Diversifying Interests

 By Peter Ward

The big players in the oil and gas industry are increasingly looking to diversify their interests, and a lot of them are turning their attention towards renewable energy…

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Almost half of senior oil and gas professionals expect their businesses to diversify into, or invest more in, opportunities outside of the industry, according to a survey by DNV GL. “Diversification is definitely something that every player in the industry is looking at,” Statoil’s Eirik Wærness is quoted as saying in the report. “Whether it is to diversify across the value chain or into other energy sources, companies are trying to make future cash flow less dependent on variations in the oil and gas price.” Manufacturers are the keenest to diversify into other areas, with 61 percent likely to invest in areas outside oil and gas. Meanwhile, 57 percent of midstream companies said they were going to look at other industries and 40 percent of primarily upstream companies were also looking away from oil and gas in 2017. When oil and gas companies choose to switch up their business mix, renewable energy is an obvious path to take. The DNV GL study says that it makes particular sense now as prices in renewables have fallen to the extent where subsidies are no longer necessary for them to be profitable as energy sources.

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In the survey, 26 percent of respondents expect their investment in renewable energy to increase in 2017, and 41 percent say their company has a good understanding of how to assess investments in that space. “Companies across the spectrum are redesigning themselves as energy companies—not just as oil and gas companies,” says the World Energy Council’s Christoph Frei in the report. “Many have started talking about their ‘energy blend’—increasing the importance of renewables and electricity.”

Historically, oil and gas companies have invested in renewable energy sources that are most similar to the work they have previously done, such as biofuels. Between 2005 and 2013, major oil companies invested more than $9.4 billion in ethanol and other plant-based fuels, according to Bloomberg New Energy Finance. But now the likes of wind, solar and other clean energy sources are becoming more viable and are attracting more interest from the oil and gas industry. Renewable were the top source for new capacity on the U.S. electrical grids last year, while global solar capacity is expected to double by the end of 2018, and wind power is set to increase by 50 percent.

SEE MORE: The Big Business of Biogas by Michelle Leslie

about the author
Peter Ward
Business and technology reporter based in New York. MA in Business Journalism at Columbia University Journalism School 2013. Five years experience reporting in the U.S., the U.K., and the Middle East.