Despite the perception that fossil fuels are directly at odds with clean energy development, oil and gas companies have a prominent role to play within the energy transition. In fact, oil and gas majors are some of the few companies that possess the financial resources, skill sets and innovation to transform present-day energy and economic systems, and as a result, should be viewed as part of the solution when it comes to decarbonizing energy and non-energy industries alike.
First, oil and gas companies are diversifying and reorienting their business models to concentrate on end user and downstream opportunities, including fuel and chemical manufacturing, as well as cleaner-burning energy sources. Baker Hughes, for example, is expanding its existing operations within chemicals and nonmetallic materials, which carry a lower carbon footprint than traditional fossil fuel extraction. The Houston-based oilfield services firm is also expanding its use of digital technologies across its oilfield services and turbomachinery and process solutions segment, which houses its liquefied natural gas (LNG) operations. LNG has been positioned by global industry as a key transition fuel, as it releases less carbon dioxide from combustion than both coal and petroleum products.
Major operators have also been innovating and implementing deep decarbonization initiatives, including carbon capture, utilization, and storage (CCUS), methane efficiency, zero-emissions production and hydrogen. CCUS represents a critical pathway to global decarbonization, promising to extract carbon dioxide from the air or capture it from high-emitting sources like coal-fired plants, then reuse or store it in deep geologic formations. Last April, ExxonMobil announced its plans for a $100-billion carbon capture project, called the ‘Houston CCS Innovation Zone,’ to be located along the Houston Ship Channel. The U.S. major has over 30 years of experience in CCUS technology and was one of the first companies to capture more than 120 million tons of carbon dioxide. To commercialize its extensive low-carbon technology portfolio, ExxonMobil announced plans in February to invest three billion dollars through 2025 in a new low-carbon solutions venture that would advance plans for more than 20 new carbon capture projects globally. Houston-based Occidental Petroleum is also spearheading a large-scale carbon capture project in the Permian Basin. Upon completion, the direct air capture facility will be capable of eliminating one million metric tons of atmospheric carbon dioxide per year.
Another way in which oil and gas companies are engaging with the clean energy transition is by entering sectors with opportunities for low-carbon investment and fostering strategic partnerships and synergies within non-energy industries. Chevron, for example, has tripled its planned investments into the energy transition through 2028 and is targeting a number of diverse sectors that are able to contribute to decarbonization objectives. The U.S. supermajor signed a partnership with agriculture company Bunge to finance Bunge’s soybean processing facilities, which will act as a feedstock for renewable fuels. Chevron also forged a renewable gas partnership with Mercuria Energy to own and operate 60 compressed natural gas stations across the U.S.; with California Bioenergy to produce renewable natural gas from dairy farms; and with Google and Delta Airlines to produce and market sustainable aviation fuel. Finally, leading oil and gas majors have also been proactive in adopting progressive Environmental Social Governance (ESG) standards with a view to sustainability and environmental stewardship, and could serve as a strategic liaison between industry, government and public interests.