After Climate Push, Energy Companies Return to Fossil Fuels in Europe
Recent oil and gas deals in Europe suggest that the growing demand for energy may be leading companies to adopt a more pragmatic approach.
TotalEnergies, the French energy giant, said on Monday that it would spend 5.1 billion euros (about $5.9 billion) to acquire a 50 percent interest in mostly natural-gas-fired power plants in several European countries, the latest move by an energy company to return to the once-shunned fossil fuel business.
The company, which is already a sizable investor in electric power, said it would use the gas plants to help balance its portfolio of electricity production from renewable sources like wind and solar farms.
The facilities, which are owned by EPH, an energy company controlled by the Czech industrialist Daniel Kretinsky, are in Britain, Italy, the Netherlands, Ireland and France.
The move appears to be a sign of an increasingly pragmatic approach to energy and climate change by companies, even in Europe, which has been more aggressive pursuing environmental goals than the United States.
The world has changed since the Paris agreement was adopted decade ago with ambitious goals to tackle climate change. It has become increasingly apparent that the agreement’s targets to reduce global greenhouse gas emissions will not be met, and not just because the Trump administration has pulled out of the Paris process.
Energy companies have taken note. “They’ve certainly abandoned the idea that they can lead the world along that kind of pathway,” said Luke Parker, vice president for corporate research at the energy consultant Wood Mackenzie, referring to the Paris agreement.
Analysts say Europe is unlikely to copy the major shifts in energy policy occurring in the United States, but course corrections are likely.
Even Germany, which has long prided itself on being a leader in renewable energy, is building gas-powered generation plants capable of generating 10 gigawatts, a substantial amount.
Some Europeans may resent Washington’s hostility toward efforts to tackle climate change, but the Trump administration’s approach may be influencing European governments to be more receptive to the oil and gas industry and its products.
Exxon Mobil, for instance, recently signed in Athens what some in the industry consider a breakthrough in a preliminary agreement to explore for oil and gas in Greek waters. Trump administration officials, including the energy secretary, Chris Wright, were in attendance.
“The U.S. is proud to partner with Greece as we restore common sense and unleash affordable, reliable and secure energy,” Mr. Wright wrote on social media.
Changes in policy matter, but the shift is also guided by the practical lessons that companies, governments and societies have learned about the difficulties in shifting from a world that runs on fossil fuels to something else.
TotalEnergies has been a large scale developer of solar and wind energy. Over time, though, the company’s executives have concluded that just building solar and wind farms is not a very profitable exercise.
These facilities alone are not sufficient for meeting the growing demand for what the company calls “clean, firm” power from customers like data centers.
Because solar and wind depend on sunshine and breeze, a steadier means of generating electricity is needed, and in many European countries, natural gas fills the bill. “It’s more or less a system that will be 50-50, you know, at the end between gas and renewables,” Patrick Pouyanné, TotalEnergies’ chief executive, told analysts on Monday, describing where his company was heading in Europe.
Mr. Pouyanné noted that the new plants would complement TotalEnergies’ position as one of the largest suppliers to Europe of liquefied natural gas, a chilled fuel transported by ship.
Shell, Europe’s largest energy company, has taken a tougher approach toward renewables on the basis that investment in some of these technologies will not be sufficiently profitable.
The company, which is based in London, said recently that it would pull out of efforts to develop two floating wind farms in British waters and an offshore wind venture called Atlantic Shores in the United States. Shell said it wanted to focus on trading electricity.
Other companies are also seeing a changing energy landscape. The war in Ukraine led to a sharp reduction in natural gas supplies from Russia and increasing dependence on the United States, nudging Europe to nurture its own production, according to some energy executives.
As chief executive of Energean, an oil and gas producer with interests in offshore fields around Europe, Mathios Rigas is well placed to pick up on changes in the region’s approach to energy.
Energean was a key participant in the deal with Exxon to drill in the waters off Greece, a country heavily dependent on imported fuel.
Italy, where Energean holds stakes in three fields, is easing some restrictions on drilling and considering legislation that may fast-track natural gas projects to feed industry.
Mr. Rigas said Russia’s invasion of Ukraine continued to influence the thinking of European governments toward fossil fuels.
“We went through a phase where Italy did not want to give permits,” he said. “Now I think they’re starting to shift, and they’re starting to understand that they need local hydrocarbon production,” he said, referring to oil and gas.