When it comes to picking which energy business is the best with new energy technologies and renewables in the mix, Chevron’s Jeff Gustavson said he never picks favorites.
However, the president of Chevron New Energies singled out one for its profitability.
“Renewable fuels [are] the most mature. We’ve invested the most money as a company in that space, and it’s the most profitable today,” Gustavson said during the Aug. 22 SPE Energy Transition Symposium.
Of the $10 billion Chevron said in 2021 it will invest through 2028 to grow its low carbon business, about $4 billion has been spent, Gustavson said. Most of that has gone to renewable fuels, specifically its $3.15 billion acquisition of sustainable fuels producer Renewable Energy Group. The deal included REG’s biorefinery in Geismar, Louisiana, where Chevron plans to expand and ramp up renewable diesel production.
“Business plans show us spending significantly more through the end of the decade. But when we think about capital…you have to find investable opportunities,” Gustavson said. “It doesn't mean the returns always match other investment opportunities you have in the traditional space, but you need to be able to see a pathway to reasonable returns and eventually attractive returns.”
Chevron is spending about 10% to 12% of its overall budget in the low carbon space as it strives for net-zero emissions by 2050.
Renewable fuels such as biodiesel, compressed natural gas, ethanol and RNG have lower carbon footprints and burn cleaner than gasoline and other transportation fuels. Capable of reducing greenhouse-gas emissions to slow the impacts of global warming, renewable fuels and products has been a growing focus for Chevron New Energies.
But they are not alone. Hydrogen and carbon capture, utilization and storage (CCUS) are also getting attention.
“Hydrogen is probably the biggest of all of the new energy businesses, but it will take the longest to develop and it will take the longest to become sustainable without significant policy support,” he said.
Gustavson described CCUS as a challenging technology that also needs policy support, a key driver in investment.
“Technology is really what makes these businesses sustainable, which allows you to have less policy support and to make these businesses viable in their own right,” he said.
Getting to net zero will require not only hydrogen, CCUS and renewable fuels alongside other low carbon sources, it will also require “a lot more nuclear power,” Gustavon added.
Collaborating, partnering, learning
The transition will also require collaboration, partnerships and learning lessons.
An energy company wouldn’t tackle drilling a deepwater well in the Gulf of Mexico without any partners; nor would it tackle an LNG facility or a Gorgon alone, he said.
“There is too much capital, too much risk. You need too much help with that. We’re very used to doing that [partnering] in traditional space. You have to do it in the in the new space. You talk about the risks associated with these very new businesses, the amount of capital that is required. It’s a huge opportunity … but the risks are enormous.”
Though competition is good when it comes to lowering costs, working together—with big and small companies alike—during the early phases of a new energy project could lead to faster progress.
He cautioned that companies should be thoughtful in selecting which technologies to pursue and considering the best fit and the fastest to scale. A willingness to invest in technology that doesn’t work today but will in the future and to experience failure are part of the learning curve, according to Gustavson.
Chevron faced technical risks with the Gorgon CCUS project in Australia. Lessons were learned. The injected CO2 volume is below the targeted 4 million tonnes per year nameplate capacity. But “[we’re] working very hard on the pressure management system, which is the key bottleneck here to increase that capacity as soon as possible.”
Operating in a complex environment, where water management is challenging, Gorgon CCUS has stored more than 8 million tonnes since it started up in 2019.
“What frustrates me and us is sometimes external stakeholders who don’t have a deep understanding of how complex these projects are, are highlighting this is as a failure—and it’s not.
“It’s a success. We’ve stored an enormous amount of CO2 and importantly we’ve got a lot of lessons learned that we can now carry forward as we grow CCUS business to an even larger scale.”
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