As we talk about the fossil fuel industry, there is a noteworthy disparity in the approach between the top six European producers and other global players when it comes to climate change. European firms have pledged to significantly reduce their carbon footprints alongside investing into innovative low-carbon technologies. These strategies are a response to the new European Green Deal. Conversely, American oil and gas companies as well as Russian, Chinese and Saudi nationalised companies seem not to take the same path.
The European group represents just 7% of global oil production (7m barrels/day). ExxonMobil and Chevron, accounting for 4% of global production (4m barrels/day), show no sign of cutting back exploration activity and have reaffirmed investments in wells and refineries to meet future demand growth. State owned oil producers, 58% of global production, whose aims are to maximise revenue, operate in a field completely immune to divestment campaigns and have a limited regulatory framework.
EU
- Shell – Carbon emissions target of 2%-3% by 2020 compared to 2016 levels. A reduction of the net carbon footprint of 20% by 2035 and by 50% by 2050. Targets will be linked to remuneration of 150 executives and to the further 16,000 employees.
- BP – Net zero across their entire operations by 2050, net zero on an absolute basis from their upstream production by 2050 and 50% reduction in carbon intensity of the products they sell by 2050. Increase proportion of investment into non-oil and gas activities over time (currently spending 3% of annual capex on low carbon ventures, below the level of peers).
- Eni – Total GHG emissions to reduce by 80% by 2050 across all divisions. Gas and oil production are expected to peak in 2025. Aim to develop 55GW of renewable energy capacity by 2050.
- Equinor – GHG emissions are expected to be near net zero in 2050, 70% reduction by 2040 and 40% reduction by 2030. Plan to invest $5.4bn by 2030 to develop new framework and investments in the onshore electricity grip in Norway.
- Total – GHG emissions already 25% lower compared to 2010 levels. Zero flaring objective by 2030. Portfolio expected to be 20% low carbon activity by 2035. $1bn fund to develop new technology vis-à-vis climate change.
- Repsol – First company of this sector to make net zero commitment. Reduction of 10% by 2025, 20% by 2030 and 40% by 2040. Large investments into low-carbon activities (3,000 MW in 2020 to 7,500 MW in 2025) and expansion in renewables.
US
- ExxonMobil: 10% GHG emissions reduction at Imperial oil operations by 2023. By end of 2020, 15% reduction of methane and 25% reduction in flaring intensity. Capital spending on operations and exploration is set at $30bn – $35bn each year for the period 2020-2025. Very limited carbon capture and biofuels schemes.
- Chevron: Aim to reduce GHG emissions by 5%/10% in oil operations in 2023. Reduce methane emissions by 25% and reduction of 30% in flaring intensity by 2023 from their 2016 levels. $1bn invested into carbon capture projects. Capital spending on operations and exploration is set at $18bn – $22bn each year for the period 2020-2023.
State run
- Saudi Aramco: No set targets for reduction in GHG emissions. No information as to whether they have reduced their methane emission despite pledging to do so.
- Petrobras: No set targets for reduction in GHG emissions. Has experienced an organic reduction in GHG emissions due to new product mix. Over the 2019 to 2023 period, 11% of R&D will be directed into low carbon technologies.
- Rosneft: No set targets for reduction in GHG emissions. Investment plan of $5bn over the next 5 years into projects to restrict carbon emissions.
The aforementioned companies with the exception of Rosneft are members of the OGCI (Oil and Gas Climate Initiative) which represents 32% of global oil and gas production. A $1bn fund has been launched to invest into low carbon technologies over next ten years between them, a fraction of their exploration budgets. Members are required to reduce their methane intensity target by just 0.25% by 2025.
Despite the ambitious targets set by the European cohort, they only represent a marginal amount of global production. Significant changes carried out among the wider sector are needed in order to attain the objectives of the Paris Agreement. Ultimately, global demand and unilateral regulation will be the true determinants for influencing the industry. The role of companies and investors is vital to encourage change.
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