In its 2023 Analyst and Investor Meeting on April 12, ConocoPhillips’ executives said the company is advancing its GHG intensity emissions reduction target through 2030.
“We play a valued role in the energy transition. We were the first U.S.-based oil and gas company to declare a Paris-aligned net-zero ambition for our operational emissions,” said Dominic Macklon, ConocoPhillips EVP of strategy, sustainability and technology.
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He said ConocoPhillips’s preliminary data for 2022 “shows a reduction of greater than 40% on our gross operated emissions intensity, and that’s against our 2016 baseline. And with this progress, today we are announcing an acceleration to our 2030 target from the current 40% to 50% reduction to a 50% to 60% reduction, and that’s on both a gross operated and a net equity basis.”
The effort is part of the updated 10-year plan for the company that was presented at the April 12 meeting. “We have successfully grown our LNG portfolio, a fuel that is crucial to provide reliable, lower-carbon energy for the long term,” Macklon said.
In addressing ConocoPhillips’s actions and progress to position the company to play a strong and valued role in the energy transition, he said: “We know it’s the low cost of supply, low GHG intensity barrel that will win, and we are making good progress on our GHG intensity reduction.”
Coal vs. gas
“We firmly believe LNG is going to play an increasingly crucial role in the global energy mix as a reliable and dispatchable lower-carbon fuel,” Macklon said.
“Let’s not forget the remarkable impact gas has already made here in the U.S. with switching from coal to gas in power generation to significantly reduce CO2 emissions. But while coal has been declining in the U.S. … global coal demand has been steadily growing and has yet to peak. So LNG can play a similar role in Asia and in Europe and around the world.”
For example, looking at the full life-cycle emissions of U.S. LNG sourced from the Permian basin and delivered into Germany, it offers a greater than 40% lower emissions to coal for power generation. And the benefits are very similar delivered into Asia,” Macklon said.
Current, new technologies and CCS
In conjunction with the operational optimization and the low cost of supply development, Andy O’Brien, ConocoPhillips SVP of global operations, said the company is “equally excited about the opportunity to materially reduce our emissions. We think about this in three categories: application of current technologies, new technologies and CCS (carbon capture and storage). Now we’re currently conducting pilots with current and new technologies focused on reducing the steam and/or increasing the production.”
“We’re also a member of the Pathways Alliance, a unique partnership collaborating with both the provincial and the federal government (of Canada) to evaluate the commerciality of large-scale CCS in Alberta,” O’Brien said.
Spend on emissions goal
In the question and answer session that followed the presentations, Devin McDermott, Morgan Stanley, Research Division VP, asked how much of ConocoPhillips’ capital spend is going toward achieving its emissions reduction goals through 2030.
“So on the operational emissions reductions, we’ve allocated about $300 million this year, about $200 million capital, about $100 million expense,” Macklon responded. “And that run rate we’ve got in there through the next … four, five years. And that is what we have line of sight to in terms of the projects to achieve that 50% to 60% reduction. So that gives you a sense of the scale and what we’re doing there.”
McDermott also asked: “You alluded to considering things like CCS or hydrogen. Can you talk a little bit more about what you’re looking at there and what type of return hurdle rate you’d consider for those types of projects?”
Macklon said ConocoPhillips is in “an early stage” with them both, spending about $50 million a year on CCS and hydrogen combined.
“We are active in acquiring some long-term leases in a couple of areas for CCS and we’re conducting some engineering studies with some key partners. We’re working with JERA on hydrogen because they would bring demand. So JERA, largest Japanese utility, and we have a long relationship with on LNG side,” Macklon said, emphasizing hydrogen and CCS are “very much in our mind for the longer term.”
But, he said, the spend will be “enough to help build the foundation of what could be business opportunities for the long term.”
Ryan Lance, ConocoPhillips chairman and CEO, added that whatever projects the company elects to invest in have to “generate a return. … This is not a business we’re going to do without … a pathway that we see to generating a decent return in the business.”
