Equinor Capital Markets Update: Doubling down on a loss-making segment

The Australasian Centre for Corporate Responsibility (ACCR) is responding to Equinor’s annual results and Capital Markets Update at which Equinor announced a:

• 12% reduction in adjusted operating income for the year

• 6% increase in its 2030 oil and gas production target, based on:

  • minor reductions in its Norwegian Continental Shelf production
  • a 40% increase in international production, which is 15% greater than last year’s Capital Markets Update

• reduction in its 2030 renewables targets from 12-16GW to 10-12GW.

Commenting on the results, Martin Norman, Investor Engagement Lead, ACCR, said:

“Today’s Capital Markets Update was another missed opportunity for Equinor to acknowledge the problems with its international oil and gas investments and finally cease allocating capital to further developments.

“International expansion has made Equinor’s investors, including the Norwegian people, poorer. Equinor should have stopped allocating capital to new international projects long ago.

“For over 20 years, Equinor’s oil and gas investments outside of Norway have delivered woeful returns. Not just lower than its highly profitable Norwegian projects but barely breaking even in nominal terms.

“We’ve found that Equinor’s $103 billion capex investment in international oil and gas has delivered $54 billion less than a comparable investment in Norway’s sovereign wealth fund would have. When considering the Norwegian state’s current stake in Equinor, this implies that Norwegians are $36 billion poorer due to Equinor’s decisions.

“The scope 3 emissions associated with Equinor’s international portfolio are five times larger than all of Norway’s domestic emissions. Continued international oil and gas growth will inevitably exacerbate this problem.

“Ahead of its 2025 AGM, investors will be watching closely to understand how Equinor’s next climate plan will meet the expectations of its majority owner and bring its portfolio into alignment with the goals of the Paris Agreement. Our research shows that ceasing international development and halting all exploration would move Equinor towards Paris alignment without diluting shareholder value.”

Background

ACCR’s recently published research, The road not taken: Equinor’s alternative to international oil and gas growth, found that:

• Despite Equinor spending $103 billion expanding its oil and gas portfolio outside of Norway between 2001 and 2023, the international portfolio has only generated $2 billion in nominal terms.

• Equinor’s international oil and gas projects have emitted 5 times Norway’s domestic emissions and are forecast to emit twice as much again by the end of the century.

• If, instead of pursuing international oil and gas growth, Equinor had paid out higher dividends to shareholders:

  • investments in the Government Pension Fund Global equities (or a similar diversified equities fund) would have generated $54 billion more value than Equinor's international oil and gas assets
  • which means the Norwegian state would have been $36 billion (400 billion NOK) better off.

• The company says it has been ‘radically improving’ and ‘optimising’ its international investments since 2013. However, our modelling shows its international investments since this time have lost money – more than $1 billion in nominal terms. This raises significant questions about the credibility of Equinor’s ability to reform its international portfolio.