Chevron Leans In on Low-Carbon Integration

Copyright © 2021 Energy Intelligence Group

Investors will have to wait until Tuesday to hear the specifics of Chevron’s augmented low-carbon strategy. But they should expect integration to be the tie that binds all planned investments – and a continued focus on decarbonizing transportation and industrial emissions.

"We want to own the whole value chain," Andy Walz, Chevron's president of Americas Products, told Energy Intelligence in an interview last October .

Chevron is expected to provide a fuller picture of how big its low-carbon value chain ambition might be during its energy transition strategy update on Sep. 14.

But every move the US major has made over the past year speaks to a wider desire to participate from production to retail, not just become an offtaker peddling someone else's energy.

Recent moves also reinforce its desire to be a low-carbon fuel supplier of choice for transportation and industrial sectors that may struggle to electrify.

Prime Partnerships

Chevron has inked partnership after partnership in recent months to join forces with companies outside of conventional oil and gas to pair their existing technical expertise with Chevron’s existing downstream presence (see table).

In some cases, the US major is gaining access to new fuel production processes or supplies. Examples include its expanded joint venture with biomethane producer Brightmark, proposed biofeedstock capacity expansion and offtake agreement with agricultural giant Bunge, and potential investment in sustainable aviation fuel facilities alongside advanced biofuel specialist Gevo.

In other cases, it hopes to work alongside equipment and auto manufacturers like Caterpillar and Toyota to develop industrial and transport demand for still-costly low-carbon fuels like hydrogen by running demonstration projects, building needed infrastructure and supporting R&D in new technologies.

Some of its partnerships are only early-stage letters of intent or memorandums of understanding. But others stump up concrete cash, including last week’s co-acquisition of American Natural Gas, a US compressed natural gas retailer, alongside trader Mercuria.

Milestones in Chevron's Low-Carbon Push
Jun '19CalBioGas partnership with California BioEnergy and local dairy farmers to produce RNG. Chevron providing funding for infrastructure and marketing RNG supplies for use in CNG vehicles in the state.
Jul '20Partnership with natural gas retailer Clean Energy Fuels to supply RNG to California ports. Chevron providing funding and RNG supplies.
Sep '20CalBioGas joint venture achieves first RNG at Kern County, California project.
Oct '20RNG JV with biomethane firm Brightmark. JV to initially own four plants. Chevron will purchase and market gas in California.
Nov '20CalBioGas JV achieves first RNG at Tulare County, California project. Third project expects first RNG in early 2021.
Feb '21Brightmark JV expands to construct five additional RNG plants. Same marketing arrangement for gas.
Jun '21Rebrands first retail fuel site in California to market its RNG as CNG. First of 30 sites it plans to rebrand or open by 2025.
Sep '21Acquires American Natural Gas alongside Mercuria. Operates 60 CNG stations in the US. Plans on expansion to serve medium- and heavy-duty vehicle customers.
Apr '21MOU with Toyota to study hydrogen demand in transport, advocate supportive public policies, and joinly pursue research and development in hydrogen-powered transportation and storage.
Jul '21MOU with Cummins to advocate supportive public policies, build commercial and industrial demand for hydrogen, develop supportive infrastructure and explore deployment of Cummins electrolyzer and fuel-cell technologies at Chevron's US refineries.
Sep '21Equity interest in ACES Delta (JV between Mitsubishi and Magnum Development). Owner of planned utility-scale Advanced Clean Energy Storage green hydrogen project in Utah. Potential to develop green hydrogen hub serving power, transport and industrial use.
Sep '21Collaboration with Caterpillar to develop hydrogen demonstration projects in transportation and stationary power.
Mar '21Partnership with Microsoft, Schlumberger and emissions-free power provider Clean Energy Systems to advance a bioenergy with CCS scheme to produce power from discarded almond trees in the state.
Sep '21Partnership with midstream giant Enterprise Products to study and evaluate CCS opportunities in the US Midcontinent and Gulf Coast that would utilize existing Enterprise infrastructure. Initial phase to take six months.
2022Expects start-up of carbon capture pilot partnership with Svante at its Kern River field in Bakersfield, Californa.
Mid-2021Begins co-processing biofeedstocks at it El Segundo, California refinery to produce renewable diesel, gasoline and jet fuel.
Sep '21Proposed joint venture with Bunge to double renewable feedstock processing capacity at select facilities. Chevron has offtake rights.
Sep '21Signs letter of intent to jointly invest alongside advanced biofuel specialist Gevo in at least one facility that can produce SAF from inedible corn. Chevron has offtake rights.

Line in the Sand

Chevron is hardly alone in wanting to leverage decades of experience as a global integrated major to craft a low-carbon energy strategy.

Royal Dutch Shell, BP and TotalEnergies similarly see integration as a competitive advantage that should buoy margins and aid their efforts to capture market share.

But Chevron does not share their desire to apply this model to power generation and marketing as well.

The company is not dismissing renewable electricity investments carte blanche. It is funding several cogeneration projects to power its own operations, participating in a bioenergy carbon capture power project in California, and buying an equity interest in a planned “green” hydrogen project in Utah that could support a hydrogen supply hub for transport, industrial and power over time.

Yet these investments tick other boxes for Chevron. Cogeneration gives it ownership in renewable electricity that the company itself will consume, while its other investments still look toward the transportation and industrial sides of the energy demand ledger, not general power use.

By contrast, Europe’s leading majors are looking to become “one-stop shop” energy providers for all types of customers, from municipalities to large corporations to retail consumers, led by solar and wind power.

Hydrogen Push?

One key area to watch on Tuesday is what Chevron has to say on hydrogen.

The US major has more established ventures in renewable natural gas and biofuels, but hydrogen has become a notable focal point of Chevron’s low-carbon partnerships over the past six months.

Many of those partnerships center around ways to develop demand for the potentially zero-carbon fuel.

Bruce Niemeyer, Chevron’s head of strategy and sustainability, said in March that the major is “very optimistic” about hydrogen’s potential to decarbonize hard-to-abate sectors, and could “eventually represent something incremental to our business.”

Tuesday might see Chevron executives elaborate on just how incremental hydrogen might become – assuming key policy supports and cost reductions are realized.

Both companies tout the deal's strategic benefits for shareholder returns and carbon emissions targets.
Mon, Sep 20, 2021
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