What Total’s Energy Transition Means for the Global EnvironmentBy Cas Biekmann | Fri, 10/16/2020 - 09:14
Total is betting big on its own energy transition, just like BP and Shell. The trend followed by oil giants has major implications for the global energy transition, even as some companies and jurisdictions follow different paths. The main goal would be to keep an increase in global temperatures below 2°C. To accomplish this, Total has identified four areas of ‘strategic focus’: natural gas, low-carbon electricity, oil products and carbon neutrality.
Natural gas is identified as a major fuel to combat climate change, since it is the least polluting fossil fuel. According to Total, natural gas should be championed due to its accessibility, large supply and ability to complement with renewable energy generation. For this reason, Total aims to increase its natural gas share by 60 percent by 2035. The company already owns a 10 percent market share in liquefied natural gas (LNG), making them the second-largest supplier in the world.
To boost low-carbon electricity production, Total focuses not only on natural gas, but also on renewable energy. Total has particular expertise in the solar value chain and it is able to develop wind and hydro through its affiliate Total Eren as well. By 2040, Total aims to have 15 to 20 percent of its sales from clean energy.
Total’s further efforts are anchored in its energy efficiency during production and development of biofuels. The company is betting on R&D to repurpose refineries so they can produce the novel fuel.
Even though every oil and gas giant has its own energy transition strategy, S&P Global Platts identifies the matter as a general trend. Way before the pandemic, shareholders and the media called on these companies to take responsibility toward environmental sustainability. The pandemic helped move the trend forward as major companies were suddenly able to envision a world with low demand for oil and gas. Total itself led the S&P Global Platts’ survey of oil companies, both in ambition as well as the Power Plays 2020 ranking in April. Other companies such as Shell and BP have made significant moves since that date as well.
While Total, Shell, BP, Repsol, Eni, Equinor, Chevron and ExxonMobil all have some strategies toward sustainability, there is a large gap between those mentioned first and last. According to GTM, ExxonMobil seems to be losing out on the energy transition. What is more, Bloomberg has consulted documents showing that the company is even planning to ramp up emissions.
That being said, ExxonMobil and the companies mentioned are really not producing that much oil if NOCs are taken into account. Saudi Aramco, China’s CNPC and Mexico’s PEMEX can be considered behemoths when it comes to oil production and they face little pressure from investors to go green, unlike their private counterparts. Countries where NOCs operate are likely to only want to increase production, as well.
S&P Global Platts highlights this issue: both ExxonMobil and Chevron argue that divesting from their fossil fuel assets will just shift the problem to another country. The reasonable key point of the argument is that the issue needs to be addressed globally. Nonetheless, decarbonization will continue to be a trend as pressure continues to mount.