Shell and BP may need US$945 billion to become net zero energy major

Shell PLC (LON:SHEL) or BP PLC (LON:BP) may have to spend US$35 billion every year until 2050 if it wants to remain a ‘major’ energy company.

If any of the seven majors wanted to maintain current outputs of oil and gas while being net zero compliant in 2050 it would have to increase the capacity of both its carbon capture and removal systems.

“This would involve developing around 60 Mt CO2 of CCUS capacity and around 200 Mt CO2 of carbon removal capacity,” the International Energy Agency (IEA) explained in a recent report.

Reaching these capacities would require around US$25 billion investment every year and an annual US$10 billion cost to maintain oil and gas production levels.

“Mobilising this level of capital would be an immense challenge as it is three-and-a-half times the annual average capital expenditure of the majors over the past five years,” IEA added.

A cheaper approach could be for the energy giants to broaden the scope of their low-emission fuels.

To keep up with today’s energy demands while remaining net zero the majors would have to produce over 300 gigawatts from renewables, 85 kboe/d of biofuels and 12 billion cubic meters of low-emission hydrogens.

This approach would cost around US$20 billion every year until 2050.

By then, the energy company would have less than 10% of capital invested in oil and gas operations, with the rest allocated to clean energy instead.

BP lifted almost 2% on Thursday at 474p while Shell (LON:RDSa) jumped 1% to 2,581p.