10th - 12th February 2019

Greater Noida, Delhi - NCR, India

Shaping the New Energy World

through Innovation & Collaboration

Plenary Session
Energy Industryʼs response to climate change -
Opportunities and Challenges
Energy Industry’s response
to climate change –
Opportunities and Challenges
Energy Sector's Response to Climate
Change

Summary:
Climate change has emerged as one of biggest crises facing the
world today. Over the past few years, there has been an increasing
acknowledgement of this phenomenon and global action in rectifying
this issue has gathered momentum. Many countries across the globe
have committed to targets to curb their respective emissions but,
most have failed to enact policies which will help limit their
emissions to the Paris Agreement level. India remains a bright spot in
this regard with its current policies and actions considered sufficient
to achieve the 2 degree target.

Tackling climate change will require a global collaborative effort

with a flow of technology and investment from developed to
developing countries. BCG analysis shows that emission reduction
from OECD countries and China won't be sufficient to reach the
targeted 2 degree scenario.

With an increasing number of countries bringing this issue to the

forefront, the energy sector falls under spotlight as it emits 2/3 rd of
global GHG emissions. Many estimates predict that global oil
consumption will have to hit its peak by 2030 if the 2 degree
scenario is to be accomplished. This presents large risks to the oil &
gas sector which needs to be prepared for the future. The sector
needs to find solutions to two primary questions - how to effectively
respond to climate change and assess the need for greener portfolios
and how to better articulate their value proposition so that it is
aligned with the society's viewpoint.

An effective solution to these challenges will require improving the

efficiency of their current portfolio and assessing their renewables
portfolio. Strong collaboration and technology can help propel these
moves. O&G companies also have to better present their position
with their stakeholders by emphasizing their tangible benefits to the
society and improving their communication strategy.

2
Climate change – Status and impact- Preparing for a warmer
world?
There’s a consensus among leading scientists that global warming is
caused by human activity. The impact of global warming is becoming
increasingly visible as the world fails to limit harmful emissions.

Climate change is being seen as one of the most important long term
issue currently being faced by humanity, with mounting evidence that is
becoming difficult to ignore.

Evidence that climate change is increasingly becoming a major issue

for the world

413 Gt of 12.8%
0.9° rise in 410 ppm Increasing
polar ice reduction
temp. of CO2 in 3.2 mm
reduction per decade
since 1880 Atmosphere per year.
per year since 1980

Global CO2 levels Polar ice cover Global sea level Arctic ice
temperatures reduction

17 of the 18 Highest level of C02 This rate has tripled Temperature rise in Summer Arctic ice
warmest years on concentration in in the past decade last 2 decades expected to
record have 650,000 years double of the vanish by 2040
occurred since century average
2001

PPM- part per million

Source: NASA

• Earth's average surface temperature has risen ~0.9 degrees Celsius

since the late 19th century. This warming trend is particularly
significant because it is proceeding at a rate that is unprecedented.
The past four years have been the four warmest years on record.
• The top 700 meters of the ocean has warmed by more than 0.2
degree Celsius over the past five decades.

3
 • The Greenland and Antarctic ice sheets have decreased considerably
in mass. Greenland has lost an average of ~280 billion tons of ice per
year between 1993 and 2016, while Antarctica has lost about 119
billion tons, during the same time period. The rate of ice mass loss in
Antarctica has tripled in the last decade.

• Global sea level rise in the last century has been about 8 inches.
However, the rate of increase in the past two decades is nearly
double that of the last century.

• The acidity of the surface ocean waters has increased by about 30%
since the beginning of the industrial revolution.

The scientific community agrees that the main cause of the current
climate change trend is the increase in man-made emission of
greenhouse gases. Carbon emissions globally have risen at 2%+
consistently in the last 70 years leading to an emission of close to 37
gigatons of greenhouse gas and overall emissions rising by 2.7% in 2018.

This rate of increase has been even faster in developing countries –

propelled by increasing energy access and demand as the energy needs
of developing countries catch up with the developed ones.

For example, from 1960 to 2018, while global carbon emissions have
increased by 2% per annum, India's carbon emissions have increased at
5% per annum. Even though there is accelerated growth in carbon
emissions in developing countries, the total emissions are much less than
the developed countries.

In future too, the growth in global emission will be primarily led by the
developing countries in Asia and Africa.

4
Increase in carbon emissions globally and in India

MtCO2 MtCO2

40,000 10,000

30,000
+2%

20,000 5,000

10,000
+5%

0 0
1960 2018 1960 2018

Coal Gas Oil Others

Source: Climate Action Tracker, Dec 2018

Scientists have projected that global temperatures will continue to rise

in the coming decades and that the quantum of this rise will depend
primarily on the amount of global emissions and the sensitivity of the
Earth's climate to those emissions.

Other long-term impact of climate change would be –

• Sea level rise: Global sea level has undergone a rise of about 0.67
feet since 1990. This effect has already started showing its impact
with many low-lying islands in Micronesia submerging permanently
and many others in Malaysia facing the same threat. Global sea
levels are projected to rise at a faster rate over the next 100 years –
rising by another 1 to 4 feet by 2100.

Source: : NASA, Berkeley Earth

5
 • Change in precipitation patterns: Rainfall distribution is expected to
change with different areas undergoing varying amounts of
increase/decrease in rainfall. The Mediterranean and South African
regions are expected to have around 20% less precipitation by 2100.

• More droughts and heat waves: Dry weather everywhere is projected

to become more intense with summer temperature predicted to
continue rising.

• Strong hurricanes: The intensity, frequency and duration of

hurricanes will continue to increase. This is now becoming evident
with the occurrence of increasingly damaging hurricanes in the
recent past.

Source: : NASA, Berkeley Earth

6
 Global response to climate change

The Paris Agreement (COP 21): As the impact of climate change becomes
increasingly real, it was agreed at the twenty-first session of the
Conference of the Parties (COP 21) in Paris that there is an imminent
need to mobilize stronger and more ambitious climate action by all Party
and non-Party stakeholders. It was a landmark agreement since for the
first time, it brought all nations to support a common cause and
undertake an ambitious effort to combat climate change. The agreement
was also remarkable since it was born out of multiple failed summits
prior to this, particularly the 2007 Kyoto summit which underwent many
non-ratifications and withdrawals.

The long term temperature goal of the agreement is to limit global

temperature increase to well below 2 degrees Celsius, while pursuing
efforts to limit the increase to 1.5 degrees. To achieve this goal, the
countries aim to reach global peaking of GHG emissions as soon as
possible and begin mitigation efforts.

The Paris Agreement requires all Parties to decide on their “nationally

determined contributions” (NDCs), to put forward their best efforts
through the NDCs and to strengthen these efforts in the years ahead. This
includes the need to report regularly on emissions and on also the
implementation efforts.

The agreement represents a hybrid of the “top-down” Kyoto approach

and the “bottom-up” approach of the Copenhagen and Cancun
agreements. It provides common binding procedural commitments for all
countries, but leaves it to each to decide its nonbinding NDC. The
agreement establishes an enhanced transparency framework to track
countries’ actions, and calls on countries to strengthen their NDCs every
five years.

The Paris Agreement entered into force on 4 November 2016. As of 2018,

184 countries have ratified to the convention.

Source: UNFCCC
7
However, the consensus thinking maintains that the world will have a
hard time reaching the headline goal of the Paris Agreement—keeping the
increase in global average temperature to less than 2 C above
preindustrial levels.

Even the European Union, which is a global leader on climate action, has
only recently put stronger policies in place to meet its targets. The
European Parliament has now called for increasing the EU's NDC emissions
reduction goal to 55% below 1990 levels. Adopting this as a target will
bring it much closer to the 2 degree scenario.

India's in line to meet its own targets but most other countries
fail to do so

Critically insufficient 2 C compatible

Highly insufficient 1.5 C Paris agreement compatible

Insufficient Role model

Source: UNFCCC, Climate Action Tracker, press reports

8
To meet the Paris target, leading climatologists contend that man-made
emissions would need to fall in the first half of the next decade and then
decline steeply such that, by 2040, the global population would produce
about half the emissions that it does today.

However, at a global scale, the current policy scenario will still lead to a
3.1 to 3.5 degree Celsius increase over pre-industrial levels by 2100. This
will result in significant risks in our everyday lives. If each signatory of
the Paris agreement enacts policies to meet its targets, we will still end
up with a 2.7 to 3 degree increase.

Global warming projections based on current policies

Source: UNFCCC, Climate Action Tracker

9
India - leading the climate change initiatives
India ratified the Paris Agreement on 2nd October 2016 becoming the
62nd nation to join the deal. The country is, in fact, also well on track to
achieving its commitments with two of the three commitments being
fulfilled ahead of its 2030 target.

As part of its commitments, India aims to:

• Achieve 40% of electric power installed capacity from non-fossil fuel
by 2030.
– A jump of 33% over non-fossil fuel capacity of 2015
• Reduce the emissions intensity of its GDP by 33 - 35% by 2030 from
2005 level.
– 75% jump in ambition over 2020

• Create additional carbon sink of 2.5 - 3 billion tonnes of CO2

equivalent through additional forest and tree cover(increase of about
680 - 817 million tonnes of carbon stock)

India has also pledged, as a long-term goal, that its per capita emissions
would never exceed those of the developed world.

Multiple analyses shows that India can achieve its NDC targets with its
currently implemented policies. India's emission intensity had come
down by 21%, below 2005 by 2014, with around 2% annual average
improvement in emission intensity. India's share of non-fossil fuel share
of installed capacity is also over 35% now, putting it on track to reach its
40% target well in time.

Govt. of India's initiatives to combat climate change

10
.Investing in renewable energy sources to reduce fossil fuel consumption
India has set an ambitious target to reach 175 GW of renewable energy
installation by 2022 which is expected to play a key role in helping
achieve its climate change goals. The country has installed ~70 GW of
renewable power as of end of 2018. This indicates a 21% year-on-year
growth since 2015.

India is aggressively expanding its renewable energy capacity

Installed RES in GW
200
+26.2% 175

150
+21.0%
100
69
57
39 46
50

0
2015 2016 2017 2018 2022
Installed capacity as of March each year Target
Source: CEA, press reports

Apart from investing in renewables, the government is also looking to

reduce fossil fuel consumption in the transport sector.

India has also implemented a biofuel policy target of 10% blending to

both reduce its carbon emissions and tackle the pollution problem
stemming from stubble burning. India also intends to lower its
petroleum imports with this policy. Raising the blending target to 20%
by 2030, as proposed, could reduce CO2 emissions by around 11 million
tonnes annually.

India has also set ambitious targets for electric vehicles to combat
both climate change and pollution. The country aims to have at least
15% of its on-road vehicles to be electric in the next five years. This is
a large jump from the current annual sales of ~2,000 electric cars and
~55,000 electric 2-wheelers . To push this transition, the government
has implemented the FAME scheme with an outlay of ~Rs 900 crores.

The government is also promoting natural gas as a fuel for

transportation with an expansion of the city gas distribution (CGD)
network. Up to 2014, only 66 districts of the country were covered
under the Gas Distribution network. As of 2018, the work on city gas is
underway in 174 districts of the country. 11
Promoting Energy efficiency

The Indian Government has recognized energy

efficiency as a key mitigation strategy to
combat climate change. As a solution it has
embarked upon the UJALA (Unnat Jyoti by
Affordable LEDs for All) scheme.
The UJALA scheme was launched by Prime Minister of India, Mr.
Narendra Modi, in January 2015 and is currently the largest LED
distribution programme in the world.

UJALA is a part of the initiatives launched by India to meet its

commitment to reduce carbon intensity by 33 to 35 per cent between
2005 and 2030.The government's flagship programme for efficient
domestic lighting is being globally recognized as one of the largest
contributors to energy savings globally.

As a result of sustained efforts by the government towards

procurement and distribution of LEDs, India's share in the global LED
market has increased to 12 per cent from a mere 0.1 per cent, with the
penetration of LED in the domestic market rising to 10 per cent from
0.4 per cent.

As of end of 2018, more than 310 million LED bulbs distributed under
UJALA scheme and ~7.5 million LED street lights have been installed.
By 2019, UJALA aims to replace 770 million old wasteful lamps with
modern, efficient and longer lasting LED lamps, without the need for
any government subsidies.

Source: Ujala dashboard

12
Other steps to meet the climate change targets:

In addition to policies/ measures to meet the INDC targets as per the

Paris agreement, India has seen action on many fronts –

• Government:
– Green buildings and energy codes: Energy Conservation Building
Code adopted by 10 leading states.
– Transportation: Leapfrogging from the current BS IV vehicle
emission norms to BS VI norms by 2020 and National Electric
Mobility Mission Plan 2020 to subsidize and facilitate sales of
hybrid cars and EVs.

• Corporates: 47 firms on the BSE 200 index disclosed information

related to climate change as against 34 companies in 2010
– Infosys and Tata Motors have committed to a 100%
renewable energy consumption target by 2018 and 2030,
respectively.
– Mahindra & Mahindra has committed to reduce its GHG
emissions by 25% over the next 3 years.
– Dalmia Cement has incorporated climate change into its core
business strategy and has set both energy and emission
reduction targets.

• Start-ups: 35+ start-ups are working to improve the environment in

India
– Avant Garde Innovations: Distributed and decentralized
renewable energy solutions, such as Small Wind Turbine.
– Greenway Appliances: Manufactured a special biomass cooking
stove that reduces overall fuel consumption by ~65% and smoke
emission by 70%.
– Banyan Nation: Technology-driven recycling business that is
rooting out inefficiencies in the waste value chain in India.

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 Combating Climate Change- Need for Global
Collaboration

Technologies—including renewables, energy efficiency measures, and

substitution of energy sources, are available to reverse the growth in
emissions. However, they must be deployed at scale, and doing so would
require fast, forceful, and united action by governments and regulators
worldwide, using all the levers at their disposal—well beyond current
efforts. It would also call for a large upfront investment: $19 trillion to
$21 trillion from now until 2030, according to our estimates. Both
requirements may be difficult to achieve considering the paucity of time.

Although rich countries are the main source of the emissions that have
warmed global temperatures to current levels, emerging countries
account for the fastest growth in emissions and would, therefore, be an
integral part of any solution for meeting the Paris target. Without the
means to pay for the necessary technologies, however, they will be hard
pressed to do this.

Majority of emissions growth increasingly generated by emerging

economies

1. Based on policy commitments to date and continuing progress in energy efficiency

Source: BCG global energy scenario model 14
To enable the required decline in fossil fuel consumption, global power
generation—which accounts for a quarter of anthropogenic emissions—
would have to emit at least 70% less carbon dioxide by 2040 (en route to
full decarbonation). This implies a steep decrease in coal power
generation and far greater deployment of wind and solar power. At the
same time, significant progress toward decarbonation would need to be
made in the transportation, agriculture, industrial, and building sectors.

If we need to reverse the trend of increasing emissions, there exists a

foremost need for an aggressive reduction from OECD countries – which
can make the investment to do so, and China – which emits around 1/3rd
of the global carbon emissions.

Emission reduction will require contributions from all types of

economies

We will still be left with a considerable margin to the 2 degree scenario

which will have to be filled by the emerging economies. However, they
will require financial and technological support to do so. Most emerging
economies cannot afford to stop using their fossil-fuel-fired power plants,
cease building new ones, or make a huge investment in zero- and low-
carbon technologies. In emerging countries, most power plants are coal-
fired and are less than 10 years old, far younger than in the OECD, where
coal plants are typically at least 30 years old.

Source: BCG analysis 15

BCG estimates that the OECD countries and China would have to invest
0.9% and 1.2% of their annual GDP, respectively, in zero and low-carbon
technologies from now until 2030 to achieve the Paris target. For
emerging countries, the investment required over the same period would
be 1.4% to 1.5% of annual GDP. For these countries—faced with the
pressure to invest in essential infrastructure, improve public health, and
provide citizens with food and other basic amenities—this amount is
beyond their means. Additionally, the populations of these countries are
unlikely to accept the tradeoffs that would be required.

A global effort is required to bridge the gap between developing and

developed countries in the world. Some actions include –

• Double down carbon reduction and build global coalitions:

Governments need to double down on decarbonization efforts. Not
doing so would significantly increase the risk of an uncontrollable rise
in global temperatures.

• Make high-impact moves: Governments must increase the efficacy of

existing environmental policies and measures even as they push
ahead with larger global goals, such as an international carbon-
pricing scheme .

• Invest heavily in proven technologies: Individuals and institutions

should invest with the crowd when it comes to emission reduction
technologies: the window of opportunity for entirely new
environmental technologies is closing.

• Explore mitigation approaches: Governments and companies should

start investing in technologies that could reduce existing greenhouse
gases or mitigate their effects on a global scale: for example, the
large-scale removal of carbon dioxide from the atmosphere through
initiatives such as global tree plantation or the use of geo-
engineering interventions to limit further temperature increases
despite high carbon dioxide concentrations.

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 Role of oil and gas sector in climate change

As discussed, the main source of climate change is the steady increase in

emissions. Global greenhouse gas emission contribution comes from all
significant economic activities. Although energy heavy industries do play
a central role in most major carbon emitting industries, other sectors
also contribute heavily. The agriculture sector and residential &
commercial sectors (including residential buildings and shops) contribute
more than 10% each to global carbon emissions. This can be significantly
reduced with the more efficient lighting technology available today. The
manufacturing industry is also very inefficient in most developing
countries and emits avoidable emissions.
However, the largest contributions are from energy supply (electricity &
heat production) and transport. Moreover, the oil and gas sector accounts
for a large proportion of most major carbon emissions, notably energy
supply (electricity and heat generation), industry (petrochemicals and
energy use) and transport (heavy bend towards oil and gas consumption).

GHG emissions contributed by all major economic activities

% Global GHG Emissions

10
6
14

21
100

24

25

Electricity AFOLU Industry Transport Buildings Others Total

& Heat

Source: IPCC AR5, IEA, BCG analysis

17
Consequently, the source of emissions is more skewed towards the
energy sector- 68% of the global GHG emissions are from the energy
sector of which 44% come from the oil and gas industry.

Majority of global GHG emissions come from the energy sector

100%

68%
44%

Total GHG Non energy Energy Non O&G O&G

emissions

Talking about CO2 emissions from energy, more than half of the energy
emissions in the world in 2017 came from the oil and gas industry. In
India, the proportion of the same is much lower at 29%, due to a heavier
bend towards coal in electricity production.

% of energy CO2 emissions in 2017

World 55.6 44.4

India 29.3 70.7

O&G Coal

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CATEGORIZATION OF EMISSIONS ON THE BASIS OF SOURCE:

• Emissions directly generated in the operations: It depends on the

process and mix changes. There are six main areas of action.
– Reduction in flaring
– Reduction of methane emissions
– Exit from highly carbon-intensive extraction processes
– Improvement in overall production efficiency (helped by disposing
of older fields and refineries)
– Production shift towards gas
– Expansion in renewable production capacity.

• Emissions indirectly generated by the power and heat consumed: This

can be improved if the companies use renewables and gas to power
their own operations.

• Emissions generated at the point of consumption by the products

sold: There are 5 main areas of action that can drive reduction in
emissions.
– Shift of production from oil towards gas (including LNG)
– Shift of downstream oil from refining to petrochemicals
– Expansion downstream in gas to gas & power retail, including
power supplied through CCGTs and renewables
– Increased sales of biofuels
– Carbon capture and natural sinks (re-forestation), to reduce net
emissions

19
 Risks to the oil and gas industry with
increasing awareness about climate change

Given the large contribution of the industry and the global policies being
enacted in this regard, the consumption of oil and gas will likely take a
dip as global policy as well as consumers shift towards greener energy
sources. This dip will depend upon the extent and speed of the policy
initiatives.

In the current policy scenario, peak oil consumption occurs in 2050 after
which it should start declining. In this scenario, oil production in 2050
will still be over 180 mboe/day.

However, in order to implement the Paris Agreement, the peak oil

consumption will have to be preponed by 20 years to 2030. This will also
limit oil production in 2030 to ~68 mboe/day which is 2/3rd of the earlier
scenario. Gas production will also be half of the earlier 2050 projection
and will be limited to ~49 tcm/d in 2050.
Oil Gas
Achieve 2 productio productio
degree Peak Peak n in 2050 n in 2050
Scenario target oil gas (Mboe/d) (tcm/d)

New Policy Scenario (NPS)

Current proposed
>2050 >2050 ~182 ~96
climate policies
are adopted

66% probability of 2 degrees (66% 2 C)

Emissions capped at
880 GtCO2 for 2015- 2030 ~68 ~49
~2020
2050 to limit global
heating to 2 degrees

Delayed Policy Action (DPA)

NPS scenario until 2030
and then an aggressive Not Not
2030 2
correction to limit global given given
heating to 2 degrees;
20

Source: IEA, IRENA

While oil and gas companies have lately been under pressure from
activists to take steps to combat climate change, it is now becoming
imperative for them to take corrective actions from the point of view of
other stakeholders as well. The increasing awareness about climate
change is posing a significant risk to the future of these companies. Some
of these are:

• Business risk: Oil and gas companies run the biggest risk of becoming
obsolete in the coming future as energy demand shifts with the rise
of renewable energy resources as well as rapid growth in electric
cars.
Exxon Mobil projected this year that demand for liquid fuel for
passenger vehicles will likely peak by 2040. BP reports that the total
number of electric cars could hit 300 million by 2040. That rise plays
a significant role given that nearly half of the oil consumed in the
U.S. in 2016 was used to produce motor gasoline. Hence, companies
in the sector need to reassess their portfolio and consider higher
share of greener technologies.

• Corporate risk: Investors are keenly aware of the importance of

migrating to a low-carbon future for the sustainability of the global
economy. Hence, there is added pressure from investors on
companies to make capital allocation decisions that help the
companies transition to a greener future.

• Financial risk: The companies are facing the risk of shortage of

finance for taking on more projects in the conventional sources of
energy. The banks, among other debt providers, are becoming more
cognizant of the increasing opportunity in renewables space vis-as-vis
the oil and gas space. Hence, raising finance can become a major
problem in the future.

21
Therefore, the oil and gas industry will have to play a critical role in
emission reduction and future decarbonization. Moreover, a large section
of the global O&G industry has not participated in the global climate
change debate for a very long time and has only recently started getting
involved in the global movement.

The industry is 20 years behind the

curve in the public opinion debate,
has been silent for too long.
-Lamar McKay, Deputy CEO, BP

This puts the multi-trillion dollar O&G industry in a key position to both
impact and be impacted by the global response to climate change.

In this process, there are two key questions facing the industry –
A. How should O&G companies effectively respond to climate change?
Need for moving towards greener portfolios?

B. What must O&G companies do to better articulate their value

proposition. aligning it with the society's viewpoint?

22
 How should O&G companies effectively respond to climate
A.
change? Need for moving towards greener portfolios?

The companies are taking a two pronged approach to tackle the issue of
climate change.

Focusing on Transitioning to
efficiency for their renewables as a part
current portfolio of new portfolio
ENABLERS
• Collaboration: With other companies and governments
• Technology: To help in smooth transition & creation of a viable market

Energy Efficiency: The companies are taking initiatives to reduce GHG

emissions from their current portfolio and become more energy efficient.

Green Portfolio: They are also increasing their investment in green

alternative technologies, which are increasingly being adopted as climate
change awareness grows

ENABLERS

Collaboration: The companies are coming together and forming

organizations eg: OGCI to enable the industry as a whole to move forward
without any significant advantage or disadvantage to any firm.

Technology: It lies at the helm of this transition- with firms greatly using
technological advancements to make energy more accessible and
affordable.

23
Oil and Gas companies expanding into energy efficient and
green technologies

Expansion Of Oil Companies Into Energy Efficient Technologies

EE and carbon
Power CCS
sinks
- Acquisition of
Small VC
First Utility for Quest CCS in
investments
200M$ Alberta; Technology
through Shell
- Trading power in Center Mongstad
Ventures
US and UK
Acquisition of
Direct Energy for R&D
$1.7 bn

World leader in CCS

Research on carbon
Owner of Solida,
Management
use of CO2 for
through its New
processing concrete
Ventures division
Buyout of Viesgo,
Spanish utility
Gorgon and Quest
CCS investment
totaling $1.1 bn
Target: 2M power &
gas clients in 2021,
50M$ in Nuclear
Development of
Participated in 1/5
energy efficient
of the global CCS
tyres, lubricants
capacity
and plastics

Level of activity High Medium Low None

24
Initiatives by Oil Companies to transition to a Green Portfolio

BIO / Synthetic
RES DER Advanced mobility
fuels
- Acquisition of

Demand - Consortium with

JV with Raizen,
Response the German Govt. to
Invest in wind and Brazilian sugar
company MP2 develop 400 hydrogen
solar projects in --60M$ finance
cane produced 2 bn
fuel stations
USA and EU liters ethanol in
in Sonnen - Investing in fast
2017
(home battery charging solutions
solutions)
-JV with Clean
Energy Fuel for
Owner of
Developer of 400 Le Mede refinery, developing of NG
SunPower and
MW of solar PV in conversion to trucks
Saft (battery
Asia biofuel from oils - Acquisition of
OEM)
PitPoint provider of
clean fuels in Europe
- Leading offshore Inv. in Investment in
wind industry Convergent ChargePoint world’s
- Funding 10M$ on energy storage largest EV charging
solar cell research developer network
- JV with Bonsucro
- 1.5 GW of wind Research on Brazilian sugarcane
Acquisition of
in US fuel cells prod.
StoreDot (20 M$) OEM
- Owner of through New - JV with Dupont
batteries for use in
Lightsource, PV Ventures developing
EVs
developer division Butamax

Owns a stake in Owns several

Principle Power, refineries for 50% IBIL, operating
offshore wind processing HVO and 700 Charging points
platforms EPC Algae biofuels
Key global player Attempts have
in geothermal been non-
development commercial
PV/Wind projects Primary producer
in Italy, Africa and of green diesel in
Middle East Europe
Investing in second
generation biofuels
(Algea) 1B$

Level of activity High Medium Low None

25
Betting on renewables
Many large oil & gas companies are already spending a considerable
amount of their capex on new energies. This number ranges from 3.1% to
7.7% overall and averages to around ~5% - a total of ~$4 Bn annually.

New energies investment of ~5% done by global majors every year

25.3
1.5

16.1
0.5 15.0
CAPEX 0.5
estimated
11.0
spend 0.9
2018 ($ 7.5 $3.9b
Bn) 0.3
4.9
0.3

CAPEX
estimated
Spend on 3.1% 5.9% 3.3% 4.0% 7.7% 5.2% 4.9%
New Energies
(%)
New energies LNG / Integrated gas
Downstream Upstream

Contribution of Exxon and Chevron are <1%

Different companies have taken up different strategies to increase their

non-hydrocarbon portfolio with these investments. While some companies
are investing in all major sectors and creating wide optionality, others
are primarily focusing on a few key areas.

26
Expanding renewables as part of core: Companies like Shell, Total and BP
are not only looking to expand their renewables energy portfolio but are
also looking at these as a part of their core business in future.

Shell: Has invested in all major sectors with special focus on power
through the acquisition of renewable companies, biofuels by getting into
JVs and advanced mobility by investing in hydrogen fuel stations and fast
charging stations.

Total: Has invested $1.7 Bn in a utility acquisition, owns a battery OEM

company in the distributed energy space and is working on developing NG
trucks.

BP: Operates 1.5 GW of wind power in US, has entered into multiple JVs
for biofuel production and has acquired battery OEM players for use in
EVs

Taking calculated specific bets: Companies like Exxon, Chevron and Eni
and focused on specific sectors and are still evacuating the right strategy
for future growth.

Exxon: Has invested $1 Bn+ in second-gen biofuel technology and

participates heavily in global carbon capture and storage installation

Chevron: Is a key global player in geothermal tech, and has invested

$1.1Bn in CCS through JVs

Eni: Has expanded investment in nuclear and is the largest producer of

green diesel in Europe

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Collaboration and technology to act as enablers to help
O&G companies expand their portfolio

Collaborative approach to tackling climate change:

An example of a collaborative effort that O&G companies can take as an
industry response to climate change is the OIL & GAS CLIMATE INITIATIVE –
a collaboration of 13 large O&G companies. These companies account for
around 30% of the global oil production and have more than 2.1
employees in 130 countries.

OGCI MEMBER COMPANIES

30% 130

Share in global Countries of

oil production operation

28
The broader objectives of OGCI include –

1. Reducing energy value chain footprint: Reduce collective average

methane intensity of O&G operations to 0.20% by 2025 from 0.32%
currently.

2. Accelerate low carbon solutions: Focus on efficient, low-carbon fuels

and long-term carbon intensity reduction targets.

3. Enabling a circular carbon model: Enable the emergence of a

commercially viable, safe and environmentally responsible circular
carbon economy.

These companies have already taken measurable steps to reduce

emissions in their operations and aim to reduce their collective methane
intensity to 0.20% by 2025 from 0.32% in 2017. A few of the recent
initiatives taken by the companies include:

• Exxonmobil: Upgradation of 99% of high-bleed controllers to reduce

methane emission

• Eni: 66% reduction in fugitive methane emissions in 2017 over 2014

levels

• Saudi Aramco: Focusing on carbon capturing and sequestration to

reduce emissions

• Repsol: Substituting 5,000 high-bleed pneumatic devices for low-

bleed ones

• Total: 80% reduction in routine flaring between 2005 and 2017

• Shell: Piloting a methane detector technology to continuously

monitor methane emissions on shale sites

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Investment in technology:
Response to climate change wouldn't be half as impactful without
technology and data. There has been increased awareness to work on
technological advancements that aid us in providing a more sustainable
environment.

OGCI has made 8 investments since 2017 and is working with the invested
companies to help them pilot and deploy their technologies to reduce
methane and carbon emissions. Some of the portfolio companies are
given below:

1. GHGSat: It provides accurate, low-cost greenhouse gas monitoring

data and services covering any facility in the world.

2. Kairos Aeropsace: It provides actionable data on major sources of

methane emissions by using aerial surveys and plans to expand
internationally.

3. AchatesPower: It is developing high fuel-efficiency opposed-piston

engines that aim to significantly reduce carbon dioxide, particulate
and nitrogen oxide emissions.

4. Inventys: It aims to halve the cost of carbon capture through its

breakthrough scalable technology and use a distributed supply model
to build a physical CO2 marketplace that can enable the utilization of
carbon dioxide on a gigatonne scale.

5. Econic: It uses pioneering catalyst technology to incorporate carbon

dioxide as a raw material into polyols, the basis of all polyurethanes.
Its aim is to replace 30% of polyol production with its new production
technologies, potentially reducing carbon dioxide emissions by up to
3.5 million tonnes per year.

30
In addition, leading companies globally are leveraging digital solutions to
increase the efficiency of their facilities and in turn, reduce carbon
emissions. Examples include –
ConocoPhilips: Employed a big data software enabling remote monitoring
of the production and emission status of wells.
Columbia Pipeline Group: Developed intelligent pipeline technology for
its natural gas transmission which integrates data from multiple sources
to quickly locate areas of interest and employ desirable measures.
BP: Leveraged big data collected from well sensors to reduce venting,
leading to a 75% reduction in methane venting.

In India too, many large O&G companies in the public and private sector
have started investing in climate sustainability programs.
These include energy carbon emission reduction initiatives and renewable
energy investments.

IOCL: Energy conservation schemes resulting in 1.07 lakh metric tonnes of

fuel savings

BPCL: 13% increase in captive renewable capacity installation in 2018 to

~25 MW and increased efficiency of sulphur recovery units in refineries

ONGC: Strong mission statement of carbon neutrality with a process to

measure, calculate and reduce carbon footprint already in place

Vedanta: Installation and regular maintenance of appropriate emission

control equipment along with regular audits in accordance with
sustainability goals

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 What must O&G companies do, to better articulate their value
B. proposition and align it with society's viewpoint?

Dealing with the second challenge will involve two steps –

1. Emphasizing the tangible benefits of the industry to the society: Oil

and gas plays a pivotal role in reducing energy poverty and improving
the quality of life across developing countries. It is also imperative to
emphasize the importance of reliable and cost effective energy
access around the world

2. Changing the way companies and the industry communicate: It is

critical to address public opinion at large through emotionally
compelling messages and not just technical arguments. An effective
way to do so would be to engage with stakeholders and build
inclusive coalitions. The industry should identify and engage on key
points to articulate the role of O&G and responses to climate change

32
Global players have already started programs to spread awareness
about their value proposition and offerings –

Companies are challenging status-quo perceptions about O&G industry

Launched the "Make the Future" campaign publicizing less carbon

intensive businesses (i.e. natural gas) in important markets
including India

Rebranded as a broad energy company as opposed to an oil-focused

company to make the transition visible "We aim to be at the
forefront of the transition of our modern day energy systems"

Propagating information on climate change and role of O&G

companies amongst youth to improve social image and attract
talent

Launched a ~$70 mn 3-year multi-agency global campaign

increase awareness and share its values with stakeholders
among

33
Energy Sector's Response to
Climate Change

Conclusion:
Reversing the trajectory of global emissions will require radical changes
to the global energy mix. However, it is important to recognize that there
are technologies to achieve this. Flaring reduction, efficient appliances,
low-fuel-consumption engines, electric mobility, and self-driving vehicles
are already starting to create a more energy-efficient world.
Moreover, renewable wind and solar power (helped by rapidly declining
costs and improved storage technologies) and the shift away from coal in
power generation and from oil to gas in refineries and heavy transport,
are reducing the carbon intensity of economic activity.
However, we must realize that oil and gas continue to be a major part of
the energy mix. Many emerging economies are still energy deprived, most
countries cannot afford to stop using their fossil-fuel-fired power plants,
cease building new ones, or make a huge investment in zero- and low-
carbon technologies. Oil & gas sectors globally need to become a part of
the solution. They have to focus on making their operations more
efficient and reanalyze the share of renewable energy in their portfolios.
Many leading companies have already begun looking into and
implementing these ideas. Some major companies have also initiated
joint efforts to tackle this issue and set higher targets for themselves.
Oil & gas companies also need to better present their value proposition
to their stakeholders. They need to reiterate their tangible benefits to
the society and highlight their role in uplifting a large section of the
population out of global poverty. Some companies, globally and in India,
have already reassessed their marketing and communication approach in
light of these challenges.
Use of technology can help move towards a more energy efficient and
lower emissions world. However, the regulators and governments around
the world would need to act together to ensure the widespread and
timely adoption of such technologies at scale. There is a need for a global
collaborative effort to facilitate transfer of technology and flow of
investment across nations in order to achieve tangible benefits.
Additionally, the companies operating in high energy intensive sectors
like oil and gas need to come together and continue to strive to find
solutions to reduce emissions from operations and also combat the
increasing issue of climate change.

34
 10th - 12th February 2019
Greater Noida, Delhi - NCR, India

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