US supermajor Chevron has tripled its planned investments into the energy transition up to the end of 2028, with new growth targets announced at its Energy Transition Spotlight held on Tuesday.
The company has committed to investing $10 billion into renewable natural gas, renewable fuels, hydrogen, carbon capture and carbon offsets, with an expected $1 billion of annual cash flow coming in from the businesses.
The investments would come to about $3 billion each to renewable gas and fuels and carbon capture and storage, along with $2 billion each to hydrogen and reducing greenhouse gas emissions, according to chief executive Mike Wirth.
“As you look forward to the $1 billion dollars in cash flow, I think by 2028, we’ll see roughly half of that coming from renewable fuels, which are a bit easier to drop into value chains today, a little bit more mature, and certainly something that we’re growing aggressively,” Wirth said.
Expanding the market
Currently, most of the company’s feedstocks for renewable natural gas comes from dairy farms, but Chevron is looking to expand to using landfill gas and wastewater as well to meet its targets of producing 40 billion British thermal units per day of renewable natural gas and 100,000 barrels per day of renewable fuels.
A recently announced partnership between Chevron and agriculture company Bunge will see Chevron financing Bunge’s soybean processing facilities, which would act as a feedstock for renewable fuels.
“The Bunge relationship allows us to secure supply from existing assets, allows us to grow with Bunge, and allows us to participate in that margin structure,” said Mark Nelson, executive vice president of downstream and chemicals at Chevron.
“The arrangement with Bunge today focuses on the first generation which would be soy, we would expect to grow into the second generation, or tallow type of bio feedstock, and then finally, maybe into algae.”
Most of this sector is focused on the California market, since the state’s Low Carbon Fuel Standard provides incentives to reduce the carbon intensity of the transportation sector.
Wirth said he expects policy and technological changes will improve the market across the rest of the country as well.
“California does have a more supportive policy environment than just about anywhere else we do business today. That results in investments and activity,” Wirth said.
"Over time, we expect a combination of cost reductions, technology improvement, market acceptance and policy advancement in other geographies all to enable the growth of these businesses.”
Chevron also has a renewable gas partnership with Mercuria Energy to own and operate 60 compressed natural gas stations across the country. Chevron claims the partnership will improve its renewable gas value chain outside of California.
Chevron also referenced several other renewable natural gas and fuel partnerships it is building in Tuesday's presentation, including the recent extension of its existing scheme with Brightmark to buy dairy biomethane.
The company also works with California Bioenergy to produce renewable natural gas from dairy farms, and in jet fuel, Chevron recently announced deals with Google and Delta Airlines and with biofuels company Gevo to produce and sell sustainable aviation fuel.
Chevron also detailed its investment into hydrogen production, although admitted the sector will likely take some time before it contributes significant cash flow compared with renewable natural gas and fuel.
The company has been in the retail hydrogen market since 2005, currently producing about 1 million tonnes per year in its traditional business. But Chevron wants to grow its low-carbon hydrogen production to 150,000 tonnes per year with its new targets.
Chevron has several partnerships dedicated to exploring business opportunities in hydrogen. A memorandum of understanding with Toyota will look into commercialising hydrogen in the transportation sector, and an agreement with heavy equipment manufacturer Caterpillar will study hydrogen as an alternative fuel for line-haul rail and marine vessels.
Blue hydrogen is produced from natural gas feedstocks, with the carbon dioxide by-product from hydrogen production captured and stored. However, the process is not emissions free.
Green hydrogen is made using electrolysis powered by renewable energy to split water molecules into oxygen and hydrogen, creating an emissions-free fuel.
Chevron is also turning its attention to green hydrogen, with the company potentially buying into Mitsubishi’s planned green hydrogen project in Utah, expanding its Richmond refinery to produce green hydrogen from waste, and working with Cummins to use its electrolysers at Chevron's refineries.
For now, wind and solar projects are not in Chevron’s future, unless they are directly related to its other operations, like green hydrogen. Wirth said the company does not see itself competing against the strong developers in the sector, so it will focus on what it does have expertise in.