Chevron sets target of ‘higher returns, lower carbon’

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US oil major Chevron has pledged to raise its low-carbon spending to more than $3bn by 2028 while holding investment in oil and gas production flat amid growing shareholder pressure to make its business green and boost flagging returns.

Chevron said in an investor presentation on Tuesday that it would power more of its operations with renewables, slash methane emissions from its shale operations and invest more than $1bn to capture and store carbon from its plants as part of an effort to clean up its oil and gas business.

At the same time it said it would hold capital expenditure on new oil and gas projects to about $14bn to $16bn a year through 2025, a sharp decline from years past when a string of costly projects around the world sent annual spending soaring to more than $30bn, which undercut returns.

“Chevron’s message to investors is summarised in four words — higher returns, lower carbon,” said Michael Wirth, Chevron’s chief executive.

The new emissions strategy comes just days after rival ExxonMobil laid out its own efforts to spend about $3bn on a newly formed low-carbon business focused largely on carbon capture and storage and deferred ambitious oil and gas production growth targets.

While Chevron is increasing its low-carbon spending, it remains a tiny proportion of the company’s overall outlays. The target implies about $375m in annual spending on efforts to reduce its carbon footprint, less than 3 per cent of total capex.

Chevron said the new spending would reduce the carbon intensity — the amount of greenhouse gases released per barrel produced — of its upstream business 35 per cent by 2028. This metric could still allow for overall emissions to rise.

Chevron and Exxon have both eschewed the sort of ambitious green transition strategies emphasising investments in renewables, electric vehicles and clean power generation that have been laid out by their European rivals such as BP and Shell.

Instead, the US supermajors have remained largely focused on their core oil and gas businesses, while investing in technologies to slash emissions from those barrels in a bet the world will remain reliant on oil and gas for decades, even as governments enact policies to reduce emissions.

The strategy would make Chevron’s business more “sustainable” through the energy transition, Wirth said.

Chevron said it would increase its oil and gas production about 15 per cent to about 3.5m barrels of oil equivalent a day by 2025, driven largely by an aggressive expansion in the US Permian Basin shale fields, which will account for about a quarter of the company’s annual spending.

A rally in Brent crude prices to nearly $68 a barrel this year has pushed Chevron’s shares up nearly 30 per cent since the start of the year, back to pre-pandemic levels.

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