Is big oil serious about going low carbon?

Is big oil serious about going low carbon?

BloombergNEF January 19, 2021

This analysis is from BlooombergNEF. It appeared first on the Bloomberg Terminal.

Executive summary
The global oil industry is facing pressure to decarbonize. Regulations and reputational risks have forced most oil majors to take action to reduce their own emissions, such as curbing methane flaring, sequestering carbon dioxide and sourcing renewable power for oil and gas facilities. Yet a much more significant trend is now underway – big oil companies are setting targets and making investments to decarbonize the energy they sell to consumers. Doing so puts the industry on a pathway to not only lower carbon production, but also lower carbon products. This Research Note assesses the ambitions being laid out by the world’s biggest oil producers and the potential decarbonization pathways for the oil industry that are beginning to emerge.

By the numbers

50-65%: Scope 3 emissions intensity reduction goals announced by Shell, Total, Eni and Equinor.

190GW: Wind power capacity required to achieve a 50% reduction in scope 3 emissions intensity per million barrels of oil equivalent per day.

8%: Percentage of global oil production covered by scope 3 targets.

Decarbonization-related targets and initiatives for major oil and gas companies

Source: BloombergNEF, company reports

To view the chart, click on the link:  https://www.bloomberg.com/professional/blog/is-big-oil-serious-abou...

Note: Blue and green indicate low carbon targets and memberships. See the Appendix in the note for more detail on each company’s targets.

  • Direct and indirect emissions (known as ‘scope 1’ and ‘scope 2’) from global oil and gas operations are estimated to be 5.2Gt CO2-equivalent, or 15% of total energy sector emissions, according to the International Energy Agency.
  • The flaring or venting of methane and naturally occurring CO2, as well as energy consumed in the production, transport and refining of crude oil are the major sources of oil sector scope 1 and 2 emissions. Most oil companies have made commitments to reduce their operational CO2 footprint, with a focus on reducing flaring/venting, improving operational efficiency, using renewable and alternative energy and employing carbon capture technology.
  • Focusing on scope 1 and 2 emissions, however, does little to answer the strategic challenge of the extent to which Big Oil can adapt to a fundamentally lower carbon energy mix. Disclosure initiatives such as the Task Force for Climate Related Financial Disclosures (TCFD) pose this question, calling on businesses to explain to investors how they would adapt to a scenario where emissions decline in line with the requirement for a sub-2 degree Celsius global temperature rise.
  • In response, a number of European oil companies that together account for around 8% of global oil production have committed to reducing not only their operational emissions, but the emissions that result from the end-use of energy products sold to consumers (so called ‘scope 3’ emissions). This signals an intention to pivot toward producing and selling lower carbon energy products.
  • The ‘net-zero’ scope 3 targets announced to date reflect different visions of the future for respective companies. Intensity targets, such as the headline goal announced by Royal Dutch Shell, measure success based on the emissions per unit of energy sold to consumers. Intensity targets imply that low carbon energy production will increase, but also envision the retention of significant oil, gas and petrochemical businesses.
  • On the other hand, absolute net-zero goals imply that companies, such as BP, will in essence cease to be oil and gas producers. This is because it is near impossible to decarbonize the production and use of fossil fuels beyond the use of carbon capture and storage (CCS), which can play only a limited role in the decarbonization of oil consuming sectors. An important caveat is the role of offsets, which several companies plan to use in order to meet at least part of their net-zero goals.
  • Notwithstanding the different strategic visions implied by the net-zero targets announced to date, the oil and gas sector is faced with a limited number of options to reduce scope 3 emissions. Natural gas and chemicals will be key to reducing scope 3 emissions over the next decade, while longer-term it will be necessary to focus on CCS, in addition to non-oil and gas technologies and products, such as biofuels, renewable power generation and retail and consumer businesses.

BloombergNEF (BNEF), Bloomberg’s primary research service, covers clean energy, advanced transport, digital industry, innovative materials and commodities. BNEF helps corporate strategy, finance and policy professionals navigate change and generate opportunities. Explore more content on the BNEF blog.

 

Views: 380

▶ Reply to This

Replies to This Discussion

Permalink Reply by John Denison on January 27, 2021 at 6:01

It appears the answer to your thread question is yes. WSJ exclusive just posted:

Exxon Planning Board, Other Changes Amid Activist Pressure

Exxon Mobil Corp. XOM +0.44% is preparing to make changes to its board and adopt further measures to reduce its carbon footprint as the beleaguered energy giant faces pressure from a pair of activist investors.

The company is discussing adding one or more new directors to the board and stepping up sustainability investments, people familiar with the matter said. Irving, Tex.-based Exxon, which has been reducing its overall capital spending, could also curtail it further.

Exxon is in talks with one of the activists, D.E. Shaw Group, which may end up supporting the moves, some of the people said. Meanwhile, the other, Engine No. 1 LLC, is moving forward with a planned proxy fight for four board seats, it said Wednesday.

Permalink Reply by Steve P on January 27, 2021 at 6:11

Exxon, in which, by the way, I own stock, is finally coming to the table.  I notice on my Facebook page, I routinely see an Exxon ad which has an aerial photo to the National Renewable Energy Lab that talks about Exxon’s investments in renewable energy.   It’s Board and top management have been pretty resistant to diversifying.

Permalink Reply by Skip Peel - Mineral Consultant on January 27, 2021 at 6:38

John and Steve, I agree with you comments.  I would point out that XOM is late in getting to this point but I think it will influence any other super-majors/majors that are on the brink.  Where XOM goes, the rest of the industry eventually follows.  The industry is not down to the last seat in a game of environmental chairs but those that hesitate much longer may find that their seat puts them far behind the competition.  Access to capital going forward is at stake.  Investors, banks and private equity will likely only work with those companies that have gone all in on Environmental, Social, and Governance (ESG).

The rational course at this point is not to punish the industry but to set it on a glide path to a soft landing that protects as many jobs as possible while mitigating all the environmental hazards that might be left behind when fossil fuels are no longer profitable to produce.  Over that period federal and state governments should be working hard to identify business lanes that suit their natural and human resources.  By the time fossil fuel jobs end, we must have replaced them with clean energy and advanced technical jobs.

I have been doing some lobbying lately here in LA in this regard.  There are obvious paths if we will embrace them now and find ways to incentivize investments.  New agricultural products such as Cross-Laminated Timber (CLT) and manufacturing/supply/maintenance opportunities such as offshore wind.  If we protect our environment, especially the coastal regions, we will always be a Sportsman's Paradise and a tourist destination.  We must diversify our economy with a view to the 21st. Century. The politics will be a struggle but we really don't have a choice.

Permalink Reply by Steve P on January 27, 2021 at 7:39

I have read a few articles on ESG investing.  Some of them point out that ESG funds have not performed as well as traditional funds.  There will be litigation over this at some point, likely soon, because pension fund managers have a “duty” to maximize returns on behalf of fund owners, and if ESG funds don’t meet that test, then there could be repercussions.  

I can invest my money however I wish, but it I’m investing someone else’s money, my obligation extends beyond my personal preference or beliefs.  So, there’s a limit on how far ESG investing will extend.

Permalink Reply by Skip Peel - Mineral Consultant on January 27, 2021 at 7:53

I am not referencing ESG funds.   I am saying that investors look closely as the ESG policies of companies, particularly O&G companies, and whether a company pays lip service to those policies or pursues them seriously.

Permalink Reply by Skip Peel - Mineral Consultant on January 28, 2021 at 2:30

Rethinking ESG: Enverus Releases Analytics Empowering Industry and Investors to See the Unseen

Objective, accurate and transparent technology platform poised to become the new standard in ESG benchmarks and scoring


Media Contact: Jon Haubert | 303.396.5996

Austin, Texas (January 26, 2021) — Enverus, the leading energy SaaS company, has released ESG Analytics, an objective, accurate and transparent evaluation standard for environmental, social and governance (ESG) benchmarks and scoring for the energy industry.

As the topic of ESG evolves, much like the energy industry itself, there are opportunities to rethink ESG. Wall Street is sending a clear message that ESG performance will be a fundamental input into its investment process. The investor community is pushing operators to disclose details related to greenhouse gas (GHG) emissions, diversity and inclusion, and other corporate governance initiatives in a more responsible way. The challenge that both the energy industry and investment community have faced is that current ESG rankings are created by generalists, with too much subjectivity, in ways that are over-reliant on public and self-reported data, and without creating meaningful comparative analytics. That is, until now.

For more than two decades, Enverus has cultivated both public and proprietary energy data to create industry-leading analytics and insights for its 6,000 customers. Enverus’ ESG Analytics lets users track emissions intensity, flaring rates, land use and water use via satellite-enabled proprietary analytics alongside industry-leading data related to production and economics. ESG Analytics users can also track the “S” and “G” elements, including pay disparity and diversity, allowing operators to benchmark themselves holistically against their peers, and giving investors the objective, verifiable data necessary to rank investments for the first time.

Enverus is in a unique position to not only create a first-of-its-kind objective scoring system, but to also combine ESG Analytics with operational and economic performance, empowering a complete end-to-end solution for all market participants.

“Just like a consumer’s credit score, preferred rates and terms will be granted to those who both show value and are deemed quantifiable leaders in environmental practices,” said Jeff Hughes, CEO of Enverus. “Objectivity, accuracy and transparency are key, and we bring all three of those elements to conversations around ESG and the future of operator valuations.”

“Corporate incentives have shifted away from production and reserve growth to living within cash flow along with a cleaner energy story,” said Manuj Nikhanj, president of Enverus. “ESG will remain in the spotlight for decades to come and we are leading on multiple fronts with this new standard. It is poised to fundamentally change how operators and investors interact.”

Enverus’ new solution will sit within Enverus Prism™, the company’s hallmark single technology platform.

About Enverus


RSS

Support GoHaynesvilleShale.com

Top Content 

1 Looking Back At The Haynesville Shale - A Retrospective

Looking Back At The Haynesville Shale - A Retrospective
2 Pending Public Oil and Gas Hearings

Pending Public Oil and Gas Hearings
3 Arkansas Smackover Lithium Play

Arkansas Smackover Lithium Play
4 Aethon looks for Buyers of its Haynesville Assets

Aethon looks for Buyers of its Haynesville Assets
5 Notice Emails Are Back! Please review how they work.

Notice Emails Are Back! Please review how they work.
6 Comstock October Presentation

Comstock October Presentation
7 Haynesville Has 12.5 Years of Sub-$3 NatGas Inventory - Enverus

Haynesville Has 12.5 Years of Sub-$3 NatGas Inventory - Enverus

Blog Posts

The Lithium Connection to Shale Drilling

Shale drilling and lithium extraction are seemingly distinct activities, but there is a growing connection between the two as the world moves towards cleaner energy solutions. While shale drilling primarily targets…

Continue

Posted by Keith Mauck (Site Publisher) on November 20, 2024 at 12:40

Not a member? Get our email.

Groups



© 2024   Created by Keith Mauck (Site Publisher).   Powered by

Badges  |  Report an Issue  |  Terms of Service