Industry Trend Analysis - Investment Interest In Low-Carbon Space To Continue - 22 JAN 2018


BMI View: Investment into renewable energy and low carbon technology by the oil and gas majors will continue to strengthen through 2018, albeit with capital allocated in this area still significantly below volumes committed to conventional business activity.

Over 2018, we expect to see continued capital allocation from traditional oil and gas companies to the renewable and low carbon technology space. We expect to see social, investor, and regulatory pressure to lower emissions and reduce environmental footprints continue to intensify. Similarly we expect to see forward-looking market players increase their offerings and expertise in the 'green-space' and begin to diversify corporate strategy to position for a low carbon future.

Capital investment by oil and gas companies into the renewable and green tech space remains relatively small when compared to capital expenditure committed to conventional business activity (see ' 2degC Transition Series: O&G Diversification Remains Muted ' , August 3 2017). However, as the cost of renewable technology continues to drop, technological innovation persists and green policy momentum continues, O&G companies will increasingly look to allocate capital towards gaining market share in renewable energy and low carbon technologies. This will manifest both through mergers and acquisitions, but also through in-house research and development. Importantly, oil and gas companies will continue to favour low carbon technology and innovation that is compatible and less disruptive to traditional core business models (see ' 2degC Transition Series: O&G Companies Must Adapt Or Decline ' , September 15 2017).

Lower Value Transactions Will Continue Through 2018
Oil & Gas Company M&A Into Alternative Energy Companies, USDmn
Source: Bloomberg.

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