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By Sarah Kent 

LONDON--Ten of the world's biggest oil companies plan to invest an average of $100 million annually over the next 10 years in low-carbon technologies, the companies said Friday.

The Oil and Gas Climate Initiative, which includes state-owned Saudi Arabian Oil Co., Royal Dutch Shell PLC and BP PLC, said its investments will initially focus on carbon capture and storage technology and efforts to reduce methane emissions from the oil-and-gas industry. Those efforts could significantly improve the prospects for the sector in a lower-emission world.

The pledged funding is the latest sign of the oil industry's efforts to respond to pressure from governments, activists and increasingly investors. The announcement came on the same day that a climate treaty negotiated in Paris last year by more than 200 countries to cap emissions and curb global warming comes into force, potentially limiting the use of fossil fuels such as oil and gas.

Environmental groups said the oil companies' pledge of $1 billion over a decade wasn't close to enough and represents a tiny fraction of the group's annual spending on finding and producing fossil fuels.

"They are committing just $100 million a year each for 10 years," said Jeremy Leggett, chairman of the Carbon Tracker Initiative. "Given that the world has to mobilize trillions of dollars a year for clean energy within that time frame, if the Paris goal is to be realized, this is quite simply nowhere near good enough," he said.

The consortium said its joint investment plan represents " an unprecedented level of oil-and-gas industry collaboration and resource-sharing."

The companies are increasingly looking toward a future in which demand for their core products--oil and gas--could begin to wane.

Total SA owns one of the largest solar companies in the world and earlier this year bought French battery maker Saft Group SA. Shell has created a "new energies" division to invest in renewables and low carbon power, and even Saudi Arabia is looking into developing solar power within the Kingdom.

Shell's Chief Financial Officer Simon Henry caused a stir earlier this week when he said the company believes demand for oil could stop growing within the next two decades and as soon as five years. Known as "peak demand," the arrival of the day when consumer demand for oil begins falling has become a central worry for the fossil-fuel industry.

"We've long been of the opinion that demand will peak before supply," Mr. Henry told analysts Tuesday. "And that peak may be somewhere between five and 15 years hence, and it will driven by efficiency and substitution."

With that view in mind, many big oil companies have become more vocal about their efforts to adapt to a lower-carbon world and diversify their businesses, while also emphasizing that oil and gas will remain vital energy sources for decades to come.

The Oil and Gas Climate Initiative was created in 2014 with United Nations backing to find ways the industry can support efforts to tackle climate change while continuing to produce its reserves. Its members include giant state companies and Europe's biggest oil producers, but not the biggest American companies like Exxon Mobil Corp. and Chevron Corp. Together they pump about a fifth of the world's oil and gas output.

Write to Sarah Kent at sarah.kent@wsj.com

(END) Dow Jones Newswires

November 04, 2016 09:20 ET (13:20 GMT)

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