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Chevron reported that it has reached its 2023 upstream carbon
intensity reduction targets three years ahead of schedule, and the
company outlined on 9 March a new list of carbon reduction and
offset initiatives that it plans to implement in the next
decade.
Unveiling the updated climate initiatives as part of its 2021
Investor Day, Chevron did not issue a net-zero target, as have
several of its peer group international oil companies, especially
those based in Europe. Instead, in their comments and a report
released on the same day, "Climate Change Resilience:
advancing a lower-carbon future," Chevron executives said they
are focused on real-world actions in the next five to 10 years,
rather than more general promises at more distant deadlines.
At the same time, the company made it clear that it sees itself
operating in a net-zero world. "We support the Paris Agreement,
which calls for achieving net-zero [greenhouse gas (GHG)] emissions
in the second half of this century," said John Huntsman, a member
of the Chevron board of directors and former US ambassador to
Russia, in a statement.
In fact, Chevron said its new targets align with the two "global stocktake" periods
identified in the Paris Agreement, scheduled for 2023 and 2028,
when the signatories will assess progress toward meeting the
international goals.
To meet its new targets, Chevron CEO Michael Wirth said the
company will invest more than $3 billion in environmental programs
by 2028. These are: $2 billion in carbon-reduction projects; $750
million in renewable fuels and carbon offsets; and $300 million to
the Future Energy Fund II for advanced technologies (in addition to
$100 million already invested in Future Energy Fund I for methane
reduction technologies).
"We believe in the power of people working together to advance
the technology and innovation that will help address society's
highest priorities," Wirth said. "We believe the future of energy
is lower carbon, and we intend to be a leader."
The investments will be good for the company's shareholders, as
well as for the environment, said Bruce Niemeyer, vice president of
strategy and sustainability, in the call with investors. "Achieving
our 2028 goals is expected to keep Chevron a top quartile oil and
gas producer in terms of carbon intensity," he said.
"The energy industry has been losing investor share to other
sectors for a decade, and investors increasingly want both
financial performance and societal benefits," said Pierre Breber,
chief financial officer. "Higher returns and lower carbon is how we
will address both trends."
Raising targets
Chevron's new environmental goals include: reducing the carbon
intensity (or the emissions rate per unit of production) from its
traditional oil and natural gas development and chemicals
processing; increasing the use of renewable biofuels; and raising
its investment in advanced technologies, such as hydrogen power and
carbon capture, utilization, and storage (CCUS).
With its 2023 goals already met, Chevron announced new, lower
targets for 2028, highlighted by a 35% decrease in carbon intensity
for oil and gas production, compared with 2016 levels. Also, the
company said it would end routine flaring of waste petroleum gases
by 2030.
The new targets are shown in the table below.
Chevron said that about 70% of its Scope 1 (direct) emissions
can be addressed through energy efficiency measures, switching to
lower-carbon gas, buying offsets, or using CCUS. It will also
reduce gas flaring and venting, which will especially target
methane emissions, which Chevron said account for about 5% of its
global carbon dioxide-equivalent emissions at present. Since 2013,
Chevron has reduced flaring and associated emissions by 22% from
its worldwide operations.
As for Scope 2 emissions (indirect sources, such as imported
electricity or steam), Chevron said it will sign power purchase
agreements for renewable energy to replace carbon-based energy
sources, as well as purchasing offsets. As an example, it cited an
agreement to purchase power from a 65-megawatt wind facility in the
Permian Basin.
Overall, the company has 60 carbon-reduction projects, with
commitments of $100 million, for 2021.
The chart below shows how Chevron is planning to split its
emissions-reductions investments in various categories through
2028.
Chevron's plan is comparable to ExxonMobil's plan, which was
updated in December 2020. ExxonMobil also has eschewed a big target
that's several decades in the future in favor of a plan to reduce
its upstream emissions intensity by 15-20% through 2025, along with
methane and flaring intensity goals for the same year, according to
IHS Markit Associate Director Christopher Elsner.
Elsner's analysis of corporate commitments has found that, so
far, two large US-based operators have established net-zero
targets: ConcocoPhillips and Occidental Petroleum. Conoco set a
10-year range for becoming carbon neutral in its operations,
2045-2055, and an intermediate goal of decreasing GHG emissions by
35-45% by 2030. Occidental said its goal is net-zero on Scope 1 and
Scope 2 emissions by 2040.
Smaller US operators with a large share of their production as
gas, such as Pioneer Natural Resources, have also made net-zero
pledges.
Growth in biofuels
Biofuels will be a significant part of Chevron's
carbon-reduction picture as well.
Chevron said it expects to achieve a tenfold increase in sales
of renewable natural gas (RNG) by 2025, and to double its sales
volumes of renewable diesel and biodiesel. The company has
committed more than $200 million to date in the RNG sector,
including an expansion of its partnership with Brightmark, a US
producer of dairy-based biomethane, earlier this year.
In California, Chevron's El Segundo Refinery will next year
become the first refinery in the US to co-process biofeedstock in a
fluid catalytic cracker unit to make gasoline, jet fuel, and diesel
fuel with renewable content on a commercial scale. El Segundo
supplies more than 20% of all motor vehicle fuel consumed in
Southern California, Chevron said.
Support for carbon pricing
In its report, Chevron said it supports carbon pricing. "Carbon
pricing should be the primary policy tool to achieve greenhouse gas
emissions reduction goals. It incentivizes the most efficient and
cost-effective emissions reductions while enabling support to
affected communities, consumers, and businesses," Chevron said.
As of end-2020, Chevron noted that 60% of the Scope 1 and Scope
2 GHG emissions from its operations were in countries developing or
with existing carbon-pricing policies, as well as other policies to
reduce methane and carbon emissions. "We believe it is a
competitive advantage to already operate in a lower-carbon policy
environment," it said.
The company also is a participant in carbon offset trading
programs in the US, Canada, and Colombia, and is on the advisory
board of the newly announced IHS Markit Carbon
Meta-Registry, which will debut in the next few weeks. "The
Carbon Meta-Registry will provide a network to connect voluntary
and government carbon credit programs, market participants, and
service providers. It will leverage distributed ledger technology
and reduce the risk that credits are counted or claimed more than
once," Chevron said.
CCUS also is a key part of Chevron's strategy. It has invested
more than $1 billion in Australia and Canada for CCUS research,
development, and deployment, said Jay Johnson, executive vice
president, upstream. At its Gorgon LNG production and export
facility in Australia, "we have injected more than 4 million
[metric] tons of CO2, giving us valuable insights into designing
and operating world-scale carbon sequestration facilities," he
said.
In the US, the company is involved in two CCUS projects in
California: the Kern River Carbon Capture Project, a 30 metric
tons/day facility that will soon undergo a six-month trial run; and
the Mendota Bioenergy with Carbon Capture and Sequestration
Project, that has the potential to capture 300,000 metric tons of
CO2 per year.
Chevron plans to update its intentions, particularly in the area
of investment in technologies such as CCUS and hydrogen power, at
its management roundtable in September.
However, CFO Breber noted that Chevron's primary business lines
represent only part of the transition to lower carbon needed across
the globe and across industries. "Over 90% of [GHG] gas emissions
are not related to passenger vehicles. Finding solutions to
emissions from manufacturing, agriculture, heavy-duty
transportation, and other activities will require technological and
commercial breakthroughs," he said.
IHS Markit's analysis of corporate net-zero commitments finds
that companies in other sectors are awake to the net-zero future as
well. As energy users, not primarily energy producers like Chevron,
they have easier paths to zero carbon, and companies such as
Microsoft, Levi Strauss, AstraZeneca, Siemens, and SAP have set
all-renewable energy purchases or no net-carbon pledges by 2030 or
2040.
"However, even with non-energy firms in relatively low-carbon
intensive sectors, we begin to see a divergence in the details and
metrics used in the target-setting announcements, differences that
could intensify as the company hails from an increasingly
emissions-heavy economic sector, particularly across the energy
industry," IHS Markit's Elsner wrote.
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