Industry Response

The strategic situation facing fossil fuel companies in the teens of the 21st century represented opposing demands. On one hand, demand for oil and gas remained high and profits considerable. On the other hand, international efforts were seeking to curb consumption and offer considerable incentives for businesses to do so. Industry leaders knew that they had to peer far into the future to determine the course of their companies as the industry had long lead times and high capital costs for new investments. The long-term strategies of oil and gas companies varied from those that doubled down on their existing business to those companies that were working to exit, to those that chose a hybrid strategy between extraction and building alternative energy capabilities.

Responses of Super-Majors

ExxonMobil

As the largest privately controlled oil company, ExxonMobil remained solidly in the oil and gas business – with only minor investments in alternative energy sources. In 2015, when critics argued that the company ran the risk of “stranding” its expensive assets in a low-carbon future, the company replied,

We are confident that none of our hydrocarbon reserves are now or will become ‘stranded.’ We believe producing these assets is essential to meeting growing energy demand worldwide, and in preventing consumers – especially those in the least developed and most vulnerable economies – from themselves becoming stranded in the global pursuit of higher living standards and greater economic opportunity… ExxonMobil believes that although there is always the possibility that government action may impact the company, the scenario where governments restrict hydrocarbon production in a way to reduce GHG emissions 80 percent during the Outlook period is highly unlikely.^[1] 

ExxonMobil argued that oil and gas would continue to be needed for 30 to 50 years and efforts to replace oil and gas with renewables in the shorter term were unlikely to succeed. The company vowed to remain focused on oil and gas while working to deliver petroleum products as cleanly as possible, decarbonize production, and use carbon capture and storage to bring down emissions.^[2]

In 2021, Exxon's strategy faced new challenges to its strategy when Engine No.1, an activist hedge fund, won a proxy battle to elect three eco-conscious nominees to the company's board of directors. Engine No. 1 had made a shareholder argument that Exxon did not have a viable strategy for the long term. The Engine No. 1 position appealed to several large institutional investors that were unhappy with Exxon's returns at the time. In spite of the unexpected victory, by two years later many observers said that the company's investment strategy seemed to be unaffected by the new board members. Environmental advocates opined that Exxon was continuing to focus on investments in oil and gas rather than green solutions.^[3] 

Shell

Shell, the world’s second-largest private oil company, seemed to vacillate between positions. In February 2018, Shell announced it would become an “energy” company rather than an oil and gas company. At the time, Shell’s leadership argued that the energy sector was changing fundamentally, and global oil demand would peak sometime between the late 2020s to 2040, due to competition from other sources of power. What would follow would be a long decline, with those companies left holding oil assets being the losers.  Then Shell CEO Ben van Beurden put Shell’s strategy succinctly: “We won’t be sitting ducks. We’re going to adapt.”^[2]

Then, in 2023, Shell seemingly backtracked on these commitments, announcing a new strategy to continue investing in oil and gas production and only selectively allocating capital to renewable energy solutions. New CEO Wael Sawan argued, “It is critical that the world avoids dismantling the current energy system faster than we are able to build the clean energy system of the future. Oil and gas will continue to play a crucial role in the energy system for a long time to come with demand reducing only gradually over time.”^[4]

Mid-Size Scandinavian Companies

Smaller Scandinavian fossil fuel companies took alternative approaches to the challenge of addressing climate change and continued oil production. Some examples include:

Ørsted

Ørsted had begun as a fossil fuel company created by the Danish state during the 1973 oil crisis to develop Denmark’s North Sea oil and gas sector. It was first named Dansk Olie & Naturgas A/S (Danish Oil and Natural Gas), also known as DONG. As early as 1998 it began producing electricity from offshore wind for its retail customers. In 2006 it merged with Danish electric companies to become a diversified energy company.

Even with efforts to cleaner energy sources, Ørsted remained one of the most coal-intensive energy providers. In 2016 the Danish government held an IPO for 49.9% of its shares. After major investments in offshore wind farms, the company completely divested its oil and gas holdings to focus entirely on green energy – and renamed itself Ørsted, for the 19th-century Danish physicist Hans Christian Ørsted, who had discovered the connection between electricity and magnetism. In a short time, Ørsted became the largest offshore wind company in the world.

Lundin Energy

Lundin Energy (formerly Lundin Petroleum) was a Swedish company initially focused on the exploration and development of oil and gas on the Norwegian Continental Shelf. In 2022 it split into two companies, retaining its renewable assets while selling off its oil and gas assets. The retained renewable business became Orrön Energy, a standalone business under the Lundin Energy umbrella, with a pure-play focus on energy transition opportunities in renewable wind and hydro.

Lundin sold its oil and gas business to Aker BP, a Norwegian oil and gas company created through a merger of Aker and BP’s licenses at the Norwegian Continental shelf (NCS). The company holding the combined assets of the two oil and gas companies was named Aker BP ASA and was listed on the Oslo Stock Exchange. Aker BP became the second-largest producer on the NCF. At the time of the merger of the two oil businesses, Karl Johnny Hersvik, CEO of Aker BP (recruited from Equinor), outlined the new company's goals, "Our ambition is to create the world’s best oil and gas company with low costs, low emissions, profitable growth, and attractive dividends. We will also play an important role in the global energy transition.”^[5]

Neste 

Neste was founded by the Finnish government in 1948 to secure Finland's oil supply, primarily Russian supplies. (Neste means "liquids" in Finnish.) Its core activities became oil refining and shipping. Over time it expanded to natural gas exploration and production in addition to its chemical products. It also became a retail service station brand in several countries.

In the early 2000s, Neste shifted its historical asset base from oil refining and marketing toward processing biofuels and other renewable and circular products. Its major product areas included renewable diesel produced from oils and fats; lower-emission fuels for aviation and shipping, and renewable and recycled raw materials for plastics. It successfully commercialized its patented technology to produce Neste Renewable Diesel (formerly NExBT - “next generation biomass to liquid”) a vegetable oil-based diesel. In 2016 the Finnish government dropped its share of ownership from 50% to 36%.

Neste became the world’s leading producer of renewable diesel and sustainable aviation fuel. It operated refineries in three countries and generated the majority of its revenue from renewable diesel and other renewable products. Several companies, including Volvo, Bosch, and IKEA partnered with Neste to use renewable diesel to reduce emissions and progress toward sustainability goals.^[6]