Oil giants are facing less pressure to diversify as the Ukraine war puts fresh attention on energy security and investors enjoy rewards from the majors’ oil and gas profits, some analysts say, Ben writes.

The big picture: Wood Mackenzie experts say governments have moved security above sustainability on the agenda.

  • “Investors have aligned — ‘peak ESG’ was 2021, and the pressure on oil and gas companies has, for the time being, eased,” they said in a recent note.
  • An NYT dispatch from the huge CERAWeek by S&P Global conference last week finds industry “mojo” around their core businesses.

Driving the news: A new HSBC Global Research note sees an industry “course correction” beyond BP’s recent move to scale back targets for cutting oil and gas output.

  • BP’s share price jumped after last month’s announcement.
  • “The move is evidence of the scale of the change in investor sentiment from two years ago, when ESG/climate issues were at the forefront of investor concerns (at least in Europe).”
  • There’s a “broad consensus that oil and gas will still be required for decades.”

Zoom in: HSBC and Woodmac both see more “convergence” between European heavyweights and U.S. majors Exxon and Chevron, which have not wavered from their focus on oil and gas.

  • Italy’s Eni has “shifted away from talking about a decline in volumes beyond the peak around 2026” and is now targeting an “extended plateau” from 2026 to 2030, per HSBC.

What’s next: HSBC is looking to Shell and TotalEnergies’ investor presentations next week, which could provide a “flavor of how European majors are (or aren’t) rethinking their approaches.”

  • Shell spokespersons, however, say their Capital Markets Day in June is when they delve into transition strategy.

Yes, but: Oil companies reject claims they’re backing off climate commitments.

  • BP, while increasing fossil fuel investments, is also boosting spending by billions of dollars in low-carbon areas.

State of play: There are limits to how much the European players are really aligned with Exxon and Chevron.

  • U.S. majors’ low-carbon spending is a “fraction” of European counterparts, HSBC states.
  • HSBC and Woodmac note Exxon and Chevron haven’t joined European peers in setting targets for “Scope 3” emissions — that is, emissions from use of their products in the economy.

Zoom out: “In the long run, the world is still headed towards net zero and so is Big Oil,” per Woodmac.

  • By the 2030s, energy security will be more “aligned” with sustainability, with movement away from fossil fuels to “domestically produced low-carbon energy.”
  • Incentives in the U.S. climate law, they say, are among the forces that will push companies to boost low-carbon investments.