Chevron accelerates lower carbon ambitions

Chevron has announced plans to invest more capital to grow lower carbon energy businesses, more than tripling its planned total capital investment to $10bn through 2028.

Speaking at the company’s inaugural Energy Transition Spotlight, Michael Wirth, Chairman and CEO, said: ‘Chevron intends to be a leader in advancing a lower carbon future. Our planned actions target sectors of the economy that are harder to abate and leverage our capabilities, assets, and customer relationships.’

The company set the following 2030 growth targets for new energy businesses:

• Grow renewable natural gas production to 40,000mn Btu/d to supply a network of stations serving heavy-duty transport customers.
• Increase renewable fuels production capacity to 100,000 b/d to meet growing customer demand for renewable diesel and sustainable aviation fuel (SAF).
• Grow hydrogen production to 150,000 t/y to supply industrial, power and heavy-duty transport customers.
• Increase carbon capture and offsets to 25mn t/y by developing regional hubs in partnership with others.

To achieve this scale, the company expects to invest more than $10bn between now and 2028, including $2bn to lower the carbon intensity of Chevron’s operations. This is more than triple the company’s previous planned $3bn.

However, some industry observers were disappointed that Chevron didn’t take the opportunity at its first-ever Energy Transition Spotlight to outline plans or set targets to cut Scope 3 emissions. This had been called for by investors earlier this year, but voted against by Chevron’s management in May. It is understood the company plans to address this issue when it releases an updated climate report in October.

Meanwhile, at a Brent oil price average of $60/b, the company also reaffirmed its expectation to earn double-digit return on capital employed by 2025 and generate $25bn of cash flow, above its dividend and capital spending, over the next five years. Chevron also reaffirmed its 2028 upstream production greenhouse gas intensity targets, which equate to an expected 35% reduction from 2016 levels.

‘With the anticipated strong cash generation of our base business, we expect to grow our dividend, buy back shares and invest in lower carbon businesses,’ Wirth concluded. ‘We believe a strategy that combines a high return, lower carbon traditional business with faster growing, profitable new energy ones positions us to deliver long-term value to our shareholders.’

Chevron has announced a number of new low carbon business initiatives in recent weeks, including an agreement with Enterprise Products Partners (which operates an extensive midstream pipeline and storage network in the US) to study and evaluate opportunities for carbon capture, utilisation, and storage (CCUS) from the companies’ respective business operations in the US Midcontinent and Gulf Coast.

It has also agreed on a framework to join a joint venture of Magnum Development and Mitsubishi Power, whose Advanced Clean Energy Storage project will produce, store and transport green hydrogen at utility scale for power generation, transportation and industrial applications in the western US.

In addition, Chevron is to establish a joint venture with Mercuria Energy Trading to own and operate American Natural Gas (ANG) and its network of 60 compressed natural gas (CNG) stations across the US. The joint venture will allow Chevron to rapidly grow its renewable natural gas value chain, complementing its previously announced plan to open more than 30 Chevron-branded CNG stations by 2025. The company is planning to produce a 10-fold increase in renewable natural gas volumes by 2025 compared to 2020 as part of its higher returns, lower carbon strategy.

Chevron has also announced a letter of intent with Gevo to jointly invest in building and operating one or more new facilities in the US that would process inedible corn to produce SAF and renewable blending components for petrol to lower its lifecycle carbon intensity.