progress in reducing emissions.
In any case, the energy industry stands at
The harsh reality of profitability a pivotal crossroads, where the need for
In recent years, the profitability scale financial sustainability and the demand
has clearly tipped in favour of oil and gas for environmental responsibility are in con-
projects, to the detriment of solar and flict. The real challenge for energy compa-
wind ones. Energy companies can reap nies and the global community is to find a
far greater profits from hydrocarbon balanced strategy that integrates energy
extraction projects, a fact that is leading security, profitability, and sustainable
them to revise their strategies. development.

224 NX