Argus Media Limited

09/20/2021 | News release | Distributed by Public on 09/20/2021 07:15

Chevron integrates low-carbon investment hike

US major Chevron may be speeding up investment in low-carbon technologies that it will integrate to cut the carbon intensity of its oil and gas operations, but its spending plans still trail those of its European rivals and it is yet to unveil a net zero emissions pledge.

Chevron plans to triple its spending on green initiatives to $10bn through to 2028, up from a previously planned $3bn. While it has set out 2030 growth targets for renewable fuels, hydrogen and carbon capture, the expanded investment represents less than a tenth of an overall capital expenditure programme of $15bn-17bn/yr from next year. European majors BP, Total and Shell plan to direct 20-30pc of their annual budgets towards lower-carbon initiatives within the next few years. Meanwhile, Chevron is doubling down on its traditional oil and gas business at the same time as it is stepping up its low-carbon investment.

The US oil industry has long been on the defensive over its environmental record. It suffered a historic blow this year when activists succeeded in unseating three board members at ExxonMobil, and as Chevron's shareholders urged the company to tackle emissions from customer use of its fuel.

Chevron chief executive Mike Wirth argues that demand for oil and gas is poised to grow even as the energy transition takes hold, and this should be met by the most carbon-efficient producers. And the firm put off addressing the shareholder vote in favour of clamping down on Scope 3 emissions until it issues a climate report next month. Wirth says such targets are easier to announce than to carry out. 'It's a simple question and it's an enormously challenging problem,' he says. The ultimate pathway to net zero requires advances in technology, more government support and large offset markets, according to Chevron.

Of its increased investment in low-carbon technologies, Chevron will direct $3bn to carbon capture and storage (CCS) and offsets, $3bn to renewable fuels and $2bn to hydrogen. The rest will go on greenhouse gas (GHG) reductions at its oil and gas operations. And its plans for biofuels and CCS pin down clearer, more ambitious targets than those of the European majors in these areas (see table).

Chevron expects its low-carbon investments to be competitive with oil and gas and deliver 'double-digit' returns. 'We haven't lowered the bar for returns - that's the bottom line,' Wirth says. The firm expects low-carbon investments to generate cash flow of over $1bn by 2030, up from tens of millions of dollars today.

Turning away from the sun

While its European peers have embraced large-scale solar and wind, Chevron has no plans to follow suit, citing its lack of a competitive advantage in these areas. 'Plenty of people are doing that - it's a crowded space. We don't bring much to it and I don't think you'll see us venture into that,' Wirth says. Instead, the firm says its choice of technologies are at an earlier stage of development than others, such as renewable power, and so have better growth potential. They also focus on harder-to-abate sectors such as manufacturing, aviation and heavy-duty transportation. The investment in renewable fuels will take advantage of incentives such as California Low Carbon Fuel Standard credits.

Rather than adopt carbon targets, Chevron has focused on curbing GHG intensity in its upstream operations - an approach that draws criticism. 'It's not enough to just add green energy on top and focus on the lowered emissions intensity, because the global carbon budget is based on absolute emissions,' think-tank Carbon Tracker analyst Axel Dalman says. But Wirth argues that Chevron starts from a more solid financial footing than others. 'The industry needs to deliver financial results, and it needs to sustain those into a lower-carbon future,' he says.

By Stephen Cunningham

Chevron growth targets for new energy businesses
Energy 2030 target
Renewable natural gas production mn Btu/d 40,000
Renewable fuels production capacity b/d 100,000
Hydrogen production t/yr 150,000
Carbon capture and offsets mn t/yr 25