US shale tries to answer the carbon question

US shale producers are starting to form answers to investor demands that they address the challenges of climate change, announcing ambitious emissions goals as some of the oilier names in the industry aspire to stay relevant in a greener world.

Leading US upstream independent ConocoPhillips has become the largest US oil producer to commit to an operational net zero carbon ambition by 2050, as it says it is 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 a $9.7bn acquisition of Permian basin-focused Concho Resources, providing access to decades of Permian oil production assets. The firm still says it could reach the goal of net zero emissions from its operations by as early as 2045.

ConocoPhillips is not addressing the so-called Scope 3 emissions from the combustion of its output by customers. But its task still looks onerous as the firm split its upstream and downstream businesses in 2011, making it more difficult to tap into some renewable projects that integrated companies can draw upon. A study by 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.

That dire outlook may be part of the reason for ConocoPhillips' ambitious goals and the range of options it is considering to achieve them. The firm is endorsing a World Bank programme that aims to eliminate routine flaring of natural gas 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.

ConocoPhillips is working on technology to reduce the carbon intensity of its Canadian oil sands operations, and says carbon capture and sequestration, the use of carbon offsets from trading systems, and maybe even investments in renewables will be part of the solution. "It's aspirational, but it's not aspirational just with the fingers crossed," chief operating officer Matt Fox says. "We've got a lot of work going on to identify ways that will allow us to get there."

Stealing a march?

US peer Occidental Petroleum has previously embraced some of the same initiatives as ConocoPhillips, but is also building on its traditional use of CO2 in enhanced oil recovery. It has launched a new venture with private equity firm Rusheen Capital Management called 1PointFive to finance and develop a technology to capture CO2 directly from the air, turning it into a form that can be piped into underground formations for permanent storage. The first such facility is being developed in the Permian. And its Low Carbon Ventures business works on curbing emissions at its own facilities by reducing flaring and monitoring and cutting methane emissions, and could offer these services to other oil firms.

Occidental chief executive Vicki Hollub says new technologies will be needed to take efforts to combat climate change beyond mechanisms that have gained traction with some oil and gas firms, such as a carbon tax or cap-and-trade systems for emissions. "Without the incentive to build carbon capture, it becomes a market, not a march — a commitment to build what the world ultimately needs over time," Hollub said at this month's Energy Intelligence Forum.