Despite oil companies investing obscene amounts of money into carbon capture technology, the International Energy Association (IEA) now says this may not be the best route to aid in the transition to clean energy. In a recent report, the IEA claimed oil and gas companies must do much more to reach a net zero emissions goal anytime soon.
As carbon capture is a pivotal point of many oil majors’ carbon-reduction strategies, diminishing its viability would severely hamper their efforts. The IEA would demand a significant increase in oil companies’ investment in carbon capture, with estimates up to 50% of oil companies’ revenue. While everyone must do their part for the clean energy transition, is such a drastic shift viable? Let’s unpack that question.
The Basics of Carbon Capture Theory
The carbon capture process involves implementing technologies to snatch carbon dioxide (CO2) emissions before they reach the atmosphere and potentially increase atmospheric temperature. As a critical component to a network of climate change mitigation methods, carbon capture is said to prevent greenhouse gasses from being released into the atmosphere.
Carbon capture technology comes at a hefty price tag, especially for massive industrial complexes. Naturally, the more CO2 an organization produces, the more carbon-capturing instrumentation it would need to catch the released gasses adequately.
The capture methods themselves can vary from solvent scrubbing to chemical absorption. Once captured, the CO2 can be transported via secure containment vehicles and repurposed, sold, or securely stored.
To operate successfully, such an undertaking requires exorbitant expenses, logistics, and staffing. However, carbon capture technology serves a dual purpose of pressing on toward the goal of carbon-neutral oil drilling and reducing the impact of uncaptured carbon production.
Carbon capture is just one of the many ways industrial companies and oil and gas firms have invested in reducing carbon emissions to mitigate the impact of climate change.
Despite carbon capture representing a major investment for oil and gas companies, the IEA is switching gears, saying the majors must “ let go” of carbon capture as a climate solution.
The IEA Calls Carbon Capture Tech an “Illusion” for Major Oil and Gas
According to the IEA, the oil and gas industry can no longer insist that carbon capture technology is a reasonable solution for climate change. Instead, the report suggests they must invest more in clean energy. In other words, the IEA says carbon capture is not enough.
In a statement regarding the COP28 conference, which began on November 30th, IEA Executive Director Fatih Birol wrote, “So while all oil and gas producers need to reduce emissions from their own operations, including methane leaks and flaring, our call to action is much wider.”
In the same statement, the IEA reports the oil and gas Industries would need to invest as much as 50% of their capital funds into clean energy by 2030 in order to limit climate change to the projected goal of 1.5 degrees Celsius. This would be a staggering shift in investment strategy for the industry.
While the IEA admits carbon capture technology is an essential component to reducing carbon emissions, it claims the oil and gas industry should not rely on it to maintain regulatory operations. Instead, they insist it is not nearly enough for the supposed CO2 produced by oil refineries, drilling sites, and complexes.
Are Oil and Gas Not Investing Enough in the Clean Energy Transition?
According to the IEA, oil industries must ramp up their carbon capture technology investment to reach a net zero emissions goal. According to the report released in late November, IEA claims that oil and gas industries would need to pay a whopping $3.5 trillion annually until the middle of the century to reach a net neutrality goal.
Not only is this an outrageous sum of cash, but it would require oil and gas companies to place nearly all their profits into carbon capture technology, according to the report. In 2022, oil and gas companies invested $20 billion into clean energy, comprising roughly 2.5% of the total capital spending.
The IEA calls for oil and gas companies to diversify their clean energy efforts to reach a net-zero goal. Alternatively, oil and gas firms that do not wish to venture into lesser-known climate change mitigation strategies would be encouraged to scale back production drastically.
IEA Gives Oil and Gas an Ultimatum
According to the IEA report, oil and gas producers face a crossroads. The IEA says it’s time for oil and gas companies to choose between embracing the shift to clean energy completely or contributing to a climate crisis. With this ultimatum looming in front of oil and gas companies, the IEA still has high hopes that the industry is poised to make a significant impact in the clean energy transition.
As the globe migrates toward lower-emissions goals, many, along with the IEA, predict that oil and gas will become less relevant and more risky. If the majors and super-majors implemented some of the unfathomable measures the IEA suggests, it could lead to significant changes in the energy sector.
The oil industry is already facing countless threats that increase its volatility, such as the conflict between Israel and Hamas. With shortages, the ongoing Russian-Ukrainian war, and President Biden’s continuous undermining of the industry, oil is under siege on multiple fronts. So, is now really a good time to force oil companies into multi-billion dollar energy investments on top of the expenditures that have already been invested in carbon-capturing gear?
However, as the demand for energy increases, oil production must continue to maintain the status quo for the power grid and the global energy network. As we push towards the energy transition, remembering the need for balance is essential.
Conflicting Sides of the Spectrum
On the other side of the carbon capture debate, ExxonMobil claims carbon capture tech is “critical to help meet the lower-emissions goals.” As a pillar of ExxonMobil’s climate change mitigation measures, carbon capture technology represents a significant investment for the US-based oil company.
ExxonMobil holds the position that carbon capture tech remains one of the most cost-effective methods of decarbonizing emission-heavy areas. Going beyond decarbonization, ExxonMobil touts that carbon capture and storage can actually produce a negative CO2 emission rating. In other words, carbon capturing technology has the potential to “decrease the CO2 output wind paired with bio-energy or direct capture.”
According to the Center for Climate and Energy Solutions, carbon capture can catch up to 90% of carbon emissions before they reach the atmosphere and contribute to climate change. Additionally, captured CO2 can have many benefits, including industrial power sources and energy production. If this is the case, carbon capture technology would dramatically decrease the expulsion of harmful greenhouse gasses into the atmosphere, making it a viable solution for many oil and gas companies.
However, this claim is the exact opposite of the recent report by the IEA, stating that carbon capture is nowhere near enough to reduce emissions to net zero. With such polarizing claims on either side of the spectrum, savvy energy consumers are left to wonder where the truth lies.
American Approach VS. European
American-owned ExxonMobil and Chevron are focusing primarily on carbon capture technology and hydrogen. While both American companies plan to increase their investment in carbon-capturing technology, across the pond, European oil majors set their sights on renewable energy investments, like wind and solar.
Instead of heavily investing in carbon capture technology, Shell and BP are looking to renewables to help reduce their emissions impact. Naturally, while these companies are not placing all their energy eggs in a single basket, the differing focal points from the United States and European majors present an intriguing dynamic.
With several companies exploring the potential of hydrogen power, wind, and other energy resources, there are undoubtedly multifaceted approaches to meet a lower carbon emission goal. As the globe moves forward in the clean energy transition, more and more viable approaches arise.
Another point to consider is the recent acquisitions by Chevron of Hess Oil and ExxonMobil’s merger with Pioneer Natural Resources earlier this year. CNBC calls these major acquisitions by American-owned oil companies “doubling down on fossil fuels.” These multi-billion dollar deals naturally increase both ExxonMobil’s and Chevron’s responsibility in the energy transition. As they ramp up production stateside and abroad, Chevron and ExxonMobil will need to increase their climate neutrality efforts to reach their goals.
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