We continue to be deluged with corporate advertising claiming that the multinational oil companies are in the vanguard in promoting the benefits of renewable energy. The latest ads from BP, the “beyond petroleum” company, are a case in point. They say that a combination of Oil+Gas+Wind+Solar+Biofuels will give the world a “dependable energy future”. True of course, although they conveniently miss out nuclear power – presumably because there is certainly no chance that BP will go nuclear.

But the reality is that BP, Shell, Exxon and the rest are just as ill-equipped to be players in the renewable energy sector as they would be (and in Shell’s case once were) in Nuclear Power – and the constant stream of advertising that suggests otherwise is disingenuous in the extreme. The oil majors are pretty good at what they do best – looking for, discovering, farming, transporting and refining hydrocarbons. Over decades they have built up leading edge competencies in all of these areas. But none of them has much of a track record in diversification.

Take Shell for example. Shell still has a petrochemicals business it is true but this is a shadow of its former size and breadth with many sub-sectors of the chemicals business, like agrichemicals for example, long since having been disposed of. But there is a logic to Shell’s chemicals business – it links in with the mainstream hydrocarbons business pretty closely and in a sense the production of commodity products like Ethylene, for example, is not that much different from producing petrol or aviation fuel. But where the hydrocarbon stream is in no way involved Shell has been much less successful.

The list of Shell businesses which have been started and then disposed of is a long one and it proves the point. Metals (Billiton); Coal (Shell Coal); Renewable forest cultivation (Shell Forestry); Power Generation (Intergen); much of the Solar business (Shell Solar) and Nuclear (a Joint Venture with Gulf in the USA) are all businesses which were once lauded as examples of Shell’s diversification focus, but all of which no longer exist as Shell operations.

The reality is that there is actually no logical reason at all why oil companies should be good at Renewables. The skill set necessary to build, say, a substantial wind energy business just does not naturally exist in an overwhelmingly hydrocarbon experienced company like Shell or BP. True they can if they wish buy in those skills – but why would this be a preferred route either for the company or for society at large? Surely it makes far more sense for a wind energy business to be built up by focused and specialised wind energy experts? In a Shell or a BP Renewables will always be on the fringes of the business and, furthermore, be in direct conflict and competition with the core hydrocarbons business from time to time. If you are seeking new outlets for your capital investment programme wouldn’t you favour, say, a new oil or gas field where you are in your comfort zone, rather than the problematic world of wind energy about which you know nothing and for which no corporate memory exists in your company?

Oil companies claim to be good innovators – and over time this is true so long as that innovation builds on the areas of known strength. Shell’s strength in Liquefied Natural Gas is a good case in point built as it is on some highly sophisticated technological innovations all the way along the product flow from production to consumption. But building and running wind turbines is a wholly different matter. Shell and the rest should stop pretending that they have something exceptional and distinctive to offer in this area – and stick to their hydrocarbon knitting.

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