Chevron expects to power more of its oil and gas projects with electricity generated by solar panels. The end product is a fossil fuel generated by renewable energy.
Justin Sullivan/Getty ImagesThe future of oil and gas in the era of renewable energy may cause cognitive dissonance. For instance, Chevron expects to power an increasing percentage of its oil and gas projects with electricity generated by solar panels. The end product is still a fossil fuel, but the way it’s generated is renewable.
On Monday, Chevron (ticker: CVX) issued a new report on climate resilience and announced new goals to increase its reliance on and production of clean energy. Some of that had to do with reducing the emissions that Chevron generates by powering its own operations, and some had to do with decreasing the impact the company’s end products have on the environment. For the first time, Chevron issued a target for decreasing its so-called Scope 3 emissions, which are created by the products it makes. The company said it is targeting a carbon-emissions intensity reduction of 5% by 2028 from 2016 levels. The word “intensity” is key because it refers to the amount of emissions per unit of energy produced—presumably, Chevron could still increase total emissions if its total energy production also rose over that period.
Environmental groups criticized Chevron, with activist investor group Follow This calling the company’s plans “disappointing tokenism” and calling for a 40% reduction by 2030. Follow This led a successful shareholder vote earlier this year that called on Chevron to reduce its Scope 3 emissions.
“Chevron is merely interested in appeasing shareholders, a 5% intensity target is a snub to investors who are truly committed to reaching the Paris agreement,” said Mark van Baal, founder of Follow This, in a statement.
Like other oil companies, Chevron has been under pressure from investors to transition its business.
Chevron’s other goal has to do with the emissions it generates during operations. The company says its “aspiration” is to bring those emissions to net zero by 2050.
Bruce Niemeyer, Chevron’s vice president of strategy and sustainability, said in an interview with Barron’s on Monday that the company does not like to make pledges if it doesn’t have a strategy to achieve them. So its issuance of a 2050 goal means Chevron sees a way to achieve that.
“We were not willing to set a longer-dated target [prior to now] because…we needed to see progress in technology, we needed to see progress in policy, we needed to see progress in the development of offset markets,” he said. “And we had to have a plan internally that we could see would allow us to accomplish that. And those things came together for us.”
Among the ways that Chevron expects to meet its goal is to reduce the methane produced by its oil and gas operations. Electrifying the process of oil and gas production is also part of the strategy, Niemeyer said. Rigs have traditionally been powered by diesel fuel, but that’s changing. “We’ve converted a rig to direct electrification where it takes its electricity directly off the grid,” he said. “Others we’ve converted to natural-gas use, so that’s a much lower form of emissions.”
Asked about the cognitive dissonance inherent in producing fossil fuels with renewable energy, Niemeyer said that oil and gas remain major sources of energy in many parts of the world. So as the world transitions away from them, it’s still important to produce that oil and gas in an efficient way.
“We believe the future of energy is lower-carbon,” Niemeyer said. “As we make a transition, we believe it’s important that any oil and gas that’s used is sourced from increasingly more carbon-efficient operations and more carbon-efficient operators.”
Write to Avi Salzman at avi.salzman@barrons.com
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October 12, 2021 at 04:12AM
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Chevron Plans to Make Oil and Gas Production Greener - Barron's
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