Oil companies have long relied on joint ventures to extract oil and natural gas. Now, they are partnering with their customers to help reduce the consumption of petroleum products such as gasoline, diesel and jet fuel.
International oil giants such as BP, Chevron and TotalEnergies, formerly Total, have formed alliances with companies in industries such as automaking, airlines and cement manufacturing to help cut greenhouse gas emissions.
Chevron and Toyota North America in April said they would develop transportation and storage systems for hydrogen-powered vehicles. BP and the Mexican cement-maker Cemex in May formed a partnership to decarbonize the cement industry, one of the largest producers of greenhouse gasses, both through the manufacturing process and through transportation of its products.
BP and TotalEnergies this year partnered with the ride-hailing company Uber to accelerate the global adoption of electric vehicles. TotalEnergies recently worked with Air France-KLM to complete the airline’s first long-haul flight using biofuel made from discarded cooking oils.
These partnerships represent another change in oil companies’ approach to climate change as they come under mounting pressure from investors, the courts and the public to cut carbon emissions and change their businesses accordingly. For decades, even as they began to tackle greenhouse gases from their own operations, oil companies washed their hands of emissions spewed by customers using their petroleum products.
“Historically, they said, ‘It’s not our problem,’” said Mike Coffin, a senior analyst with Carbon Tracker, a London-based think tank focused on the energy transition. “Clearly, we’ve seen a shift in that companies are taking responsibility for these emissions.”
The shift comes as the need to address climate change takes on new urgency with the northwestern United States baking under triple-digit temperatures, the West and Southwest in extended droughts and forecasters predicting another active hurricane season after the record-breaking season of 2020.
The Biden administration, meanwhile, has pledged to cut U.S. greenhouse gas emissions in half by the end of the decade. And earlier this year, the International Energy Agency, long friendly to the oil industry, concluded the development of new oil fields must halt in 2021 if the world is to meet net-zero greenhouse gas emissions by 2050 and avoid the worst effects of climate change.
Scoped out
Under the international agreement adopted in Paris in 2015, companies on the path to net-zero emissions by midcentury must report emissions associated with their business under a “scope” framework. Scope 1 and 2 deal with greenhouse gases emitted directly from their operations or through energy sources used by the business.
Scope 3 encompasses greenhouse gases that come from customers’ use of fossil fuels, including commuting, business travel and transportation of goods and services.
Oil companies have in recent years addressed Scope 1 and 2 emissions by trying to reduce the routine burning of natural gas in oil fields, a practice known as flaring, as well as mitigating methane leaks from pipelines and other operations. They also have converted more of their power sources to renewables, such as wind and solar.
But few oil companies have addressed Scope 3 emissions from customers’ consumption of their products, which requires greater collaboration with customers and significantly more money. It would require oil companies to move away from the fossil fuels on which their businesses are built and help themselves and their consumers to adopt new technologies, from solar and wind energy to batteries to carbon capture.
“Most oil and gas companies are focused on their Scope 1 and 2 emissions, created by their own operations and their purchases of energy,” said Ed Crooks, vice chairman of energy in the Americas for the British research firm Wood Mackenzie. “Significant reductions in Scope 3 emissions are likely to require fundamental structural changes to business models, with companies moving from Big Oil to Big Energy.”
The catalysts for change are already coming to bear. A Dutch court in May ordered Royal Dutch Shell to cut its emissions — including Scope 3 emissions from its customers — by nearly half by 2030. Also in May, shareholders at the U.S. oil major Chevron backed a climate proposal urging the oil giant to cut customers’ carbon emissions.
Analysts said the Dutch court ruling is unlikely to survive appeals, and the Chevron shareholder resolution is nonbinding. But the courtroom and boardroom actions are forcing oil exploration and production companies to rethink their approach to customer emissions.
“When it comes to Scope 3 emissions,” said Lars Eirik Nicolaisen, a deputy chief executive with Norwegian energy research firm Rystad, “there is some analogy to the tobacco industry, where producers became more liable for the choices of their customers.”
More than PR?
Big Oil’s partnerships with airlines, cement companies and Uber are a good first step toward addressing customer emissions, said Carey King, an assistant director and research scientist with the Energy Institute at the University of Texas at Austin.
These partnerships can help spread the cost and risk of building out expensive new energy systems, such as hydrogen fuel stations and carbon capture and storage facilities. And they can provide oil companies with valuable data on consumer demand for these emerging energy sources.
For example, BP and Total’s partnership with Uber will give the energy companies access to driver data, which can help inform where electric vehicle charging stations should be installed.
“It’s hard for individual companies, even large ones, to push hard for change,” King said. “You need some pairing up. And it’s an easy PR win to say you’re working on this.”
The question for environmentalists and climate activists is whether these efforts will extend beyond public relations. Environmentalists remain skeptical of pledges by companies to reduce carbon footprints, citing efforts that generate good press but have little practical impact of lower carbon emissions.
For example, companies have bought and touted so-called carbon offsets that aim to save forests that absorb carbon dioxide from the air. In some cases, however, those forests were already protected and the offsets did little to save new forest land.
Collective responsibility
Ultimately, tackling climate change is a collective responsibility, said Coffin of Carbon Tracker. BP, Total, Shell and Houston independent Occidental Petroleum have all set targets to reduce customer emissions but have not been clear on how they will lower them on an absolute basis, according to Carbon Tracker.
For example, an oil company could work with an airline to lower emissions by using biofuels, but if it flies more planes or longer flights using biofuels, there’s no net-impact on carbon emission and defeats the purpose of these partnerships, Coffin said.
“Collaboration is good,” Coffin said. “But the devil’s in the details.”
paul.takahashi@chron.com
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