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CERAWeek: For some oil companies, getting to net zero is already in the plan

02 March 2021 Kevin Adler

While many international oil and gas companies have made emissions reductions pledges, few have gone as far as Occidental Petroleum, either in commitments or actions taken to date. And the same can be said about ADNOC, the national oil company of the United Arab Emirates, when state-owned companies are considered.

The top executives of Occidental and ADNOC shared their perspectives on the challenges of getting to net zero in a discussion led by IHS Markit Vice Chairman Daniel Yergin on 2 March at CERAWeek by IHS Markit.

"Our goal is to provide the world with net-zero carbon oil," said Vicki Hollub, Occidental CEO. In November 2020, Occidental became the first large US-based oil company to say it will eliminate Scope 3 carbon emissions (those created by the customers for the oil and gas it produces) across its value chain by 2050.

The company's path leverages technology it has developed over 40 years of enhanced oil recovery with carbon dioxide (CO2) injection into a wide range of carbon capture and sequestration (CCS) services for oil producers and other industries. And it's transforming how the company thinks about itself, she said. "We do not expect to be an oil company only in the next 10 to 20 years. We expect to become a carbon management company," she said.

Occidental announced last year a partnership with private equity firm Rusheen Capital Management to create a joint venture called 1PointFive to commercialize technology to remove carbon directly out of the air. "United Airlines is a partner … because they have a goal of net zero by 2050," she said.

In February, the partners announced that Worley had been selected to perform front-end engineering and design of the planned facility in West Texas. The first train of the facility could capture 500,000 metric tons/year of CO2.

Occidental also is working on CCS for industrial companies, such as two ethanol plants in Texas owned by White Energy, a gas-fired power plant in North Dakota, and it will soon be working with a steel plant in Colorado, she said.

United Arab Emirates

For ADNOC, pushing forward on the zero-carbon transition is part of an ongoing commitment, said H.E. Minister Sultan Ahmed Al Jaber, director general and CEO of ADNOC.

"The truth is … the whole of the UAE has been preparing for the energy transition for more than 15 years," he said. "We have always seen the energy transition as a unique opportunity to diversity and grow our economy."

Also, ADNOC will be propelled in the next few years by the nation's recovery from the COVID-19 pandemic and the global rebound in demand for oil, gas, and power. He said the UAE has vaccinated nearly 50% of its population to date, and its industry is poised to meet new demand as oil and gas demand globally return to pre-COVID levels.

"The best way to manage any period of uncertainty is to stay focused on what we can control: It is, simply, our costs," he said. Technology and operational innovations in the last five years have improved UAE's drilling efficiency by 35%, he said.

"We understand the world will need oil and gas for many decades to come," Al Jaber said. "Our mission at ADNOC is to provide that oil and gas as responsibly as possible … [to be the] lowest-cost producer and lowest emitter."

UAE has two advantages as the oil and gas industry decarbonizes, according to Al Jaber. First, he cited the company's leadership on environmental issues, such as being the first Middle East nation to sign the Paris climate treaty. Second, the country's geology gives it access to some of the lowest carbon intensity (CI) oil and gas production in the world. Despite being a low-carbon producer now, ADNOC's goal is to reduce its CI by 25% in the next 10 years, he said.

Beyond that, the UAE has spread its investments across an array of energy transition projects. It has three of the largest and lowest-cost solar projects in the world, he said, and it has significant investments in more than 30 solar projects around the world.

ADNOC teamed up with Emirates Steel more than four years ago on a CCS project. "We can capture 800,000 [metric tons (mt)] of CO2 and have plans to expand significantly in very near future," Al Jaber said.

Different attitude

Looking ahead, both executives said that they see demand rising from governments and the public for net-zero carbon operations — and they support it.

From Hollub's perspective, the key is to take a whole new attitude when tackling a global problem like carbon emissions. "When you think about your stakeholder being the world, you do things differently than you did before," she said.

In the case of Occidental, she said the company's environmental, social, and governance commitment "becomes an opportunity, an advantage." By making pledges with real milestones, she said Occidental welcomes investors to "judge how we are doing."

The demands of decarbonization require scaling-up operations, and this realization was a factor in Occidental's purchase of Anadarko Petroleum in August 2019 in a transaction valued at about $55 billion. The acquisition was designed to give it access to massive oil and gas reserves in key basins so it could scale up for more efficiency and to support investments in technologies such as CCS.

Yet, with all that new acreage, Occidental is careful, Hollub said. "It's not all about drill, drill, drill," she said. Oil and gas production must be done "with thought," and with an eye to complementary opportunities for enhanced oil recovery and CCS, she said.

For ADNOC, technology is at the heart of the transition as well. Renewable power and CCS projects are "a natural extension" of its commitment, Al Jaber said. "We intend to leverage our experience in the energy spectrum to promote every enabler [technology] of a lower-carbon future."

Posted 02 March 2021 by Kevin Adler, Editor, Climate & Sustainability Group, IHS Markit

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