Insights

Surmont deal will have small impact on ConocoPhillips’ emissions reduction plans

| By Darrell Stonehouse

The recent move by ConocoPhillips to buy out its partner TotalEnergies EP Canada Ltd.’s 50 per cent stake in the Surmont oilsands project — a deal worth more than US$3 billion — will have minimum effect on the company’s progress on climate and emissions.

ConocoPhillips has outlined ambitious plans to slash GHG emissions intensity from production, and is making progress, Evaluate Energy data shows.

Overall GHG emissions intensity on operated assets declined steadily between 2016 and 2021, while methane intensity has also fallen. At Surmont, GHG emissions intensity has fallen about 20 per cent since 2016, the company’s baseline emissions year.

ConocoPhillips has embedded emissions intensity targets and reductions into its M&A strategy, said chief executive officer Ryan Lance, in announcing the transaction. “We will remain on track to achieve our previously announced accelerated GHG intensity reduction target of 50–60 per cent by 2030, using the 2016 baseline.”

These are more aggressive targets than the company outlined in its ‘Plan for the Net-Zero Energy Transition 2022-2023 Progress Report,’ published earlier this year.

In this document, the stated objective is to reduce GHG emissions intensity by 40–50 per cent by 2030, across both net and gross operated production — a target introduced in 2021.

This is up from a previous 35–45 per cent — hinting perhaps at the company’s increased confidence in its ability to hit emissions intensity targets.

Evaluate Energy compiles all ESG related targets for every major oil and gas producer around the world. Find out more about all of Evaluate Energy’s ESG data at this link.

ConocoPhillips noted that it has plans for future emissions reduction at Surmont by applying a broad mix of both current and new technologies, which could include carbon capture and storage (CCS).

In November 2021, its Canadian business joined the Pathways Alliance, which has a goal to achieve net zero GHG emissions from oilsands operations by 2050.

Across the border, the group outlined various tactics to reduce operational GHG emissions from its U.S. Lower 48 business unit, where each asset has a roadmap to support the journey to net zero by 2050.

That includes adjusting operational and offtake practices to achieve a target of zero routine flaring by 2025, ahead of a 2030 World Bank target.

Key measures comprise tackling key GHG emission sources, including pneumatic controllers, the primary source of reported methane emissions, as well as combustion and flaring.

In 2021, the company also established a Low-Carbon Technologies unit to look at further emissions reduction opportunities focusing on electrification studies, equipment design, enhanced monitoring and detection of methane emissions, reductions in flaring and methane venting volumes, and CCS.

As well as identifying new low emission design concepts for future projects, the company says it intends to step up activity in the retrofit of existing assets across its U.S. Lower 48 business during 2023.

It underscores the mesh of challenges of meeting energy transition demands and reducing emissions, all the while delivering competitive returns for investors.

The Surmont buyout illustrates strong appetite for long-life, low-sustaining oil assets, with the deal expected to add approximately $600 million of annual free cash flow in 2024 (based on US$60 WTI).

At the same time, the U.S. company is expanding its business in other areas, such as LNG, and studying potential opportunities for CCS hubs along the U.S. Gulf Coast, as well as investing in additional low-carbon niches to further diversify its portfolio on the road to net zero.

That includes the nascent hydrogen sector, investing in a venture with Canada’s Ekona Power Inc. to develop hydrogen production technology through methane pyrolysis.

It is also working with Japan’s JERA to evaluate the development of blue and green ammonia as a low-carbon power generation fuel, again along the U.S. Gulf Coast.

 

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