The question that is worth a billion dollars – how will the oil and gas majors position themselves in the energy transition to ensure relevance, maintain profit and market share, and to survive against growing activist pressures?

This begs the question as to what are the differing strategies of the oil majors and how do they stand-up to scrutiny of climate activism. Clearly, the belief that oil and gas is a dying fuel has now been discarded in favour of the more pragmatic assumption that decarbonising oil and gas processes is the preferable route to securing an affordable low-carbon society, together with expanding energy access and not shifting the ownership of oil and gas production to a select number of petro-states.

The Energy Council has taken a look at the energy transition strategies of the oil majors: bp, Shell, ExxonMobil, Chevron, ConocoPhillips, Eni and TotalEnergies – each with their own vision of how to proactively engage with transition challenges.

bp

The British-based giant, bp, has sought to rapidly expand their emissions reductions actions and outlook, setting out 3.5 million tonnes of sustainable GHG emissions reductions by 2025. Delivering their vision, bp has set out three broad areas of focus: reduction of emissions, improving energy efficiency and developing low-carbon businesses. Each focus has their own benefits for decarbonisation, and these are common themes throughout each oil major.

Their emissions reductions strategy sees bp seeking to target the greenhouse gasses across their supply chain, above giving singular attention to the promotion of on low-carbon fuel – such as green hydrogen.

Energy efficiency is to be improved through the development of lower carbon fuels, lubricants and petrochemicals, optimizing process heat using digital technologies, and upgrading and retrofitting ageing infrastructures with new technologies.

Bp has also sought to progress the emergence of carbon pricing which will positively affect the creation of low-carbon businesses. So far bp has and will continue to invest $500 million into “low-carbon activities” each year. In their own words, “our portfolio is a balance of advantaged oil and gas, a competitive downstream, the trading of all forms of energy and a wide range of low-carbon businesses.”

Read their full report on decarbonisation strategies here

Shell

Shell has had to undergo a more public reconsideration of their operating model following the ruling by the Dutch Courts that ruled the company must undertake a 45% reduction in emissions by 2030, compared to 2019 levels. Such a mammoth task may have seen unattainable a decade ago, and yet today Shell is tackling a vast array of their impacts to reach their court-ordered targets.

To engage with their rapid decarbonisation programme, Shell has developed six ‘levers’ that will drive their short, medium and long-term goals; “pursuing operational efficiency in our assets, shifting to natural gas, growing low-carbon power businesses, providing low-carbon fuels such as biofuels and hydrogen, developing carbon capture and storage, and using natural sinks”.

Read their full report on decarbonisation strategies here

Chevron

Chevron’s decarbonisation outlook is focused toward extracting ‘superior financial performance’ from their process of ‘active portfolio management’ instead of preset targets. By relying on their strategic processes and investment patterns to adapt to ‘changing policy, demand and energy transition opportunities’ – Chevron believes that their method will keep their business relevant and environmentally responsible.

Developing a strategy that concentrated toward five areas of strategic decision-making: decision Analysis, business planning, capital-project approvals, business-development screening, and the marginal abatement cost curve process. Firstly, decision analysis is crucial to understanding the risks and uncertainties within future oil and gas exploration and production, and then providing a basis for comparison with alternative energy business opportunities. Secondly, business planning now incorporates carbon costs and carbon pricing into their models, including the costs of abatement and emissions reductions technologies. Thirdly, capital project approvals are guided by a strategic outlook that considers; the business landscape, internal carbon price forecasts and carbon costs, and the ‘annual anticipated GHG emissions profile’.

Read their full report on decarbonisation strategies here

ExxonMobil

ExxonMobil has been a little late to jump onto the transition train, yet they have revealed an approach in which they will seek to progressively reduce their emissions profile while seeking to deploy technologies and businesses that can facilitate a low-carbon business model. Their statement outlines the development of four actions to accomplish these goals; “Mitigating emissions in company operations, providing products to help customers reduce their emissions, developing and deploying scalable technology solutions, and proactively engaging on climate-related policy”.

Their emissions mitigation plan has thus far decreased their exposure from base facilities by 27% against 2011 levels or roughly 33 million tonnes of CO2 abatement, mainly sourced from “portfolio optimization; energy efficiency improvements; reductions in flaring, venting, and fugitive emissions; and the impact on the company’s operations due to COVID-19”. Their total abatement of all Scope 1 emissions, in comparison to 2001, has been roughly 520 million tonnes of CO2 – indicating that the capacity to change exists and when taken on by Oil Majors, can make significant positive impacts.

Read their full report on decarbonisation strategies here

ConocoPhillips

The ConocoPhillips strategy is structured according to a ‘hierarchy of targets’ divided along the lines of “long-term business direction and strategy medium-term performance target for GHG emissions intensity, and short-term targets for venting and flaring methane reductions”. These objectives are facilitated by three areas of investment; technology choices, portfolio decision-making and engagement with external stakeholder initiatives.

Technological choices aim to drive their offset strategy by constructively reconsider their marginal abatement cost curve each year as emissions risks expand. ConocoPhillips intends to do this through the integration of low-carbon opportunities throughout their global business operations, markets and competencies. These will include the obvious routes of renewable development, battery storage, carbon capture, utilization and storage and the hydrogen economy.

Portfolio investment decisions have begun to incorporate carbon pricing into all project approvals, especially targeting major projects where the “fully burdened cost of supply” is less than WTI $40/boe.

ConocoPhillips has sought to go beyond their own internal measures and to find agreement with external stakeholders on funding and engaging with initiatives that can have broader global impacts. Each initiative has specific goals from the; World Bank Zero Routine Flaring by 2030, advocating for the existence of nationwide carbon pricing in the USA and discussing net-zero benchmark assessments with the Climate Action 100+ group.

Read their full report on decarbonisation strategies here

Eni S.p.A

Eni’s decarbonisation strategy has setout a wholesale organizational recalibration over the next 30 years, expanding on their historical record of excellence and progressive modernization. The Italian oil major will dedicate resources to shift eight areas where they believe they can make a significant difference in their emissions profiles.

Their start point is to reduce their oil production over the next 30 years, a “flexible oil decline”, that will see their production profile for natural gas to become 85% of production by 2050. This approach will be underscored by “resilient and flexible 3P reserves”, that will see 94% of their value realized by 2035 so long as Brent stays above $50/boe, with a breakeven price of $20/boe.

 As oil production declines, Eni has set out a plan to maximize their sustainable gas production through carbon abatement programmes of forest conservation and CCUS projects, which they believe, will abate over 40 million tonnes of GHG emissions each year by 2050.

Naturally, expanding renewable generation will be a popular choice among oil majors, especially to power their own facilities. In this respect, Eni intends to expand their generation capacity to over 55 GW by 2050. Eni will also transform their petrol stations to include a range of differentiated services to accommodate biofuels, electric charging and battery replacement.

Eni has a large refining portfolio in which they will rapidly undertake to increase bio refining to 5 million tonnes per year, while also removing any palm oil refining by 2023 – ahead of EU regulations. Their chemical production will expand to utilize more bio and plastic recycling technologies, together with more sustainable feedstock.

Lastly, they have developed a framework with outside, third-party actors to measure and audit their emissions reductions. This framework will ensure targets of an 80% reduction of total by 2050, above the 70% needed to align with the IEA’s Sustainable Development Scenario.

Read their full report on decarbonisation strategies here

TOTALEnergies

TOTALEnergies has a task that requires a more pragmatic approach than some of their competitors due to their commitments to third-world assets. Where some oil majors may divest and pass off those emissions to other producers, TOTALEnergies strategy has long focused on assets in the developing world. Therefore, the French oil major has set out reducing their Scope 1 & 2 emissions to net-zero across all operations by 2050 or sooner.

Natural gas will also become their core production focus, which aligns with the discoveries along the coasts of Africa, from the Senegal Basin down to Namibia, South Africa and Mozambique, back up to Egypt. The continent will become a primary supplier of gas in the coming decades.

Renewable development will focus on the electrification of their facilities to swiftly reduce their Scope 1 impacts. Beyond this, there will be considered efforts to produce low-cost oil and biofuels.

Read their full report on decarbonisation strategies here

Big Oil Outlook

The big seven oil majors each have similar approaches to their decarbonisation strategies, albeit with tweaks that will transform their business models to maintain shareholder value while seeking routes to lower their emissions profiles. The core focuses are essentially: the recalibration of portfolios to be inclusive of zero-carbon and low-carbon assets; integration of new, decarbonisation technologies across their operations; alignment of policies and protocols with Paris Agreements; and, investing heavily into low-carbon fuels.

The markets are keenly watching how these targets progress and who is able to accomplish decarbonisation at the fastest rate. Access to capital will increasingly consider these roadmaps, their targets and how they have accomplished these goals – and while the post-Covid recovery has amplified our need for oil and gas, the public sentiment is unlikely to return to climate skepticism.

Of the oil and gas majors, there is a consistency in approach with tweaks toward current business models and concerted shifts to become natural gas majors whose facilities are net-zero, and who can maximise their current market positions to be early entrants into the hydrogen economies. The oil and gas majors have now all accepted the energy transition challenge, their task now is to lead the industry transformation and present a new model for energy production that considers broader stakeholders and the ailing climate.