The Oil & Gas Climate Initiative (OGCI) plans to invest $1 billion of its members’ own funds in key technologies and projects for the energy transition and is considering allowing third parties to invest with OGCI Climate Investments (OGCI CI).

Formed by eight oil companies in 2014 — a year before the Paris Agreement — the OGCI today comprises a coalition of 12 industry heavyweights looking at decarbonisation.

The members are Saudi Aramco, China National Petroleum Corporation, Petrobras, BP, TotalEnergies, Shell, Equinor, Eni, Repsol, ExxonMobil, Occidental and Chevon.

With its refreshed strategy and action plan agreed late last year, OGCI chairman Bob Dudley reveals that OGCI is now also turning its attention to the possibility of developing new funds, in addition to its current $1 billion fund managed by OGCI CI.

Any such funds may potentially include third party capital, although no decisions have been made at this stage.

Targeted returns

“[There is] perhaps a perception among some people that they don’t want to invest in something that actually is called oil and gas anymore. But [there are] people who are interested in investing in technologies that will accelerate the [energy] transition and will have a targeted financial return.”

However, he adds that a lot of investors recognise there will be demand for oil and gas through to the end of the century.

“Just take plastics as an example, which are all from oil and gas. Electric cars are generally 20% plastics. You hear things about plastics from algae, but it’s not commercial, financially or technology-wise, at the moment.

“The energy transition will happen… but it’s not going to be a straight line,” Dudley says.

“When you have 2 billion people more on the planet by 2050, we’re going to need all forms of energy.”

OGCI Climate Investments funding is currently focused on companies with technologies in three fields: reducing methane emissions, reducing carbon dioxide emissions, and recycling CO2 through carbon capture, utilisation and storage.

“We first started on methane — pushed it really hard, made investments here — and then looked at energy intensity, so Scope 1 to Scope 3 emissions,” he says.

Last year, the OGCI’s focus was on CCUS.

Another feather in the initiative’s cap was the Net Zero Teesside CCUS project in the North East of England — enabled by a BP-led OGCI membership consortium with Eni, Equinor, Shell and TotalEnergies — which is a landmark project in the UK's industrial decarbonisation scheme.

Dudley says the OGCI worked with the UK government to help define and develop a policy scope for the project.

“And then we've gone around the world and identified 50 countries with potentially viable hubs for CCUS," he says.

He hails the wealth of expertise that OGCI’s 12 member companies bring to the table.

“I don't think there's another industry in the world that competes so heavily, but co-invests and works together so heavily — you wouldn’t find that in any other industry.

“It’s because the size of the capital to do these big projects is so great, that even for big companies, the risk has to be spread around. That is what makes this industry, you know, really interesting, competing hard and then working together and having an effect.”

Dudley says the OGCI “is truly co-led” with the chief executives, whom he refers to as friends, meeting four times a year.

The OGCI today has two parts. The first, and original, looks at policy work, sets joint agendas and determines collective targets for the reduction of methane and energy intensity.

Dudley says the organisation has worked with governments around the world to help develop policies that enable carbon capture and CCUS projects.

He adds: “Fast forward to 2016, and the OGCI members thought, ‘Why don’t we do more than that? Let’s establish a billion-dollar fund, that all the companies would contribute to, to develop clean technologies for the energy transition.”

As with any venture capital fund, OGCI carefully screens the companies in which it is considering investment.

What sets it apart, however, is that in addition to financial support, the companies can avail themselves of OGCI members’ projects to pilot their technologies.

“They can work on [our] fields, which is always helpful for a company,” Dudley says.

To date, the initiative has made around $650 million in commitments to its chosen companies — “and it will continue to a billion”, he says.

These investments are not acts of benevolence, he says.

“We don't just throw the money at it. We expect a financial return from any of the investments that we make,” Dudley explains.

“That’s not a negative about, you know, Bill Gates or any of those other firms that do very, very early life cycle ones, which have a little bit different risk profile.”