The largest oil company in western Europe’s biggest petroleum exporter wants to drastically cut its carbon footprint.
Equinor ASA, which is based in the Norwegian town of Stavanger on the edge of the North Sea, is trying to adapt its business model to a world increasingly alarmed by the fallout of climate change.
Eldar Saetre, the chief executive of Equinor, puts it simply. “The most important question for us as a company and as an industry — and also for Norway as a nation — is this: how do we remain relevant and competitive?”
Equinor, which is controlled by the Norwegian state, just launched its most ambitious climate goals to date. The idea is to make oil and gas installations virtually emissions-free by 2050.
“This isn’t politics, it’s business,” Saetre told reporters in Oslo on Monday.
Equinor, which not that long ago was called Statoil, is betting that lower emissions in the production phase can keep the company competitive. And with roughly a quarter of Norway’s total emissions coming from Equinor, any cuts the company can achieve would make a meaningful difference to the whole country.
To be sure, the emissions caused during production represent just a small fraction of the total over an oil barrel’s life cycle. And other oil companies are chasing more ambitious goals. Repsol SA of Spain said last month it would cut all emissions by 2050, including from the products it sells, as opposed to Equinor.
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In Norway, which has become one of the world’s richest countries thanks to its vast oil reserves, figuring out how to adapt to climate change is becoming an increasingly fraught subject. Its $1.1 trillion sovereign-wealth fund (locally dubbed the oil fund) has tried to exit fossil-fuel stocks. But Norway has so far proved unable to wean itself off oil.
Calls from activists and some politicians for an end date to oil production are growing more frequent. Meanwhile, uncertainty over key parameters such as industry taxes has grown.
Equinor stressed that its emission cuts depend on stable framework conditions. In an interview, Saetre said he hopes the steps Equinor is taking will “strengthen and make more robust the political support the industry has enjoyed.”
“This is something we don’t wish to be dragged into,” he said. “We want to be at the forefront and the driver’s seat.”
Equinor and its partners plan to invest about 50 billion kroner ($5.7 billion) to reach a first target to cut emissions by 40% by 2030. That will mostly be done by connecting offshore platforms and onshore plants to Norway’s electricity grid, which is dominated by clean hydropower. Reductions will then reach 70% in 2040 and almost 100% by 2050.
Though the investment needed to switch to clean energy in the production stage will have a “neutral to positive net present value,” Saetre said the expectation is that Equinor will become more cost competitive over time, as carbon pricing increases.
Equinor’s efforts to reduce its carbon footprint will bring it in line with the overall climate goals of Norway, which is a signatory of the Paris Agreement. But the measures are unlikely to satisfy drilling opponents, given that the cuts do nothing to address emissions from the oil’s combustion, which makes up more than 90% of the total.
“These ambitions ignore the elephant in the room,” said Mark van Baal, the head of Dutch investor advocacy group Follow This. “An oil company with targets for its own emissions, and not for its products, is like a cigarette producer that promises that all employees will quit smoking, while increasing cigarette production.”
A good illustration of why activists are concerned can be found in the giant Johan Sverdrup field in the North Sea, which was officially opened on Tuesday by Prime Minister Erna Solberg. It’s slated to continue pumping oil for several decades after starting in October. Emissions from the field are way lower than those elsewhere in the industry, at less than 1 kilogram of CO2 for each barrel that’s produced. But emissions from the oil itself, if all 2.7 billion barrels are used, would amount to more than 20 times the annual total for Norway.
The new targets “will obviously have a positive reputation effect in Norway,” said Klaus Mohn, an economics professor at the University of Stavanger. “But I don’t think it will be enough to calm the debate about the industry’s future.”