Aramco and other oil giants set first joint carbon target

The joint target reflects the pressure on the sector’s climate stance. (AFP)
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Updated 17 July 2020

Aramco and other oil giants set first joint carbon target

  • The decision marks a change of heart by the US oil company Exxon, which did not report its carbon emissions in 2019

LONDON: A group of the world’s top oil companies including Saudi Aramco, China’s CNPC and Exxon Mobil have for the first time set joint targets to cut their combined greenhouse gas emissions as a proportion of production, as pressure on the sector’s climate stance grows.

However, the target set by the 12 members of the Oil and Gas Climate Initiative (OGCI) is eclipsed by more ambitious plans set individually by the consortium’s European members, including Royal Dutch Shell, BP and Total.

The OGCI members agreed to reduce the average carbon intensity of their aggregated upstream oil and gas operations to between 20 kg and 21 kg of CO2 equivalent per barrel of oil equivalent (CO2e/boe) by 2025, from a collective baseline of 23 kg CO2e/boe in 2017, the OGCI said in a statement.

Intensity targets mean absolute emissions can rise with increasing production.

The OGCI’s members are BP, Chevron, CNPC, Eni, Equinor, Exxon, Occidental Petroleum, Petrobras, Repsol, Saudi Aramco, Shell and Total.

Together they account for more than 30 percent of the world’s oil and gas production.

“It is a significant milestone, it is not the end of the work, it is a near term target ... and we’ll keep calibrating as we go forward,” OGCI Chairman and former BP CEO Bob Dudley told Reuters.

The members agreed on a common methodology to calculate carbon intensity and the targets could be extended to other sectors such as liquefied natural gas and refining in the future, Dudley added.

The announcement marks an important change for Exxon, the largest US oil company, which has resisted investor pressure to improve the disclosure of its impact on the environment. It did not report its carbon emissions in 2019.

Exxon supports the OGCI targets to decrease the carbon intensity of energy production and is “part of the industry’s efforts to take practical, meaningful steps to reduce emissions,” a spokesman said.

The targets set by different companies can vary widely in scope and definition, making it difficult to compare. However, some members of the OGCI already exceed or plan to overshoot the joint target.

For example, Saudi Aramco, the world’s top oil exporter, had an upstream carbon intensity of 10.1kg CO2e/boe in 2019, according to its annual report.

Norway’s Equinor aims to reduce its CO2 intensity below 8kg/boe by 2025. It has said the current global industry average is 18 kg CO2e/boe.

OGCI said the group’s collective carbon intensity would be reported annually, with data reviewed by EY, as an independent third party.

The target includes reductions in methane emissions, a potent greenhouse gas, which the group had previously committed to cut.


Oil giants’ production cuts come to 1m bpd as they post massive write-downs

Updated 10 August 2020

Oil giants’ production cuts come to 1m bpd as they post massive write-downs

  • Crude output worldwide dropped sharply after the market crashed in April

LONDON: The world’s five largest oil companies collectively cut the value of their assets by nearly $50 billion in the second quarter, and slashed production rates as the coronavirus pandemic caused a drastic fall in fuel prices and demand.

The dramatic reductions in asset valuations and decline in output show the depth of the pain in the second quarter. Fuel demand at one point was down by more than 30 percent worldwide.

Several executives said they took massive write-downs because they expect demand to remain impaired for several more quarters as people travel less and use less fuel due to the ongoing global pandemic.

Of those five companies, only Exxon Mobil did not book sizeable impairments. But an ongoing reevaluation of its plans could lead to a “significant portion” of its assets being impaired, it reported, and signal the elimination of 20 percent or 4.4 billion barrels of its oil and gas reserves.

By contrast, BP took a $17 billion hit. It said it plans to recenter its spending in coming years around renewables and less on oil and natural gas.

Weak demand means oil producers must revisit business plans, said Lee Maginniss, managing director at consultants Alarez & Marsal. He said the goal should be to pump only what generates cash in excess of overhead costs.

“It’s low-cost production mode through the end of 2021 for sure, and to 2022 to the extent there are new development plans being contemplated,” Maginniss said.

London-based BP has previously said it plans to cut its overall output by roughly 1 million barrels of oil equivalent (BOEPD) by the end of 2030 from its current 3.6 million BOEPD.

Of the five, Exxon is the largest producer, with daily output of 3.64 million BOEPD, but its production dropped 408,000 BOEPD between the first and second quarters. The five majors, which include Chevron Corp, Royal Dutch Shell and Total SA, also cut capital expenditures by a combined $25 billion between the quarters.

Crude output worldwide dropped sharply after the market crashed in April. The Organization of the Petroleum Exporting Countries agreed to cut output by nearly 10 million barrels a day to balance out supply and demand in the market.