Big Oil’s bad week

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The largest integrated oil and gas companies in the world are the so-called supermajors or more commonly “Big Oil”. In decreasing order of market capitalization, these companies are ExxonMobil

XOM
, Chevron

CVX
, Royal Dutch Shell, TOTAL SE and BP.

Because global oil consumption makes one of the greatest contributions to air emissions of carbon dioxide from any source, Big Oil is often blamed for climate change.

There have been various campaigns targeting the operations of these companies (for example, when activists try to stop drilling or construction of pipelines) and their finances (for example, targeting banks that lend them money and the institutions that invest in it).

Last week, three Big Oil club members each received blows over the status quo of their businesses.

The Shell decision

A Dutch court has ordered Royal Dutch Shell to cut its CO2 emissions by 45% from 2019 levels by the end of 2030. It was the first time a court has ordered a private company to cut its carbon dioxide emissions.

The lawsuit was filed in 2019 by Milieudefensie, the Dutch branch of Friends of the Earth. More than 17,000 Dutch citizens and six environmental groups joined the lawsuit, arguing that Shell’s business practices violated the “unwritten standard of care” which required it to protect Dutch residents.

The court agreed with the plaintiffs, ruling in part:

“The court considers that the CO2 emissions for which RDS can be held responsible by their nature constitute a very serious threat, with a high risk of damage to Dutch residents and inhabitants of the Wadden region and with serious impacts on human rights. This applies to present and future generations. The overriding common interest served by complying with the reduction obligation outweighs any negative consequences that RDS may suffer as a result of the reduction obligation as well as the commercial interests of the Shell group, which are served by unhindered preservation or even an increase in CO2-generating activities. “

Shell had previously pledged to reduce the carbon intensity of its products by 20% by 2030 and achieve zero net carbon emissions by 2050. The court ruled that was not fast enough.

Shell has announced that it will appeal the decision to the Supreme Court of the Netherlands.

ExxonMobil loses a vote

On the same day as the Shell decision, ExxonMobil unexpectedly lost a vote on board member seats. A small hedge fund called Engine No. 1 toppled at least two of ExxonMobil’s board members. The vote count continues, but it’s possible that another of the No.1 Engine nominees could win.

The activist hedge fund had campaigned on the theme of revitalizing ExxonMobil, writing on its website:

“No public company in the history of oil and gas has been more influential than ExxonMobil, and yet the company has failed to scale with the industry transition, resulting in significant underperformance at detriment of shareholders. The energy industry and the world are changing. To protect and enhance shareholder value, we believe ExxonMobil must change as well. We believe that for ExxonMobil to avoid the fate of other once iconic American companies, it must be better positioned for long-term sustainable value creation.

ExxonMobil CEO Darren Woods campaigned against the board challenge, arguing the company was already doing enough to advance low-carbon projects while improving profits.

Shareholders were not surprised by the news, with shares rising 1.2% on the day the voting results were announced.

Chevron also suffers a setback

Chevron also lost a shareholder vote last week. The Dutch campaign group Follow This had proposed to force Chevron to reduce its Scope 3 emissions. These emissions are the result of activities of assets which are neither owned nor controlled by the reporting organization, but which are part of its Scope 3 emissions. value chain. The main category of interest here would be emissions from fuel burned by the end user.

The vote was approved by nearly 61% of Chevron shareholders. Follow Founder Mark van Baal said the vote marks a “paradigm shift” and a “victory in the fight against climate change”.

This is the third success coordinated by Follow This against US oil companies. The group had previously successfully secured votes to cut emissions at ConocoPhillips

COP
and Phillips 66

PSX
.

Moody’s rating agency

MCO
weighed in on the string of decisions and votes against Big Oil, indicating that it poses a credit risk to the energy sector. Moody’s warned that this would lead to higher production costs and greater challenges in accessing capital to support these businesses.



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