Supermajors prepare for the energy transition

Oil And Energy In 2030   A Prediction

Rod Prowse oil-trading-shipping-and-supply

Supermajors prepare for the energy transition 

The fossil fuels era, which has enabled economic growth and development of an unparalleled kind, now faces an entirely new and different set of challenges. The Energy Institute led the challenge at last year’s IP Week with a focus on the key role and measures which need to be adopted for the oil & gas industry to achieve a low carbon future.

There are two distinct and clear strands of attention/focus being pursued by the companies detailed below.

  1. Pursuit of efficient, safe and environmentally friendly/compliant operations in their existing businesses, particularly mindful of sustainability considerations, and technological solutions to address the various challenges of decarbonisation- exemplified by the US companies, Chevron and ExxonMobil.

  2. Active embrace of the expanding role of electricity as a key energy source, in particular with electrification of mobility/transport - through involvement in power supply and provision of electric vehicle charging points as exemplified by the European companies, BP, Shell and Total.

CHEVRONhas been actively involved in two very large CCUS projects, investing in excess of $1 billion in the Gorgon (Australia) gas field CO2 injection project and in Quest (Edmonton, Canada with Shell). Chevron is also a stakeholder in Carbon Engineering, a start-up company in British Columbia, Canada which is trialling a new process called direct air capture. This process sucks carbon dioxide from the atmosphere by using chemicals and fans. The CO2 extracted can then be used to produce synthetic fuels to substitute for petrol, Jet A-1 or diesel.

Chevron has stated  ‘a commitment to understanding and evaluating opportunities across a range of alternative and renewable energy sources, including wind, solar and biofuels, as well as energy efficiency technologies’.  Its Technology Ventures arm promotes innovation, commercialisation and adoption of emerging technologies in areas such as water management, production enhancement, power systems and emerging materials.

Also heavily involved in CCUS programmes, EXXONMOBIL is seeking to make the technology both scalable and more affordable. The company has an agreement worth up to $60 million with FuelCell Energy, which specialises in providing clean, efficient and affordable fuel cell solutions configured for the supply, recovery and storage of energy.

Carbonate fuel cells can then efficiently capture and concentrate carbon dioxide streams from large industrial sources; its modular design, capable of being deployed at a wide range of locations, offers the potential for a more cost efficient pathway for large scale CCUS adoption.

For several years ExxonMobil has been researching the possibilities from advanced biofuels, with particular focus on algae’s potential. Its properties enable the manufacture of biofuels with similar composition to existing fossil fuels used in transportation.  

BP acquired Chargemaster, the UK’s largest electric vehicle charging company, in 2018 with its Polar network comprising circa 7,000 publicly available charging points. A programme to install 150KW ultra-fast charging points at BP’s UK sites is currently under way, with the intention of having 400 in place by the end of 2021. The units have an assessed capacity to deliver a 10 minute charge which will provide a 100 mile range.  BP’s ambition is to have  the UK’s largest ultra-fast public charging network.

In 2010 the company set up Lightsource for the development, acquisition and long-term management of international large-scale solar projects and smart energy solutions. This now manages 2GW of solar capacity, involving total investment of £2.6 billion with a team of 300+ people. BP is currently developing five solar farm projects around the UK, capable of supplying 63,000 homes and saving an estimated 79,000 mt/year of carbon emissions.

In 2017 Shell acquired Dutch company, NewMotion, another of Europe’s largest electric vehicle charging companies, which provides circa 30,000 residential and business charging points and 50,000 public sites. Shell, which is installing charging points at its networks in Norway, the Netherlands, the Philippines and the UK, is currently converting an existing filling station in Fulham, London to all-electric with the site opening in 2020.

Independent energy supplier, First Utility which was acquired in 2017, has a portfolio of around 800,000 residential customers all receiving renewable electricity. Now rebranded as Shell Energy, customers can also benefit from the Shell Go+ loyalty rewards programme and a range of smart home offers including smart thermostats with discounts on home electric vehicle charger and fast broadband.  It has been mooted that by 2030, this could be the world’s largest power company, with electricity projected to account for 30% of its business by the mid 2030s.

From renewable generation to battery storage to vehicle charging and domestic power,

TOTAL has also been acquiring companies along the electricity supply chain.

In 2016 the long-established French battery manufacturer Saft Group was acquired with G2Mobility, a leading French provider of electric vehicle charging solutions, acquired in 2018.  The latter having almost 10,000 points managed by its web services platform, supporting both municipal governments and private businesses.

Lampiris, the third largest supplier of natural gas and renewable power to the Belgian residential sector, was acquired in 2016.  Bringing circa one million customers, the company is now called Total Spring.  Paris based power supplier, Direct Energie, France’s third largest energy supplier, was acquired in 2018 giving Total around four million customers.  Total’s aim is to expand the network to 6 million by 2022 thus becoming a major challenger to EDF which currently supplies 80% of the market, and Engie.  

BP, Shell and Total are all members of the Hydrogen Council, launched at the January 2017 Davos meeting as a global initiative to frame a unified vision to promote hydrogen as ‘one of the key solutions of the energy transition’.

A combination of increasing public and political pressure and shareholder activism, including rising concern/interest from institutional holders, is clearly playing a key role in shaping the supermajors’ energy transition strategies.

The EU is seeing immediate pressure towards electrification of vehicle fleets as a result of  more stringent CO2 emissions reductions targets. Fleet-wide emissions for new passenger cars will be phased in during 2020 and effective in 2021.  This will require an average of 95gm/km- down from the 2015 target of 130gm/km and 2018 average of 120 gm/km.         

Around for a long time, the supermajors size and position are testament to their success in meeting numerous, and often, formidable challenges over many years. They have the resources, expertise and knowledge base to build resilience by addressing the energy transition in their own, different ways!