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Are Renewables An Attractive Investment For Oil Companies?

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Pressured by investors who expect to see higher returns after the oil price downturn, oil and gas companies are finding themselves without much incentive to invest in renewable energy technologies, according to fund managers and oil executives who spoke to Houston Chronicle at the CERAweek by IHS Markit in Houston.

While energy companies are constantly pressured by the environmental movement to clean up their act, they are facing increased pressure from investors to churn profits—so investing in renewables, with unknown technology and regulations, is still too much of a gamble for the oil and gas companies, according to Marcel van Poecke, the head of Carlyle International Energy Partners, a fund launched in 2013 with US$2.5 billion that targets global opportunistic investments in oil and gas outside of North America.

“A lot of investors want to be in renewables, but they want the same returns as in oil and gas,” van Poecke told Houston Chronicle. “But we can’t give them that,” he noted.

According to Maynard Holt, the chief executive of the Houston-based energy consulting and investment firm Tudor, Pickering, Holt & Co, investors in energy prefer technology that boosts oil and gas production and streamlines operations.

“Oil and gas is obviously the reigning fuel king,” Holt said at CERAweek, as quoted by Houston Chronicle.

“We have to be very careful to make money or advise [clients] to make money. We can’t fund things that are so many steps ahead that you don't know if they make money,” Holt said.

An executive at a U.S. oil company also weighed in. According to John Hess, the chief executive of Hess Corp, investors will be seeking profits this year after U.S. drillers have more than doubled the rig count but have disappointed shareholders with returns. Related: Is This The Death Of The Dodd Frank Act?

Capital discipline and returns to shareholders are expected to be the main themes among U.S. oil firms and investors this year.

Shareholders are pressuring oil companies for more discipline and more profits, Dan Pickering, Managing Director at Tudor, Pickering, Holt & Co, told CNBC.

“They are buying companies that are more disciplined, and they are selling companies that are less disciplined. There would be more spending if companies could do whatever they wanted,” Pickering said.

By Tsvetana Paraskova for Oilprice.com

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