Repsol CEO Sees Green Targets as Key to Growth
September 16 2020 - 5:47AM
Dow Jones News
By Dieter Holger
After other oil-and-gas companies pledged carbon neutrality this
year, Repsol Chief Executive Josu Jon Imaz felt validated.
"Because of my scientific background, sometimes I doubt about
everything we do," said Mr. Imaz, a chemist, in an interview.
Last year, Repsol became the first big oil company to pledge
net-zero emissions by 2050 as part of a plan to move away from
fossil fuels and toward renewable energy in response to climate
change. BP PLC and Royal Dutch Shell PLC followed suit this year
and set their own carbon-neutrality goals.
"We are not producing paper and beer," said Mr. Imaz, who took
the helm of the Spanish oil company in 2014. "It is more difficult
being an oil-and-gas company to make this kind of commitment. We
are going to need time."
He says setting the distant 2050 target was an easier part of
Repsol's climate transition while reaching its medium-term goals--a
cut in carbon intensity of 20% by 2030 and 40% by 2040--is more
important and challenging.
"We are not only talking about 2050," Mr Imaz said. "We have to
change the company today."
Mr. Imaz, a 57-year-old who learned about climate change as a
student in the 1980s, said that reaching net-zero emissions is the
best way to ensure Repsol remains competitive in the greener future
that investors and politicians envision.
The European Union aims to reach carbon neutrality by 2050
through a massive shift to renewable energy. On Wednesday, EU
Commission President Ursula von der Leyen proposed that the bloc
increase its emissions-reduction target to 55% by 2030, up from the
previous goal of 40%.
As part of its climate commitment, Repsol will spend a quarter
of its capital expenditure on low-carbon projects through 2025,
with the majority going to renewables but also other energy sources
like biofuels. This share grew to 30% this year after Mr. Imaz told
Spain's Congress of Deputies last week that Repsol would invest an
extra 150 million euros ($178.03 million) in a biorefinery plant in
Cartagena, pending board approval.
This project and others represent around EUR840 million of the
company's EUR2.8 billion capex spending in 2020, a budget it
lowered by EUR1.1 billion earlier this year amid tumbling
oil-and-gas prices from the economic fallout of the coronavirus
pandemic.
Like many energy companies, Repsol's profit evaporated as the
pandemic hammered demand for oil and gas. It posted a loss of
nearly EUR2 billion in the second quarter of this year, compared
with a profit of EUR525 million in the previous year.
Still, its clean energy efforts have earned recognition from
analysts and nonprofits.
Repsol leads big oil-and-gas companies moving toward cleaner
electricity generation, according to Citi. Analysts at the bank
said that 27% of the company's growth capital is going toward
electricity and other so-called new energies like liquefied natural
gas, placing it ahead of Italy's Eni SpA at 24% and BP at 20%.
Analysts at Credit Suisse shared similar views, naming Repsol
alongside Shell and Norway's Equinor ASA as a forerunner in the
transition to a low-carbon economy based on renewable energy.
It ranked second behind Eni this year among nine big oil-and-gas
companies for its alignment with the Paris Agreement on climate
change, according to London-based nonprofit Carbon Tracker.
Hydrogen is key to Repsol's decarbonization plan, Mr. Imaz said.
This year, Repsol said it would initially invest EUR60 million in a
synthetic fuel plant that uses hydrogen made from renewables in
Spain's Basque Country, where Mr. Imaz was formerly the minister of
trade and industry for the regional government.
The EU, where Mr. Imaz previously served as a member of the
European Parliament, has proposed directing tens of billions of
dollars into hydrogen made using sun and wind power over the coming
decade. By 2024, the bloc aims to up hydrogen production
sixfold.
Yet Mr. Imaz said that fossil fuels will still remain part of
the economy even if the goals of the Paris Agreement are met. In
2040, oil and gas could account for more than 45% of the energy
mix, according to a sustainable development scenario from the
International Energy Agency.
"Oil-and-gas companies have to prepare to be part of the
solution," he said.
--Giulia Petroni contributed to this article
Write to Dieter Holger at dieter.holger@wsj.com;
@dieterholger
(END) Dow Jones Newswires
September 16, 2020 05:32 ET (09:32 GMT)
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