Big oil's $1 billion bet on climate solutions

A group of major oil and gas companies today unveiled plans to invest more than $1 billion towards tackling climate change by accelerating development of low emissions technology such as carbon capture and storage (CCS) and energy efficiency over the next decade.

The Oil and Gas Climate Initiative (OGCI) — made up of 10 oil and gas giants such as Shell, BP, Statoil and Total — said its newly established joint investment fund marked an “unprecedented” level of industry collaboration and resource sharing on climate change.

The announcement comes on the same day the historic international Paris Agreement on climate change officially came into force, setting a target of zero net emission in the second half of this century — an aim that requires a significant cut in fossil fuel use and likely some use of technologies to remove excess carbon from the atmosphere.

The initial focus of the OGCI investment will be on deploying carbon capture and storage (CCS) on a wide scale, enhancing the role of natural gas by reducing methane emissions along the value chain and improving energy efficiency in both transport and industry, according to the OGCI.

It believes these areas of focus are those where the oil and gas industry “has meaningful influence and where its collaborative work can have the greatest impact.”

The group said it aimed to deploy successfully developed new technologies among member companies — which together represent one-fifth of the world’s oil and gas production — that then potentially could be multiplied across other industries.

“The creation of OGCI Climate Investments shows our collective determination to deliver technology on a large scale that will create a step change to help tackle the climate challenge,” the group said in a statement. “We are personally committed to ensuring that by working with others our companies play a key role in reducing the emissions of greenhouse gases, while still providing the energy the world needs.”

Beyond the initial focus areas for development, the OGCI also plans to make investments that support improving energy and operational efficiencies in energy-intensive industries, with the group aiming to work with manufacturers to increase transport energy efficiency.

A CEO and management team for OGCI Investments will be announced in the “near future,” according to the group, which is made up of BP, CNPC, Eni, Pemex, Reliance Industries, Repsol, Saudi Aramco, Shell, Statoil and Total.

Concerns repeatedly have been raised by green groups and investors regarding the commitment of fossil fuel industries towards cutting emissions and tackling climate change. And, a report this morning claimed oil and gas firms across the fossil fuel industry are still failing to properly assess and disclose the risks they face from the expected rapid growth in electric vehicles and renewable energy in the coming years. 

However, the OGCI’s announcement was welcomed by the Institutional Investors Group on Climate Change (IIGCC) — although its CEO, Stephanie Pfeifer, said investors nevertheless would be looking carefully at the investment plans going forward in light of changing industry and political circumstances.

“As the Paris Agreement gains the full force of international law, institutional investors are looking for signs that oil and gas majors recognize they need to move swiftly to refocus their business models towards activities that are stress tested to thrive under a 2-degree pathway and sufficient for a smooth transition to a low carbon economy,” said Pfeifer. “Funding for research geared for technologies that will improve energy efficiency and help to cut carbon emissions is welcome and necessary. It suggests that engagement by investors and others with this critical sector should continue.”

She added: “Investors, however, will be looking closely at how these plans support the development of resilient portfolio strategies in the light of rapidly changing policy and demand conditions.”