The Schlumberger net-zero goals, as discussed in a couple of articles in today's daily and the presentation linked, set some aggressive but bold ambitions, especially as they are looking to solve problems that they share with their customers, methane leakage from oil and gas wells, and minimizing flaring. Schlumberger is a little dependent on collaboration from its customers here as the technology solutions are likely to be more expensive than current options and the oil and gas producers will need to pay up.
While Schlumberger’s plans are appropriately vague, given that customer acceptance, customer existence, and new technologies by 2040-2050 are hard to call, we want to focus on the offset bar in the 2050 projection in the exhibit below. Almost every company looking at a net-zero goal reaches a point in their analysis where they conclude that all things being equal, they cannot go any lower in terms of CO2 equivalent emissions. At that point, they are assuming that they can get to net-zero through offsets – either with projects to consume carbon that they invest in themselves – note the direct air capture (DAC) project discussed for the UK in the linked headline, which would be a legitimate offset – or credits that they can buy from others who have achieved net-negative status. The original offset idea was reforestation, and many of the European oil majors have talked about, and are in the midst of, planting initiatives. But planting is unlikely to provide a large enough pool of offsets and the oil majors are looking to solve their specific problems and likely not expecting to create a surplus to sell. DAC projects are a way of creating offsets, but this is an expensive route and although costs are expected to fall the costs should remain at the top end of the carbon abatement curve – the CO2 in the air is in much lower concentrations than in furnace gases.
A risk here should be the problem of double-counting in company assumptions. We are already concerned that many of the hydrogen projects are planning on getting the same share of renewable power capacity as it is built over the next 20 years – “we only need 3% of the wind capacity likely to be built in 2027” – which will not work if 100 projects are making the same assumption. The same could be true of offsets. The offsets in Schlumberg’s plan may not look large, but if 1000 companies are banking on them being available and there are only enough for 500, prices could rise meaningfully, increasing the cost for the corporates of getting to that last mile or forcing them to walk back their targets. If this is the case, some of the more speculative DAC investments that we see today may make significant commercial sense.
Source: Schlumberger Announces Commitment to Net Zero by 2050
