(Bloomberg) -- Equinor ASA will downsize its renewables unit and is beginning discussions with unions regarding employees at the division.
The Norwegian company becomes the latest European oil and gas producer to adjust its clean-energy strategy as the industry faces the dual challenge of rising costs and low returns. Equinor will prioritize profitability over growth and undertake fewer renewables projects in fewer markets, according to an internal memo seen by Bloomberg.
“Renewables is in a down cycle, and the next two to three years will be about getting in shape to compete effectively when the industry rebounds,” Pal Eitrheim, head of the renewables unit at Equinor, said in the memo. After having scrapped projects with “poor economics,” the company needs to do “even more to adjust to the new realities we are facing.”
A spokesperson for Equinor declined to comment.
European oil majors have been under pressure from investors for several years to boost cash returns by focusing on their core petroleum business. At the same time the renewables sector — particularly offshore wind — has struggled with rising interest rates, supply chain bottle necks and cost inflation.
BP Plc said in in 2023 that it would pump more oil and gas than previously planned and pause its expansion in offshore wind, while Shell Plc has scaled back plans to cut CO2 emissions and invest in renewable power.
For employees at Equinor, the company has started a “dialogue with union representatives” to settle on a process, according to the memo. Engagement with UK employees will be through Works Councils and staff will be invited to town hall meetings to discuss the changes, according to the memo. The first of these was held on Thursday afternoon.
While Equinor has remained committed to its long-term renewable targets, the company is in a phase where it “must shift priorities from growth and optionality to increased emphasis on profitability,” Eitrheim said in the memo.
This year is due to be “the busiest year of execution ever” for Equinor’s renewables division, according to the memo, as the company proceeds with three large-scale wind projects — Dogger Bank in the UK, Empire Wind 1 in the US and Baltyk 2 and 3 in Poland.
While these projects remain on track and are forecast to require additional personnel as they proceed, the company is reducing early-phase spending and administrative costs, and “simplifying” its approach, according to the memo.
The company’s renewables unit has suspended business development activities in France, Spain, Portugal and Vietnam and is assessing its entire Americas portfolio to make cost-cutting measures where possible. Depending on the outcome of license awards in Australia, adjustments to projects will be made in that market as well, according to the memo.
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