Oil Price Crash Opens A Window Of Opportunity For Renewables | OilPrice.com
https://oilprice.com/...Energy/Oil-Price-Crash-Opens-A-Window-Of-Opportunity-For-Renewables.amp.html
Average returns for wind and solar are typically in the 5-10 percent range. Oil and gas project returns, at $60 oil, are 20 percent on average
At $35 oil, however, the average IRR for oil and gas projects slumps to the renewables return range—5 to 10 percent, according to Wood Mackenzie
The low oil prices will severely constrain cash flows for Big Oil, which switched back to survival mode just four years after the previous oil price collapse
...
Following this month’s price crash, Big Oil’s immediate thoughts will be to preserve dividend payments with negative cash flows at $30 oil. So they are slashing CAPEX and deferring investments in basically every part of their portfolios.
“All discretionary spend will be under review – that includes additional budget allocated for carbon mitigation,” WoodMac’s Kretzschmar said.
According to Wood Mackenzie’s corporate analysis team, the oil majors Exxon, Chevron, Eni, Shell, BP, Total, and Equinor have an average corporate cash flow break-even price of $53 a barrel for 2020. If Big Oil aims to achieve cash flow neutrality at $35 Brent Crude this year, it would need to slash total spending by 41 percent compared to 2019, according to WoodMac’s analysts.
...
The coronavirus pandemic is disrupting all supply chains right now, including renewable energy targets and deadlines for capacity installation. But the second oil price collapse in just five years is a point for the camp of analysts and experts who argue that lower but more stable returns from renewables is the way to go in the energy transition.
Experts at the Atlantic Council Global Energy Center say that the COVID-19-induced global downturn and potentially low-for-longer oil prices could hamper the energy transition in the short term as governments will be focused on protecting their economies and consumers from the recession/depression.
But the pressure for decarbonization will not go away once all this chaos is over – it could even intensify calls for ditching fossil fuels in an increasingly volatile and politically-charged global oil market. This would be an opportunity for increased investment in renewables.