Norwegian energy major Equinor has announced it will step up investments in renewable energy and low-carbon solutions to more than 50% of gross annual spend by 2030.
Under a strategy update today, the company said it wants to achieve net zero carbon by 2050, with interim reductions of 20% by 2030 and 40% by 2035.
“This is a business strategy to ensure long-term competitiveness during a period with profound changes in the energy systems, as society moves towards net zero,” said Equinor president and chief executive Anders Opedal.
“We will continue to cut emissions, and in the longer term, Equinor expects to produce less oil and gas than today.”
New oil and gas projects will continue to come on stream, however, with an average annual free cash flow of $4.5 billion expected up until 2030 from operations on the Norwegian continental shelf.
The share of gross capex for renewables and low-carbon solutions is forecast to grow from around 4% in 2020 to more than 50% by 2030. Equinor expects to have an installed offshore wind capacity of 12-16GW by 2030, producing returns of 4-8%. It says it “remains determined to capture higher equity returns through project financing and farm downs”.
So far, Equinor has divested assets for $2.3 billion, booking a capital gain of $1.7 billion, and expects to deliver nominal equity returns in the range of 12-16% from its offshore wind projects with offtake contracts in the UK and US.
Equinor has stakes in more than 10GW of offshore wind in operation, or in various stages of development, in Europe alone, according to Windpower Intelligence, the research and data division of Windpower Monthly. It recently partnered with RWE and Hydro to exploit opportunities in the Norwegian North Sea. The company also pre-qualified for an upcoming 7GW wind lease sale in the New York Bight.
“Our strategy is backed up by clear actions to accelerate our transition while growing cash flow and returns,” said Opedal.
“This is a strategy to create value as a leader in the energy transition.”
Equinor is looking to develop new value chains and markets in carbon management and hydrogen. By 2035, it aims to store 15-30 million tonnes of CO2 per year, and to provide clean hydrogen in up to five industrial clusters.
The company’s board has introduced a new annual share buy-back programme of around $1.2 billion starting from 2022, which will be executed when Brent oil prices exceed $50/barrel. The $5 billion share buy-back programme launched in September 2019, and suspended on 22 March 2020, is cancelled.
In addition, Equinor will execute two tranches of share buy-backs in 2021, each of $300 million, to be launched after Q2 and Q3 results, respectively. All share buyback amounts include shares to be redeemed by the Norwegian State under an agreement that is expected to be renewed after 2022.