Developing a New Plan

In the 2000s, environmental concerns about Norway’s role in producing oil and gas began percolating throughout the country’s political institutions. Even the country’s Minister of Petroleum and Energy, Terje Riis-Johansen, expressed the importance of considering alternatives to fossil fuels. And even as concerns about the environment were growing locally and internationally, Statoil’s oil and gas revenues remained important to multiple stakeholders – employees, public shareholders, the Norwegian government, the industries that supported oil and exploration and development, as well as the Norwegian public.

In 2007, following Statoil's merger with Hydro, Statoil's bylaws were amended to add “other forms of energy” to the list of the company’s approved activities.^[1] After the bylaw change, under the leadership of CEO Helge Lund, Statoil began a multi-year strategy review to address what role, if any, alternative energy would play in the company’s future. Lund described the options under discussion:

There were two options that we discussed. One was that we concentrate on oil and gas to become the safest, most reliable, most effective oil and gas company, with the least emissions from our activities. And then based on that, create value and return dividends to shareholders, which they could invest in other sources of energy with the best players in that space in the energy market. So that was one strand.

The other strand was really to continue to pursue oil and gas with the same sort of ambition of improving our operations all the time, while at the same time building options within a broader set of the energy market, looking at carbon capture and renewables.

The path of divesting oil and gas was "never on the table," as one company executive put it. Although company leaders recognized that future environmental concerns could limit the production of oil and gas long before oil fields were depleted, many stakeholders still depended on the energy and revenues produced by Statoil's oil and gas resources.

Eldar Sætre, who succeeded Lund as president and CEO of Statoil in 2014, continued the evaluation process and gave it a high priority. Sætre strongly advocated for adding renewable energy and carbon capture to the company’s oil and gas business. After long discussions, Statoil’s executives decided on a long-term strategy of becoming a "broad energy company," developing a portfolio of multiple energy options. They resisted the term "hybrid," since they looked to develop multiple energy options, balancing its investments in oil and gas with investments in renewables and carbon capture technology.  

By 2017, the company's climate roadmap had taken shape. The strategy set goals for investment decisions in both renewables and oil and gas. In addition, the plan set goals for carbon reduction, but it did not attempt to predict specific activities to reach those goals. Overall, the plan was designed to meet the goals of the Paris Agreement while sustaining the company. Pål Eitrheim, who at the time led Equinor’s upstream business in Brazil, remembered some of the factors that had led to this decision:

On the very practical level, I think the fact that we had a new CEO putting renewables very firmly on the agenda was a factor in itself. I also think changes in the market and also in the competitive environment played into this. I think there was a strong drive from the new CEO to position Equinor for the long-term future. And this was not something he came up with when he became CEO. It was something that he had been contemplating in his different roles at Equinor over his long career.

The plan made it clear that any renewable investments had to be business opportunities with a reasonable rate of return, and not just "greenwashing" efforts to create the illusion of environmental responsibility. Even though most renewable opportunities had a lower rate of return than oil and gas expansions, Sætre and others believed that the risk profile for renewables was lower, balancing the lower return. Over time renewable investments would continue to grow as they provided income diversity - the price of renewable energy production would not follow oil and gas prices.

Presenting the Climate Roadmap

On March 9, 2017, Statoil made the public announcement of its new high-value, low-carbon strategy to develop as a broad energy company. The announcement detailed the company's targets for reduced CO2 emissions, lower carbon intensity, and increased energy efficiency in its oil facilities while taking on profitable investments in renewables and low-carbon solutions. The press release quoted CEO Sætre:

We believe that being able to produce oil and gas with lower emissions while also growing in profitable renewables will give competitive advantages and provide attractive business opportunities in the transition to a low-carbon economy.^[2]  

For oil and gas production, the roadmap promised to reduce CO2 from its own operations by 20% by 2030 – well below the industry average. It also promised to increase investments in profitable renewables and low-carbon solutions, with the potential for renewables to constitute 15-20% of capital investments by 2030, four times the current rate, by investing $10 billion in renewables and carbon capture over the next ten years.

The strategy presentation was seen as a milestone within Statoil. Siv Helen Rygh Torstensen, head of the CEO office at the time, described the strategy as a “sharpening of the focus that had been there for a while and a part of a narrative in becoming a broader energy company.” The strategy’s low-carbon solutions, both in renewable energy assets and in the production of oil and gas, attempted to balance a broad set of expectations for the company. The challenge remained: How could the company address the new climate roadmap with its stakeholders - government and public investors, employees, Norwegian citizens, and others? How could the company’s leaders consider the new stakeholders that would be introduced as the company executed its strategy as a broad energy company?