A group of the world’s largest member companies of the Oil and Gas Climate Initiative teamed up in October 2016, pooled together $1-plus billion to launch an investment fund designed specifically to catalyze a low-carbon industry chain and put a woman with a doctorate in chemical engineering from Princeton University in charge.
Under the leadership of Pratima Rangarajan, OGCI Climate Investments has backed some of North America’s largest carbon capture and sequestration projects, jump-started the U.K.’s carbon capture, utilization and storage hub project in the northeast of the country and supported cross-sector emerging technologies, including artificial intelligence (AI) technology that increases efficiency, sustainability and productivity at industrial sites.
Five years in, Rangarajan highlights a “trilemma” of energy concerns and their impacts. This summer, she discussed energy’s climate problems and OGCI Climate Investments’ work to resolve them with Oil and Gas Investor editor-in-chief Deon Daugherty.
Deon Daugherty: Let’s begin with the energy security issues that are coming to the fore with Russia's invasion of Ukraine. How do the increasing security issues around energy impact your work to finance the acceleration of the energy transition?
Pratima Rangarajan: The world is faced with an energy trilemma—a combination of energy security, energy equity and climate issues.
These three factors are very interconnected. Let’s take India in April 2022—in 45-degrees C weather, the climate was not cooperating—so everybody turned up their air conditioning and suddenly there wasn’t enough power generation in the country and energy security became a problem.
We’re seeing this cycle play out, not just in India but in many parts of the world right now. This cycle needs to be broken, which means that we need to think not just about whether we have enough energy, but are we using our resources wisely and where can we stop the waste in the system?
DD: When you mention waste of energy resources, the flaring of natural gas comes to mind. What can OGCI Climate Investments do to address that sort of waste?
PR: Natural gas is a great source of energy but only if we can keep it in the pipes and avoid leaks. The oil and gas industry needs to be taking a leadership role here, and the OGCI members are.
The first thing to do when you want to solve a problem is measure it. Five years ago, when we started OGCI Climate Investments’ current fund, there weren’t good technologies to measure methane emissions. Today we have investments in satellites, aircraft, drones and artificial intelligence.
The transparency is here. We know that the technologies to fix these emissions have arrived because there are some operators that have almost no emissions. If they can do it, everyone else can do it. But it really takes the will to go in and fix it. This is why OGCI has announced the Aiming for Zero Methane Emissions Initiative, a tangible, ambitious effort to eliminate the oil and gas industry’s methane footprint by 2030.
DD: Does the political will exist among lawmakers to address the climate challenge?
PR: I think we need the political will to do that because the consequences of not doing it are even worse.
The OGCI members are excellent operators, and they are driving toward near-zero methane emissions. But without the right policy or regulations, we end up with an unlevel playing field, which is never what you want.
It is policy makers’ role to help figure out how to get to the right answers as a country.
DD: Is it even possible to establish an energy policy in a country where the whole government can change every four years?
PR: It is very difficult to establish and act on energy or industrial policy in four years because it takes a lot longer to build infrastructure and drive change. Short-term shifts in policy result in market uncertainty leading to lack of investment, which affect jobs and the economy.
DD: How does your work fit in?
PR: We invest in technologies and solutions that can lower the greenhouse-gas footprint of multiple sectors.
“Our goal is to be part of the climate ecosystem and drive us all together in a way that all investments are made for the best possible outcomes. This is an expensive journey. We can’t afford to waste either time or resources.”
We look at the energy sector but also other industries like chemicals and power generation, cement and steel. We’re in local and heavy-duty transportation, shipping, trucks and also buildings. These are also sectors that are underserved by the current investment ecosystem.
That’s why we’re in this investment arena. And our job is to deliver carbon reduction.
DD: OGCI consists of a dozen big oil companies, each with international assets. Is the general reaction, ‘Hey, maybe we should pay more attention’ or is it a tongue-in-cheek response to this idea that Big Oil wants to save the planet? What’s the perception out there?
PR: I’m happy to report that a lot has changed in five years. Twelve majors are OGCI member companies, representing over 30% of the world’s operated oil and gas production, that are investors in our current fund. And I’d say five years ago when we started, there were a lot of questions about whether it’s greenwashing. We receive far fewer, if any, questions about that today. That’s because of what we’ve delivered.
Not only have we delivered greenhouse-gas reduction today, we’ve developed measurement systems to estimate this and monitor and produce the transparency that we all need as investors. And we use this to drive our own behavior, to drive our own investments.
But we also realize the entire ecosystem of investors needs this so we can all be transparent together.
Our goal is to be a proactive part of the climate ecosystem and drive us collectively toward making investments targeting the best possible outcomes. This is a high-stakes journey. We can’t afford to waste either time or resources.
DD: What differentiates OGCI Climate Investments’ fund from other climate focused funds?
PR: There are three factors that differentiate us from most other climate tech-oriented funds. The first is that we invest in sectors that are typically underserved by the venture capital and growth equity funds.
We also work on the industrials that are heavy users of energy. These are all greenhouse-gas emitting sectors. When you look at venture capital, 60% of the money over the past 10 years has gone toward mobility. The manufacturing sectors have not seen a lot of innovative dollars coming in. So that’s one.
The second is that we know how to measure the forward impact of our investments in terms of carbon reduction. As I mentioned, we’ve developed the methodologies—it took us three years because it’s actually quite complex—and we use those to inform our due diligence on target investments and measure their performance. Success is measured by impact targets that we set on a yearly basis.
And we report progress annually.
DD: What is the dynamic between OGCI Climate Investments and the corporate backers?
PR: I was a little cautious when I first came in. But I have to tell you, five years down the line, it’s a gift. They’ve given us over $1 billion to take technology risk and project risk to help everyone figure out how to develop and scale decarbonization and climate technologies.
They created us as an independent company so we can make our own decisions. They help us with strategic insights. They help us when we need technical expertise, but they leave us to make decisions ourselves. And some of those decisions may be to invest in technologies that compete with their corporate venture businesses. We have our own independent investment committee.
So, we have independence, we have investment capital and we have a fabulously wide array of sectors we can invest in.
But behind us, we have companies that are willing to contribute their technical know-how. They pilot the technologies we invest in. We have 80 pilots with OGCI member companies, and that really helps OGCI Climate Investments’ investees scale their technologies very quickly. And OGCI member companies are also their customers. They are a market for what our investments produce.
So, all in all, it’s a gift.
DD: What’s next?
PR: OGCI member companies are asking us to scale what we’ve already got. They said, “This is great, how can we get OGCI CI’s portfolio companies scaled up so that impact can accelerate?”
And for that, we are actually looking to raise some more capital. This capital we intend to raise may include companies that are not OGCI member companies. This new capital will be growth capital and will take less risks.
But we have now a pipeline that we’ve already de-risked so we can allocate some more money to them. Raising additional sources of capital is important because one of the things that OGCI asked us to do was develop an ecosystem [and] bring other key stakeholders along in the decarbonization journey.
I think we’re in the right place when we can bring in other oil and gas companies, other sectors, even financial investors, because we all have to learn how to scale these technologies.
2022-11-29 - Meanwhile, the first days of December bring opportunities that may upend oil economies around the world as Russian sanctions kick in and OPEC reconvenes in Vienna.
2022-09-20 - The coming end of SPR oil releases by the Biden administration could shift market dynamics again in a year of high volatility following Russia’s invasion of Ukraine in February.
2022-10-07 - Brent was on track for its highest close since Aug. 30 and WTI on track for its highest close since Aug. 29. It was also their fifth daily rise in a row and second straight weekly gain.
2022-09-30 - Both contracts rose by more than $1 earlier in the session but dropped on news that OPEC’s oil output rose in September to its highest since 2020, surpassing a pledged hike for the month, according to a Reuters survey on Sept. 30.
2022-09-28 - Approximately 11% of U.S. Gulf of Mexico production has been shut-in due to Hurricane Ian.