Integrated oil companies, including Exxon Mobil Corp., Chevron Corp., BP Plc., Royal Dutch Shell and Total, are developing new products and technologies to reduce their carbon emissions, according to a new report by Moody’s Investors Service. Strategies include expanding natural gas operations, upgrading refineries and developing and selling lower-emissions products, the report said.

“The world’s major integrated oil and gas companies are responding to climate change imperatives, in particular the Paris Agreement, by developing new products and technologies to optimize energy usage and reduce their carbon footprint,” said Steve Wood, managing director at Moody’s Investor Service. “In some cases, companies are linking employee compensation plans to reducing greenhouse gas emissions.”

The report outlines the steps taken by the integrated oil majors in meeting the challenges presented by energy transition and how their businesses will evolve in the coming years.

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Exxon Mobil
Exxon Mobil has invested more than $10 billion over the past decade in its facilities and research to develop and deploy lower-emission energy solutions such as cogeneration, algae biofuels and carbon capture and storage (CCS). The company also announced investment of up to $100 million over 10 years in research and development of advanced lower-emissions technologies with the U.S. Department of Energy’s National Renewable Energy Laboratory and National Energy Technology Laboratory.

The world’s largest publicly traded integrated oil company has also identified near-term and longer-term strategic actions that it plans to take in response to energy transition risks.

Near-term actions include expanding the supply of cleaner burning natural gas, continuing to upgrade its refineries towards higher value distillates, lubricants and chemical feedstocks; reducing emissions from its own facilities; and supplying products that help others reduce emissions, such as premium lubricants and lightweight materials.

For the longer term, Exxon Mobil is pursuing technologies to enhance existing operations and develop less carbon-intensive alternative technologies. This effort includes making CCS more economic, developing technologies to reduce energy requirements of refining and chemical facilities and developing advanced biofuels, including algae, for transportation and chemicals.

Chevron
Chevron has pledged to invest $100 million through the Oil and Gas Climate Initiative (OGCI), in addition to the $100 million Chevron Future Energy Fund launched in 2018. Chevron’s first investment through OGCI went to ChargePoint, one of the largest operators of electric vehicle charging networks, which will use this investment to expand its 57,000-location network in North America and Europe.

According to the report, Chevron has dedicated efforts in improving current sources of energy to deliver its products with less environmental impact. The company also added two performance goals to its variable compensation plans tied to reducing greenhouse gas emissions for about 45,000 eligible employees. The company is also designing new facilities and upgrading existing equipment to further reduce methane emissions.

Chevron aims to reduce flaring intensity by 25% to 30% by 2023, compared to 2016 levels, and to reduce methane emissions intensity by 20% to 25%, compared to 2016 levels, the report said.

Chevron has invested about $1.1 billion to date in carbon CCUS projects that will reduce greenhouse gas emissions by some 5 million metric tons annually, once operational. Chevron also executed agreements for solar power and renewable power for its Permian Basin operations.

Royal Dutch Shell
According to the report, Royal Dutch Shell believes it has one of the most advanced energy transition strategies among large integrated oil companies, “reflecting in part the ambitious targets of its U.K. and Netherlands domiciles.”

The company fully supports the Paris Agreement and is committed to adjusting its business strategy in line with energy transition and climate-related risks and opportunities.

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Shell’s strong global position in natural gas and rising investments in its New Energies business are core parts of its energy transition strategy, which will likely help mitigate the long-term effects of energy transition on its traditional oil and gas business. According to the report, Shell plans to step up capital investment in its new energies segment, which runs low-carbon energy operations such as renewables and biofuels.

Shell includes energy transition targets in its long-term incentive plan metrics for 2019, which applies to senior executives, directors and members of the executive committee. The energy transition condition in the incentive plan include Shell’s first three-year target toward achieving its ambition to reduce the net carbon footprint of the energy products it sells. The company also plans to incorporate the energy transition targets into the performance share awards for around 16,000 employees in 2020.

In addition, Shell aims to develop carbon sinks and is also investing in hydrogen and biofuels for blending into gasoline or diesel, which can help reduce CO2 emissions.

Total
Total’s energy transition strategy is focused on reducing its carbon intensity by 15% between 2015—the date of the Paris Agreement—and 2030, and roughly by 30% in the subsequent 10 years. The company has identified five key areas to reduce carbon emissions including optimizing its facilities’ energy usage, expanding its natural gas operations, expanding its electricity operations, incorporating more biofuels into its gasoline and diesel, and increasing its carbon-storage efforts. Total envisions a 2040 sales mix comprised of about 50% natural gas, 35% petroleum products, including biofuels, and 20% low-carbon electricity.

Total aims to become the second-largest LNG operator after Shell, following strategic upstream and downstream acquisitions. The company also plans to incorporate more biofuels into its gasoline and diesel in order to help decarbonize its fossil fuels.

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Total seeks to find opportunities to expand the range of resources that it can process sustainably and competitively. The report stated that the company is also increasing its carbon storage efforts, promoting CCUS, while also preserving and restoring the ability of forests and other ecosystems to act as carbon sinks.

The company plans to supplement its natural gas efforts by expanding its electricity operations, including power generation from natural gas plus renewables such as solar and windpower, as well as storage and sales. Total aims to distribute natural gas and electricity to 7 million customers by 2022. The company invests $1.5 billion to $2 billion annually in low-carbon electricity.

BP
BP plans to invest at least $500 million annually to support its low-carbon activities, including $200 million for the development of several lower-carbon businesses: advanced mobility, including charging infrastructure for electric vehicles and other battery-charging technology, biofuel and low-carbon products, carbon management, including CCS technology and carbon offsets, digital transformation, and power and storage.

In 2018, BP acquired Chargemaster, a U.K.-based electric vehicle charging company. BP also partnered with Tesla Inc. to test how effectively wind energy can be stored at its Titan 1 wind energy site in South Dakota. BP believes that this project will help it to learn more about energy storage applications that could be useful across its entire portfolio.
Moreover, BP recently announced it would boost low-carbon energy products within its product mix by forming BP Bunge Bioenergia, a 50-50 biofuel and renewable power generation joint venture in Brazil, which would produce more than 2 billion liters of ethanol equivalent annually.

According to the report, “BP has a four-pronged strategy to increase resilience to a range of scenarios, based on increasing gas and advantaged oil production upstream, market-led growth downstream, venturing and low-carbon energy, and modernization.”

BP targets a 3.5 million-ton reduction in its scope 1 and 2 greenhouse gas emissions by 2025.

By the end of 2018, BP achieved a 2.6 million tonne reduction through less flaring and greater energy efficiency. The company also has compensation plans for reducing emissions and creating low-carbon businesses for 36,000 of its employees, including executive directors.