Chevron to Maintain ‘Capital Discipline’ in Clean Energy Expansion, CEO Says

Chevron Corp.’s newly created New Energies business unit will exercise capital discipline in low-carbon partnerships similar to its traditional fossil fuel deal activity, which has historically been a strength of the second largest U.S. oil producer.

“Negotiating deals is something we have done across upstream and downstream for many years,” Chevron CEO Mike Wirth told analysts during the company’s first-ever ESG-focused investor day titled ‘Energy Transition Spotlight’ on Sept. 14.

“Although these are new technologies, the fundamentals of the commercial transactions remain similar,” he added.

Chevron’s dealmaking will be supported, according to Wirth, by a “well-valued market of green energy startups,” many of which have used special purpose acquisition vehicles to enter public markets.

In little more than two weeks, Chevron has already finalized eight deals to invest in clean energy and reduce its carbon footprint. The company’s latest includes a joint venture with Houston-based Enterprise Products Partners to advance carbon capture from its Midcontinent and U.S. Gulf Coast operations.

Wirth’s comments came soon after Chevron pledged to nearly triple investment to $10 billion in low-carbon fuel and projects through 2028 amid pressure to boost clean energy markets.

“Chevron’s new announcement does not represent a particularly large strategic shift,” Axel Dalman, an associate analyst with climate change researcher Carbon Tracker told Reuters. “The main item is that they plan to spend more on ‘lower-carbon’ business lines.”

Analysts also note Wirth has no easy task ahead. Chevron’s environmental pillar score of 3.01 out of 10, according to Bloomberg’s ESG ratings, is below those of its European peers including Equinor and Royal Dutch Shell, but surpasses Exxon Mobil, Saudi Aramco and the state-backed oil majors in Russia and China.

The oil major is also bracing itself against a potential activist challenge and earlier this month met with tiny hedge fund Engine No. 1 who put the oil industry on notice that the days of ignoring appeals from climate-conscious investors are over. In a shocking move, Exxon Mobil was forced to surrender 25% of its board seats to outsiders after Engine No. 1 persuaded the oil giant’s largest shareholders to rebuff company leadership.

Net-zero coming soon?

Chevron hasn’t jumped on the net-zero bandwagon yet, but Wirth said during the analyst call that the company is seeing “real progress” in reducing emissions as a part of its New Energies portfolio.

He also reaffirmed the company’s goal of reducing Scope 1 and 2 greenhouse gas emissions by 35% through 2028, compared to 2016 levels, adding that Chevron’s board of directors is continuing discussion on mid-century targets for zeroing out carbon emissions.

“Getting to net zero beyond that will require new technologies, more ambitious policies and development of large offset markets,” Wirth told investors. “We are trying not to be in a position in which we lay out ambitions that we don't believe are realistic and deliverable.”

Chevron will elaborate further on new net-zero targets later this year when it discloses its latest climate report, according to Wirth.