Repsol, Spain’s largest oil and gas company, announced a net-zero emissions target for 2050 and a €4.8 billion ($5.3 billion) write-down of its upstream oil and gas assets, claiming to become the world’s first oil and gas player to pledge a complete decarbonization.
The Madrid-based company says it will reorient its upstream business so that it’s in compliance with the Paris Agreement, prioritizing “value generation over production growth.” The €4.8 billion write-down will affect the company’s 2019 income, as Repsol adopts a new oil and gas price scenario consistent with the Paris Agreeement’s goals.
Going forward, Repsol’s senior management will have a minimum of 40 percent of their bonuses linked to the decarbonization effort, which may include carbon offsets.
Valentina Kretzschmar, director of corporate research at Wood Mackenzie, said the announcement has global significance for the energy industry.
“Repsol has leap-frogged the European majors as it set out a clear strategic vision to become the first oil and gas company committed to achieving net-zero carbon from Scope 1, 2 and 3 emissions by 2050,” Kretzschmar said. “It raised the bar not only for the majors, but for the entire oil and gas industry.”
Repsol’s announcement underscores the pressure that some oil and gas companies, particularly those based in Europe, are under to acknowledge the long-term financial challenges of their carbon-intensive business models. Repsol produces the equivalent of 718,000 barrels of oil a day, though its focus has shifted toward natural gas in recent years.
Shares in the company, which hauled in nearly €50 billion ($55 billion) of revenues last year and has 25,000 employees worldwide, fell slightly on the news.
Repsol plans to use a variety of approaches to transform its business in the coming decades, including ramping up its investments in renewables.
The company believes it can achieve at least 70 percent of its mid-century target with technologies that can currently be foreseen, including carbon capture, utilization and storage. If necessary, it will offset remaining emissions through reforestation and other natural climate sinks.
The non-binding decarbonization goal includes interim targets for 2020 and 2040.
Beyond its exploration and production business, Repsol owns nearly 5,000 fueling stations across Southern Europe and Mexico, a number of industrial facilities, and nearly 3 gigawatts of electricity generating capacity. But in recent years, Repsol has joined European peers like Shell and Total in making a broad range of investments with the energy transition in mind.
Repsol owns a 19.4 percent stake in the WindFloat consortium, which has a floating wind trial undergoing commissioning off the coast of Portugal, and it has made investments in energy storage, e-mobility and the internet of things. The company had previously committed to investing €2.5 billion into its “low-emissions” businesses by 2020, more or less on par with Total and Shell.
Shell, Total and Repsol were the only majors to include Scope 3 emissions in their own climate targets, according to a report by the Carbon Tracker think tank published in November. Scope 3 emisisons are linked to the burning of their products.
In its new announcement, Repsol did not give a specific figure for its anticipated production losses in the years ahead. The company plans to unveil its 2021-25 strategic plan sometime in the first half of 2020, based on its new targets.
As part its net-zero announcement, Repsol said it has approved construction of two new solar and one new wind project with a total capacity of 1.6 gigawatts. The projects were not detailed, and the company did not immediately respond to a request for more information.
Repsol also added 3 gigawatts to its low-carbon electricity target, bringing it to 7.5 gigawatts by 2025.
The company said it will look to integrate more renewable generation into its refining operations, including identifying where it can produce and utilize green hydrogen. Biofuel production will be doubled.
“We are convinced that we must set more ambitious objectives to fight climate change,” CEO Josu Jon Imaz said in a statement. “Addressing the significant challenges that lie ahead with strategic clarity is what will allow us to turn them into opportunities.”
Source: Greentech Media