Many of the largest oil and natural gas companies in the U.S. and Canada jumped on the train to combat climate change in the second half of 2020 as they began to more fully embrace the energy transition and started to adopt stricter goals to reduce emissions.
Investors and consumers have been pushing hard for global energy companies to take environmental stances. Some companies have outlined more ambitious goals than others — from plans to cut emissions intensity to setting absolute net-zero ambitions by the middle of the century.
Looking at the top 30 oil and gas companies in Europe and North America based on market capitalization in July, S&P Global Market Intelligence found that none in the U.S. or Canada had set net-zero emissions goals. By Dec. 4, four had. Eleven of the 30 oil and gas companies have now announced net-zero goals.
Large U.S. oil companies making commitments to reduce emissions to net-zero is critical, LanzaTech CEO Jennifer Holmgren said during a Dec. 3 industry event hosted by KPMG. LanzaTech captures industrial carbon emissions and converts them into ethanol.
"At the end of the day, that is what will drive change," Holmgren said, adding that she believes that more oil companies need to cut not only Scope 1 and Scope 2 emissions but also Scope 3. "That will drive purchasing. That will change entire supply chains," Holmgren said.
Scope 3 emissions can account for as much as 85% of some oil and gas companies' total emissions.
Still noticeably absent from the growing list of major energy companies setting strict emissions reduction targets are U.S. supermajors Exxon Mobil Corp. and Chevron Corp.
"Exxon and Chevron have a few emissions reduction targets, but they are very short-term or focused on specific asset areas, such as oil sands," Morningstar analyst Allen Good said Nov. 23.
"Chevron and Exxon continue to pursue oil and gas projects with little [interest] in low carbon businesses. So, setting long-term targets is not in line with their business models and would actually conflict with what they are doing," Good said. "Both management teams also appear to take a dim view of setting such long-dated emissions targets given they are largely irrelevant to investors today and the probability of significant change in global energy markets over the next 30 years."
LISTEN: Click here to hear exclusive interviews on the S&P Global podcast Energy Evolution in which executives from two of the largest North American pipeline operators that recently set net-zero emissions targets, Enbridge Inc. and Williams Companies, Inc., outline their path forward.
Occidental Petroleum Corp. was the first U.S. integrated major to fully take the plunge, setting hard targets to reach net-zero Scope 1, 2 and 3 emissions by 2050.
A month earlier, the largest U.S. independent producer, ConocoPhillips, said it would reduce its Scope 1 and Scope 2 emissions intensity to net-zero by 2050.
In December, fellow producer Pioneer Natural Resources Co. formally adopted softer targets to reduce greenhouse gas emissions intensity from its operations by 25% and methane emissions by 40% by 2030 from 2019 levels.
Environmental groups said intensity targets fall short of meeting the mark. Intensity-based targets measure the amount of emissions released into the atmosphere relative to the company's net hydrocarbon production. A company could maintain or even increase upstream production and still hit carbon intensity targets by adding low-carbon alternatives such as solar and wind to its portfolio, critics said.
"They're still focusing on intensity targets rather than overall reductions. We've gone from the age of denial to what I'm calling the age of delusion," Tzeporah Berman, international program director at environmental group Stand.earth, said during a Dec. 1 industry event hosted by Reuters.
Although it is much harder for midstream companies to truly achieve net-zero status, several entities in the space are working toward that end. Natural gas-focused Williams is one of the only major pipeline players with environmental ambitions, setting a target in August to reach net-zero carbon emissions by 2050.
Calgary, Alberta-based Enbridge, one of North America's largest oil and gas transporters, announced in November that it will pivot to renewable energy with a target of reaching net-zero emissions by 2050. Enbridge is exploring alternative fuels, including hydrogen.
The oil and gas companies making up the top 30 have shifted slightly, but more major companies outlined new plans to hit net-zero emissions since goals were compiled in July. Calgary, Alberta-based integrated Husky Energy Inc. also set a soft target this summer to reduce the company's Scope 1 emissions intensity by 25% by 2025 from 2015 levels as part of a plan to reach net-zero emissions by 2050. Cenovus Energy Inc., also based in Calgary, said it will honor Husky's environmental goals when it completes its pending purchase of Husky in the first quarter of 2021.