Energy Producers Ramp Up ESG Initiatives

Posted: March 24, 2021

Abstract

As the world continues to battle climate change, energy companies have begun to release environmental, social, and corporate governance (ESG) policies and implement carbon capture, utilization, and storage (CCUS) techniques in order to lower their carbon footprint. While renewables, nuclear, and energy efficiency will all be critical tools in the armory for lasting change, the fact remains: fossil fuels are not going anywhere soon. This means the world must find effective new ways to manage emissions in order to balance increased regulatory oversight with the globe’s growing energy demand. Major oil and gas companies have taken various routes to accomplish this goal, and time will tell which of the initiatives provide best results.

Key Points

ExxonMobil has created a new business, ExxonMobil Low Carbon Solutions, focused on the commercialization and deployment of emission-reduction technologies. It will build at least 20 new CCUS facilities and invest $3 billion in low-emission technologies by 2025. Projects will begin in the U.S. Gulf coast area and they have partnered with two green energy firms, FuelCell Energy and Global Thermostat. The company anticipates a 30% reduction in greenhouse-gas emissions by 2025 which will ramp up to 50% in the following years.

Shell has announced five projects they have partnered with that relate to CCUS initiatives for the company. These include the Gorgon LNG project in Australia which will capture 3-4 million tonnes of CO₂ per year, the Quest CCUS facility in Canada to capture over 1 million tonnes of CO₂ per year, CCUS technology used at the Boundary Dam coal-fired power station in Saskatchewan, Canada, the Technology Centre Mongstad in Norway for developing new technology, and the Northern Lights project to transport and store CO₂ in a reservoir in the Norwegian North Sea. Several of these projects are collaborations between other supermajors and/or European energy companies. Shell’s target is to operate a net-zero emissions energy business by 2050.

Chevron has invested in a startup company called Blue Planet that develops carbonate aggregates and carbon capture technology to reduce the intensity of carbon in industrial operations. By using Direct Air Capture (DAC), the technology removes CO₂ from flue gas and converts it into limestone that can be incorporated into concrete. Chevron has also begun to implement internal metrics that will align the company’s environmental, safety, and social performance with the recommendations from the Sustainable Accounting Standards Board (SASB).

Total has been involved in carbon capture, storage, and utilization technologies for several years. Recently the company has focused on meeting the Paris Agreement goal of maintaining global warming increase below 2°C from pre-industrial levels. This initiative is being implemented by investing 10% of the R&D budget towards CCUS technologies. Total also supports an investment fund, the Oil & Gas Climate Initiative (OGCI), that manages over $1 billion in clean technology companies. Additionally, Total has entered into JV’s with several companies to study CCUS and has begun a carbon pricing program.

As one of the first companies to announce net-zero carbon initiatives by 2050, BP has spun off part of its business to create a subsidiary focused on hydrogen and carbon capture utilisation and storage business. One of BP’s major CCUS projects is the Net Zero Teesside project out of northeast England focused on capturing 10 million tonnes of ‎CO₂ emissions each year. Currently the company is working to get appropriate agreements in place with partners and the government to safely transport and store industrial CO₂ emissions under the North Sea by 2025.

Supermajor ConocoPhillips is working with the Energy Advance Center to advocate for standards to demonstrate secure geological storage of carbon dioxide sequestered underground for enhanced oil recovery projects. The company operates Buckeye East EOR flood in New Mexico which utilized 259,000 tonnes of recycled CO₂ in 2019. Conoco is also a backer in a global competition, the NRG COSIA Carbon XPRIZE, where a $20 million prize is distributed to winners that can develop technologies for converting CO₂ from fossil fuel combustion to valuable products.

In 2018 Oxy announced the creation of its Oxy Low Carbon Ventures business group. Its focus is on developing CCUS technologies to remove human-made CO₂ from the atmosphere and then use it in lower carbon oil production or create less carbon-intensive products. Oxy has several CO₂ EOR operations in the Permian Basin, injecting over 20 million tonnes of carbon dioxide per year into geologic formations. They have partnered with several companies to implement a Carbon Neutral Energy Cycle that will remove CO₂ directly from the atmosphere and allow for sequestration at an industrial scale to offset the company’s emissions from production and processing of fossil fuels.

Several smaller U.S. independent companies have also tried to bolster their ESG footprint by utilizing carbon credits to offset their emissions footprints. When a company is over its allowable emissions set by the government, credits are purchased from companies that have not gone over their carbon allocation.

Some of the smaller companies implementing emissions goals include Diamondback Energy, Cimarex Energy, and Crescent Point Energy. Diamondback has implemented a “Net Zero Now” initiative to reduce the company’s greenhouse gas and methane emissions at least 50% and 70%, respectively, by 2024. Cimarex is reporting annual GHG emissions to the EPA and monitors emissions from known emitting devices across their operations. Crescent Point has focused on methane reduction by committing to reducing methane emissions over 50% by 2025.

Introduction

As more companies set aggressive decarbonization and net-zero goals, the role of technologies and processes that draw down excess levels of atmospheric carbon dioxide and help sequester those emissions by using it as a feedstock for other products has taken center stage. Carbon capture, utilization and storage (CCUS) has long been a buzz-phrase in the energy sector. Its promise, in a nutshell, is that the release of carbon dioxide can be prevented, and fossil fuels can be burned without any foot-print. Through the process of capturing the gas, transporting it to a suitable site, and then storing it underground; CCUS projects could enable the energy industry to mitigate the environmental damages brought on by hydrocarbon combustion. As a result, CCUS technology is expected to play an important role in the global climate change response in the coming years. According to a report by the International Energy Agency, Carbon Capture could contribute to a 19% reduction in global CO₂ emissions, while significantly reducing the cost of fighting climate change [1]. While a striking estimate, more recent projections make the case on even stronger terms, especially with a new commander and chief taking control of Washington. A huge reason for the surge in CCUS projects being announced in many Q4 and EOY earning reports lies in the actions of President Joe Biden rejoining the Paris Climate Accord. Under the Paris Agreement, nations must strive to limit the global average temperature increase, keeping it “well below 2°C above pre-industrial levels” [1]. While renewables, nuclear, and energy efficiency will all be critical tools in the armory, the fact remains: fossil fuels are not going anywhere soon. This means the world must find effective new ways to manage emissions in order to balance increased regulatory oversight with the globe’s growing energy demand. While it is certainly an evolving frontier, many fossil fuel producers are also getting on board, releasing information in recent months about their goals for implementing carbon capture in daily operations as a part of their growing ESG mission.

INTERNATIONAL COMPANIES & SUPERMAJORS

ExxonMobil

On February 1, 2021, ExxonMobil announced the creation of a new business, ExxonMobil Low Carbon Solutions, to commercialize and deploy emission-reduction technologies [2]. It will initially focus on carbon capture and storage which as noted is one of the critical technologies required to achieve net-zero emissions and the climate goals outlined in the Paris Agreement. The announcement includes plans to build at least 20 new CCUS facilities in addition to investing $3 billion in low-emissions technologies by 2025 [3]. One of the places that the new low-carbon unit is looking to make its presence known is in the U.S. Gulf coast where multiple projects are already under consideration. ExxonMobile said the potential exists to collect millions of metric tonnes (Mt) of CO₂ from industrial plants that dot the coastal region which can then be stored in formations accessible from both onshore and offshore fields [3]. Such projects will add to the companies already globe-leading portfolio including more than 30 years in the carbon-capture business and capturing capacity totaling about 9 million tonnes of CO₂ per year [2]. As part of the rollout, two new partnerships were shared. ExxonMobil said it is working with a carbonate fuel cell developer called FuelCell Energy and a direct-air-capture firm called Global Thermostat but also announced plans to increase its production of hydrogen, which has some synergies with CCUS operations [3]. All of this follows ExxonMobil’s announcement in December that it was taking new measures to reduce its overall emissions profile. The broad plan calls for a reduction in methane emissions and flaring by up to 50% and an overall reduction of greenhouse-gas emissions of 30% by 2025 – all in line with the Paris Climate Accord [3]. Luckily for ExxonMobil, a company report released in February notes it has achieved a 6% net reduction in greenhouse-gas emissions since 2016—the year the Paris Agreement was signed by most of the world’s countries.

Shell

Royal Dutch Shell, commonly known as Shell, has not been in the carbon-capture business for long but are already becoming innovative leaders in this exploding field. Shell is helping to develop large-scale commercial projects and has research partnerships within the industry and leading academic institutes. Their five active projects include a partnership the Gorgon liquefied natural gas project in Australia which will include the world’s largest CCUS operation when complete with plans to capture 3 to 4 million tonnes of CO₂ each year and over 100 million tonnes of CO₂ will be captured and stored over the life of the project [4]. The Quest CCUS facility in Canada, which is operated by Shell on behalf of the Athabasca Oil Sands Project, is a fully integrated CCUS facility designed to capture, transport and store more than a million tonnes of CO₂ annually and in less than five years since its start up, Quest has captured and safely stored five million tonnes of CO₂ and at a lower cost than anticipated [4]. CCUS technology developed by Shell Cansolv is now in use at the Boundary Dam power station in Saskatchewan, Canada. Boundary Dam is SaskPower’s largest coal-fired power station and a significant source of power for the region [4]. Both of Shell’s final two CCUS projects are located in Norway, but the Technology Centre Mongstad is not an operational project. Instead, it is the world’s largest test centre for developing CO₂ capture technologies and a leading competence centre for carbon capture [4]. The final project, the Northern Lights project, includes transportation, receipt, and permanent storage of CO₂ in a reservoir in the Norwegian North Sea. Northern Lights is part of the Norwegian State’s demonstration project ‘Full-scale CO₂ handling chain in Norway’, which also includes CO₂ capture from up to two industrial plants (cement and waste-to-energy) in Eastern Norway [4]. The project is a collaboration between Shell, Total and Equinor in which the partners reached an investment decision in May 2020, conditional upon further relevant governmental and administrative approvals and consents, and expect to set up a Joint Venture (JV) company. Similar to their counterparts worldwide, Shell’s target is to become a net-zero emissions energy business by 2050, in step with society’s progress in achieving the goal of the UN Paris Agreement on climate change [5].

Chevron

In mid-January, Chevron Corporation announced a Series C investment in San Jose-based Blue Planet Systems Corporation, commonly known as Blue Planet, a startup that manufactures and develops carbonate aggregates and carbon capture technology intended to reduce the carbon intensity of industrial operations [6]. Blue Planet uses Direct Air Capture (DAC) technologies to concentrate and remove carbon dioxide from flue gas and then creates a chemical reaction to convert the CO₂ into limestone, which is a building block of concrete [7]. Blue Planet then sells the aggregate to be used in concrete mixes, which has been used on a number of projects including the San Francisco International Airport interim boarding area B. The Chevron Technology Venture is directly in line with Chevron’s sustainability vision that “the future of energy is lower carbon and affordable, reliable, ever-cleaner energy is essential to achieving a more prosperous and sustainable world for all” [8] but is not their only ESG focused initiative of 2021. Like their investment in Blue Planet, Chevron’s future energy funds invest in innovation with potential to play a critical role in the future energy system and include climate forward companies like Carbon Clean, Carbon Energy, and Natron Energy [9]. In addition to investments in a low carbon future, Chevron has taken steps to initially align their environmental, safety, and social performance data table with the recommendations of the Sustainable Accounting Standards Board (SASB) voluntary framework as reflected in the SASB index highlighting their profound knowledge of the impacts of their operations. As their report states “Enabling human progress in a sustainable manner requires reliable, affordable, and ever-cleaner energy to serve the world’s growing population and create a better future” [9].

Total

For a number of years, Total has been active in the development of carbon capture, storage and utilization in order to help reduce greenhouse gas emissions and is a global challenge that Total is fully committed to tackling. In recent years, Total has taken four distinct steps ESG steps towards a low carbon energy future. Their most recent step is to devote considerable resources to help accomplish the Paris Goal of maintaining global warming below 2°C from pre-industrial levels. In fact, as of 2021, 10% of the Group’s R&D budget is allocated to carbon capture, utilization and storage technologies [10]. In addition to R&D budget allocations, Total supports the Oil & Gas Climate Initiative (OGCI), which manages an investment fund of over $1 billion for clean technologies, including CCUS [10]. As previously mentioned, in 2017, Total signed an agreement with Shell and Equinor to develop a large-scale carbon storage project on the Norwegian Continental Shelf [10]. The project is perfectly in line with Total’s roadmap that aims to develop CCUS in order to reduce the environmental footprint of our projects. Finally, and more recently, Total signed a partnership with Svante, LafargeHolcim, and Oxy Low Carbon Ventures to study the feasibility of an industrial carbon capture and utilization system installed in a facility in Colorado [10]. Among these four ESG steps towards a low carbon energy future, Total has also begun a carbon pricing program. They believe that CCUS will only be rolled out on a large scale if the technology is deemed profitable which is why they are working to promote the implementation of a carbon pricing mechanism, which the group believes is the most effective way to send an economic message and therefore quickly change mentalities on the viability of this technology.

In their bid to become leaders in changing the energy landscape, BP became one of the first energy companies to announce initiatives to become net-zero by 2050. For BP, net zero means reaching a balance between emissions introduced to the atmosphere and emissions removed [11]. To achieve their lofty goal, they need governments, companies and consumers to work together to accelerate meaningful action. In their fight for net-zero, a key pillar aiding in their fight is the first mandatory market based program in the United States to reduce greenhouse gas emissions called the Regional Greenhouse Gas Initiative for carbon pricing and the Transportation and Climate Initiative that BP helped outline the legislation for. In fact, BP is so devoted to seeing carbon capture utilized in the fossil fuel industry that an entire new business – BP’s new hydrogen and carbon capture utilization and storage business – was spun off to support the initiative [12]. Among the many projects the business is currently focused on is the Net Zero Teesside project based out of the northeast of England. This ground-breaking CCUS project is set to revive the local economy and create thousands of jobs, while also capturing up to 10 million tonnes of ‎CO₂ emissions each year – equivalent to the emissions associated with the annual energy use of up to three million homes in the UK [13]. While only a slice of BP’s focus on transitioning to become a net-zero company by mid-century, the CCUS business is working on getting the right agreements in place with partners and the government so that by around 2025, local industries can ‘plug into’ a pipeline that transports their industrial CO₂ emissions and safely stores them under the North Sea. BP flirted with carbon-capture technologies in the early 2000s, when the U.K. government put out a series of bids and competitions to attract private companies to build technology capabilities and large infrastructure projects. The U.K. government’s flip-flop on supporting the technology cost BP as much as $50 million, which it had spent studying the feasibility of the world’s first natural-gas power plant fitted with the equipment [11]. But now, BP is aiming to align its emissions targets to match the ambition that governments set under the 2015 Paris Agreement on climate change realizing the only way to achieve this goal will be through the implementation of carbon capture technology.

ConocoPhillips

In the United States, ConocoPhillips is actively advocating for a commercially reasonable standard to demonstrate secure geological storage in the context of captured carbon dioxide that gets sequestered underground as a tertiary injectant in enhanced oil recovery projects through the Energy Advance Center [14]. In addition to their membership to the voluntary group, ConocoPhillips actively utilizes the technology in their operations at Buckeye East in New Mexico where in 2019, 259,000 tonnes of recycled CO₂ was purchased for enhanced oil recovery techniques [14]. Their progress is more substantial in Canada as the leader of the Canada’s Oil Sands Innovation Alliance as the seven member companies have partnered with U.S. based NRG Energy to back a global competition to research technologies to capture and transform CO₂. The $20 million prize purse of the NRG COSIA Carbon XPRIZE challenges the world to reimagine what can be done with CO₂ emissions by incentivizing and accelerating the development of technologies that convert CO₂ from fossil fuel combustion into valuable products [14]. While not necessarily capturing carbon dioxide to store it underground, the competition utilizes a plentiful greenhouse gas to create valuable products the world needs on a daily basis. The 10 finalists received equal shares of a $5 million milestone prize to test their technologies at commercial scale under real-world conditions at the Integrated Test Center in Gillette, Wyoming for the coal track or at the Alberta Carbon Conversion Technology Centre in Calgary for the natural gas track [14]. While all in good fun, the purpose of the competition aligns with ConocoPhillips strategy to manage climate-related risk, optimize opportunities and equip themselves to respond to changes in key uncertainties, including government policies around the world, technologies for emissions reduction and alternative energy technologies [15].

Occidental Petroleum

Occidental Petroleum has recently become a global leader in envisioning a low carbon future with the creation and implementation of their Oxy Low Carbon Ventures business group. Formed in 2018 to sustainably enhance business while providing impactful global emissions reduction solutions, Oxy Low Carbon Ventures focuses on developing carbon capture, utilization and storage technologies to remove human-made carbon dioxide from the atmosphere for use in lower carbon oil production operations and to help create other less carbon-intensive products, like fuels, chemicals and concrete [16]. Having been implementing hands-on carbon utilization and storage as part of everyday operations in the Permian Basin for more than 40 years, Oxy has emerged as one of the world’s leading authorities on capturing, separating and safely injecting CO₂, over 20 million tonnes annually, back into geologic formations for permanent storage [16]. In order to further their efforts towards carbon-management technology, they have partnered with a number of companies (Carbon Engineering and 1PointFive for direct air capture and Net Power and Carbon Finance Labs for the development of carbon-neutral fuels markets) to implement a Carbon Neutral Energy Cycle which mimics the natural carbon cycle by pulling CO₂ directly from the atmosphere to be sequestered—at an industrial scale [17]. The process allows Oxy to permanently store captured CO₂ in geologic formations in an amount equal to that which is emitted through the production, processing and combustion of oil and fuels. The Oxy Low Carbon Ventures business unit recognizes that achieving carbon-neutral energy will take a comprehensive approach which is why they are dedicated to working with organizations of all types worldwide to help address the complex challenges of the energy transition.

*Figure 2: Oxy Low Carbon Ventures Carbon Neutral Energy Cycle [17]*

The Role of Carbon Credits

The companies above have entire business units dedicated to the advancement of their ESG movements, which in recent years has focused on the development and deployment of carbon-capture technologies. Many smaller companies do not have the deep pockets or investor base to be capable of such large scale investments. Instead, many times they are forced to focus on reducing their carbon footprint with the use of carbon credits. Carbon credits are a tradable permit or certificate that provides the holder of the credit the right to emit one ton of carbon dioxide or an equivalent of another greenhouse gas [18]. In other words, carbon credits are exchanged in a carbon market where businesses can sell each other’s right to pollute. The main goal for the creation of carbon credits is the reduction of emissions of carbon dioxide and other greenhouse gases from industrial activities to reduce the effects of global warming [18]. Since companies that pollute are awarded credits that allow them to continue to emit up to a certain limit, if a company reduces their emissions below their allocated limit they can sell their excess credits. If they pollute more than the allocation they will be required to purchase more credits. The practice of purchasing carbon credits was very common in the oil and gas industry until the ESG movement recently gained more momentum. Now investors wanted to see greater strides towards environmental sustainability. As mentioned before, some companies lack the capital to invest in mega projects to reduce their carbon footprint. The only remaining choice is to do everything they can to reduce emissions and purchase carbon credits for the remaining share. While the practice is much more common with smaller companies, it is still utilized by many of the larger corporations previously mentioned. Some of those companies even sell carbon credits to their smaller counterparts.

U.S. INDEPENDENTS

Diamondback Energy

Diamondback announced the “Net Zero Now” initiative, which means that as of January 1, 2021, every hydrocarbon molecule produced by Diamondback is anticipated to be produced with zero net Scope 1 emissions, all direct emissions from the activities of Diamondback under their control. The GHG and methane intensity reduction targets announced are the primary focus of the company as it relates to environmental responsibility. Goals include a GHG intensity reduction from 2019 levels by at least 50% and methane intensity reductions by at least 70% by 2024. The company recognizes it will still have a carbon footprint after the goals are met. Therefore, carbon offset credits will be purchased to offset the remaining emissions [19].

Cimarex Energy

Cimarex is focused on reducing both their environmental footprint and emissions associated with operations. While required to report our GHG emissions to the EPA annually, Cimarex enhanced the processes to identify and monitor the location and emissions from GHG emitting devices across the entirety of their operations, with a focus on methane emissions. Due to the recent acquisition of Resolute Energy Corporation in March 2019 the total reported 2019 GHG emission volume increased 11% year-over-year due primarily to combustion associated with production, gathering, and boosting operations. Despite the increase, Cimarex achieved a 14% reduction in GHG intensity during this period (metric tonnes CO₂ equivalent of GHG emissions/MBoe) [20].

Crescent Point Energy

Crescent Point has focused their emissions reduction on methane because methane is a much more potent greenhouse gas than carbon dioxide and methane reductions are at the forefront of both federal and provincial regulations. While Crescent Point’s facilities currently meet regulatory requirements, they are committed to reducing methane emissions by over 50% by 2025, which not only exceeds the industry target, but would result in reducing direct (Scope 1) emissions intensity by 30% by the same time period [21].

Conclusion

The story of carbon capture and storage begins with oil and gas. Oil companies pioneered a process decades ago to isolate CO₂ from plumes of mixed gases to sell better quality natural gas. In an effort to squeeze more oil out of the ground, the CO₂ was utilized as an enhanced oil recovery technique. Now, not only is carbon capture key to global energy company’s pledges to net-zero, but regulators claim it will be key to keeping global temperatures well below 2°C above pre-industrial levels. The Intergovernmental Panel on Climate Change has released a report showing the 2050 goal is to capture approximately 5 billion metric tonnes of CO₂ per year to keep global warming below 2°C [22]. The world has a long road ahead to meet these recommendations for maintaining the globe’s thermostat. While CCUS is certainly not the sole answer to the climate crisis, it does have several benefits including giving new life to depleted oil and gas reservoirs, hedging heavy emitters against rising carbon prices, and even providing a green revenue source for technology providers. Many of the companies mentioned have implemented drastic changes to their involvement in ESG efforts, but only time will tell which technology or method remains viable as a solution to corporate environmental and social governance.

References

[1] https://www.iea.org/fuels-and-technologies/carbon-capture-utilisation-and-storage

[2] https://corporate.exxonmobil.com/Energy-and-innovation/Carbon-capture-and-storage

[3] https://jpt.spe.org/exxonmobil-doubles-down-on-carbon-capture-in-3-billion-plan-to-lower-emissions

[4] https://www.shell.com/energy-and-innovation/carbon-capture-and-storage-projects.html#vanity-aHR0cHM6Ly93d3cuc2hlbGwuY29tL3N1c3RhaW5hYmlsaXR5L2Vudmlyb25tZW50L2NsaW1hdGUtY2hhbmdlL2NhcmJvbi1jYXB0dXJlLWFuZC1zdG9yYWdlLXByb2plY3RzLmh0bWw

[5] https://www.shell.com/energy-and-innovation/the-energy-future/our-climate-target.html#iframe=L3dlYmFwcHMvY2xpbWF0ZV9hbWJpdGlvbi8

[6] https://www.chevron.com/stories/chevron-invests-in-carbon-capture-and-utilization-startup

[7] http://www.blueplanet-ltd.com/#technology

[8] https://www.chevron.com/sustainability?gclid=Cj0KCQjwrsGCBhD1ARIsALILBYofd3E6MXdcR4BcGk2wYbMlrMGiQl_FpU9r1FiJY-KwI9FH7h-huKoaAggJEALw_wcB&gclsrc=aw.ds

[9] https://www.chevron.com/-/media/chevron/technology/documents/future-energy-fund-overview.pdf

[10] https://www.total.com/news/totals-initiatives-promote-ccus?folder=9186

[11] https://www.bp.com/en_us/united-states/home/who-we-are/our-commitment/advocating-for-change-in-the-us.html#tab_tci