From increasing shareholder activism to shifting political tides, Big Oil has reached a tipping point in its fight against climate change. But the industry can remain resilient in the face of such strong headwinds while playing an active role in the global energy transition.

In May 2021, the IEA warned that there can be no new investments in oil and gas if the world is to reach net zero by 2050. One week later, three of the world’s largest oil and gas companies—Shell, ExxonMobil and Chevron—were dealt crushing blows as boardrooms and courtrooms alike mandated they set more aggressive emission reduction targets.

Praised by climate activists as a much-needed wake-up call for the industry, these landmark actions signalled that the pressure is mounting on oil and gas companies to respond to the climate crisis— and to do so quickly.

Scrutiny of Big Oil is nothing new—for decades the industry has faced backlash for its role in contributing to climate change. But the conversation has now shifted gears, with climate action at the top of political, corporate and investor agendas across the globe.

Big Oil continues to hold significant political and economic capital

The global political landscape is changing. With all eyes on Cop26 later this year, governments are strengthening their climate strategies, focusing heavily on divesting from fossil fuels and scaling up renewable technologies.

In the last six months alone all G7 countries pledged to phase out coal by the end of this year. And in Germany, amendments to the Federal Climate Protection Act have brought forward the country’s climate targets by five years, with climate neutrality to be achieved by 2045.

Future-proofing Big Oil

Despite its recent challenges, Big Oil continues to hold significant political and economic capital, making the industry a powerful force in driving change. Its resources, expertise and innovative mindset are precisely what is needed to build a low-carbon economy. But its business model must be adapted to align with the Paris Agreement goals and avoid climate risk—a move we are already driving forward at Raffinerie Heide.

Our ambition is to transition from a traditional oil refinery to a ‘green refinery’. This pivot requires us to explore a range of decarbonisation solutions, including wind, solar, battery value chain, carbon capture and, notably, hydrogen—which is at the heart of our transition strategy.

Through our HyScale100 and Reallabor Westkueste100 projects, both of which have been selected for funding by the German government, we are working collaboratively with our cross-industry partners—including the likes of French utility EDF and Danish energy company Orsted—to develop green hydrogen production on an industrial scale. Green hydrogen will be a critical fuel of the future and has the potential to significantly decarbonise heavy-polluting sectors such as chemicals, heavy industry, heat and transport.

1mnt/yr – CO₂ savings foreseen at Raffinerie Heide from green hydrogen

We envisage the utilisation of green hydrogen at Raffinerie Heide to save 1mn t CO₂ per year. By adapting our business model and industry skillset to invest in climate-friendly solutions, we are not only minimising the impacts of our business on the environment, but also securing our place as a ‘refinery of the future’—offering valuable lessons for Big Oil to follow.

Opportunity in the transition

No singular government, company or sector can achieve net zero alone. To be successful, all possible technologies and innovations must be championed across industries. Although Big Oil’s transition pathway will be challenging, it will also be one of opportunity. By leveraging its capabilities to become a leader in the energy transition—mirroring the steps we have taken at Raffinerie Heide—  Big Oil will maintain its social licence to operate, while working alongside global leaders to fulfil climate objectives and build a cleaner world.

Juergen Wollschlaeger is the CEO of Heide Refinery