Shale tries to answer the carbon question

Author Tom Fowler

US shale producers are starting to respond to investor demands that they map out a plan for developing and adjusting their business models to fit in with the world’s slow march towards a lower carbon economy.

Leading US upstream independent ConocoPhillips has become the largest US oil producer to commit to an operational net zero carbon ambition by 2050, embracing the goals of the Paris climate accord and pursuing a range of measures to lower the carbon intensity of its operations in the shorter term. This includes upping its goal to reduce its greenhouse gas emissions intensity to a 35-45pc cut by 2030 from a 5-15pc reduction. Never mind that ConocoPhillips announced the environmental goals just as it moved on the acquisition of smaller shale-focused rival Concho Resources, providing access to decades of Permian basin oil production assets. The firm still says it could reach the goal of net zero emissions from its operations by as early as 2045.

Unlike its larger integrated peers in Europe, ConocoPhillips is as yet making no attempt to address so-called Scope 3 emissions from customers’ combustion of its products. But its task still looks onerous -- a study last year by UK think-tank Carbon Tracker found ConocoPhillips to be the oil producer that needs to make the biggest cuts in production to meet Paris agreement goals by 2040 — up to 85pc, compared with 55pc for ExxonMobil, 40pc by Italy’s Eni, 35pc by Chevron and Total, 25pc by BP and just 10pc by Shell.

The dilemma facing upstream producers like ConocoPhillips – the company spun off its Phillips66 downstream business in 2011, leaving it with fewer of the low-carbon options around electric charging and biofuels that companies like Total and BP are now trying to exploit – was illustrated by the results of this week’s Argus Twitter poll. Our question asked whether it was pragmatic, risky or simply futile for upstream firms like ConocoPhillips to try to become “net zero” producers. Nearly half of respondents think such a strategy is futile, but more than a third view it as pragmatic, underlining that this is a complex strategic choice.

Having come down firmly on the “pragmatic” side of that debate, ConocoPhillips is considering a range of options to achieve its ambitious goals. The firm is endorsing a World Bank programme that aims to eliminate routine gas flaring and other well-site emissions by 2030, hoping to reach this goal at its operations by 2025. It plans to add continuous methane monitoring devices to two-thirds of its operations in the US lower 48 states by 2021, and it is advocating for a US carbon price to address end-use emissions by joining the Climate Leadership Council. Carbon capture and sequestration, the use of carbon offsets from trading systems, and maybe even investments in renewables may also be part of the long-term strategy, ConocoPhillips says.

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