September 23, 2021 • Paul Rodden • Season: 2021 • Episode: 49
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In episode 049, On today’s show, I focus in on one of the biggest oil super majors in the world, Chevron and the big investments they’re making in the hydrogen space. All of this on today’s hydrogen podcast.
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Transcript:
On today’s show, I focus in on one of the biggest oil super majors in the world, Chevron and the big investments they’re making in the hydrogen space. All of this on today’s hydrogen podcast.
So the big questions in the energy industry today are, how is hydrogen the primary driving force behind the evolution of energy? Where is capital being deployed for hydrogen projects globally? And where are the best investment opportunities for early adopters who recognize the importance of hydrogen? I will address the critical issues and give you the information you need to deploy capital. Those are the questions will unlock the potential of hydrogen, and this podcast will give you the answers. My name is Paul Rodden. And welcome to the Hydrogen podcast.
Okay, so why am I focusing in on Chevron? Well, for starters, in just over a week, they have announced three different press releases where they’re investing big money and time into the energy transition, carbon capture and storage and hydrogen markets. And it’s important to look into what this large company is doing. The first comes in a press release from September 9, Where Chevron there at Chevron new energies division announced it has agreed on a framework to acquire an equity interest in Aces Delta LLC. This is a joint venture between Mitsubishi power Americas, and Magnum development LLC. They together own the advanced clean energy storage project. This project will produce store and transport green hydrogen at utility scale for power generation, transportation and industrial applications in the western United States.
The joint venture is located in Delta Utah, adjacent to the inner mountain power plant, which will use green hydrogen to produce electricity with lower life cycle carbon emissions. Future anticipated projects include the expansion of green hydrogen supply to other western states and the construction of connecting hydrogen infrastructure to build a regional hydrogen production, transportation and supply network. Chevron is working to build demand for hydrogen and the technologies that support it in heavy duty transportation and industrial sectors in which greenhouse gas emissions are hard to abate. And in a quote from Jeff Gustavson, president of Chevron new energies, Chevron new energy was created to grow new competitive business lines in areas like hydrogen.
The potential to partner with Mitsubishi power and Magnum development on the Advanced clean energy storage project presents an exciting opportunity that would bring together our unique strengths and provide a scalable platform to supply our customers with affordable, reliable and ever cleaner energy. Paul Browning, President and CEO of Mitsubishi power America said, For several years, we’ve been working with early adopters of green hydrogen in the power sector that have easy access to salt domes or existing hydrogen infrastructure, such as the Inter Mountain Power Agency and Magnum Development. Now it’s time to connect massive geologic hydrogen storage in delta Utah to power transportation and industrial users throughout the western United States.
Chevron’s footprint and expertise in the transportation and industrial sectors make them an ideal partner for this next phase of expansion. Together with our customers and partners, we are creating a change in power. And according to Craig Broussard, President, CEO and board chairman of Magnum development, says I look forward to the opportunity to collaborate with Chevron as a strategic partner in our Aces Delta venture. Chevron’s participation will add tremendous value as we develop a world class and world’s largest green hydrogen production and storage facility, combined with Chevron’s in depth capabilities, and Aces Delta facility will serve as a platform to deliver on our shared vision and continue building a robust pipeline of high quality actionable projects that will help decarbonize multiple sectors of the US economy.
Now, Aces delta is co owned by Magnum, which is a Headington ventures portfolio company in Mitsubishi power. Chevron, Magnum and Mitsubishi power are negotiating definitive documentation outlining Chevron’s participation in the joint venture. The terms of this transaction are subject to the negotiation definitive agreements, and closing of the transaction will be subject to customary closing conditions. Now, I have been paying attention to the Aces Delta project for over a year now, including the scrutiny it’s had to face as they transition the inner mountain powerplant from coal to green hydrogen. But now with the vast resources and expertise that Chevron brings to this project, this could lead to a massive boost in productivity and utilization of hydrogen made at this facility. I very much look forward to seeing how this develops.
And now four days after that on September 13, another Press Release of Chevron, joining forces with Enterprise to explore carbon storage business opportunities. And so Chevron through its Chevron new energies division again, and a subsidiary of Enterprise Products Partners announced a framework to study and evaluate opportunities for carbon dioxide capture, utilization and storage CCUS from their respective business operations in the United States, midcontinent and Gulf Coast, the companies expect the initial phases of the study in which they will evaluate specific business opportunities to last about six months. Jeff Gustavson, president of Chevron new energies said this joint effort has the potential to advance our ongoing work to grow our lower carbon businesses with commercial scale using the industry expertise both companies bring to the project. international climate change scientists working with United Nations have identified carbon capture as a critical technology needed to help the global energy system transition to a lower carbon future.
The companies has successfully worked together on prior business opportunities and believe they bring complimentary capabilities to successfully pursue CCUS. The projects resulting from the evaluation would seek to combine Enterprise’s extensive midstream pipeline and storage network with Chevron’s subsurface expertise to create opportunities to capture, aggregate, transport and sequester carbon dioxide in support of the evolving energy landscape.
According to Jim Teague, co Chief Executive Officer of Enterprises general partner the joint study was Chevron is part of our growing focus on developing and utilizing new technologies and leveraging our transportation and storage network in order to better manage our own carbon footprint and provide customers with new midstream services to support a lower carbon economy. Our success and upgrading and repurposing existing assets will be important to the success of any initiative we move forward with and just a little background on Enterprise Product Partners. They’re one of the largest publicly traded partnerships and a leading North American provider of midstream energy services to producers and consumers of natural gas, NGL’s crude oil, refined products and petrochemicals. In total, the partnership’s assets include approximately 50,000 miles of pipelines, 260 million barrels of storage capacity for NGL’s, crude oil, refined products and petrochemicals, and 14 BCF of natural gas storage capacity.
So an unbelievably massive team up between two of the largest oil and gas companies in the world, one midstream and one full stream, and with the resources that these two companies bring to the table, could mean an absolutely massive jump forward for the CCUS industry. And I also know firsthand that enterprise is looking diligently into both CCUS and hydrogen. And lastly, just one day after that on September 14. Another press release Chevron accelerates lower carbon ambitions. The top three bullet points is that they are tripling planned total capital investment to $10 billion through 2028. They set growth targets for renewable fuels hydrogen and carbon capture through 2030. And they’re reaffirming guidance of $25 billion in excess cash generation over the next five years. During their energy transition spotlight on September 14, Chevron announced plans to invest more capital to grow lower carbon energy businesses. And in a quote from Michael Wirth, Chevron’s Chairman and CEO, Chevron intends to be a leader in advancing lower carbon future. Our planned actions target sectors of the economy that are harder to abate and leverage our capabilities, assets and customer relationships. Building on Chevron strengths, the company has set the following 2030 growth targets for new energy businesses.
Number one, grow renewable natural gas production to 40,000 mmbtu per day to supply a network of stations serving heavy duty transport customers. Number two, increase renewable fuel production capacity to 100,000 barrels per day to meet growing customer demand for renewable diesel and sustainable aviation fuel. Number three, grow hydrogen production to 150,000 tonnes per year to supply industrial power and heavy duty transport customers. And number four, increased carbon capture and offsets to 25 million tons per year by developing regional hubs in partnerships with others. Now to achieve this scale, the company expects to invest more than $10 billion between now and 2028, which includes $2 billion to lower the carbon intensity of Chevron’s operations.
This is more than tripled the company’s previous guidance of $3 billion. And again, in a quote from Jeff Gustavson, president of Chevron new energies, renewable fuels, hydrogen and carbon capture target customers such as airlines, transport companies and industrial producers. These sectors of the economy are not easily electrified, and customers are seeking lower carbon fuels and other solutions to reduce carbon emissions. Now at a bid price average of $60 per barrel, the company reaffirmed its expectation to earn double digit return on capital employed by 2025 and generate 25 billion of cash flow above its dividend and capital spending over the next five years. The company also reaffirmed his 2028 upstream production greenhouse gas intensity targets, which equate to an expected 35% reduction from the 2016 levels.
Wirth concluded With the anticipated strong cash generation of our base business. We expect to grow our dividend buyback shares and invest in lower carbon businesses, we believe a strategy that combines a higher return lower carbon traditional business with faster growing profitable New Energy ones positions us to deliver long term value to our shareholders. Okay, so three, almost back to back press releases from Chevron, targeting ccus, hydrogen and renewable fuels. Now what makes this interesting is that none of these seem to placate to anyone, but rather that Chevron is relying on its expertise to start building capital in other areas of energy. And I am very much liking what Chevron is putting out right now.
Alright, that’s it for me, everyone. If you have any questions, comments or concerns about today’s episode, come visit me at my website at thehydrogenpodcast.com and let me know I would really love to hear from you. And as always, take care. Stay safe. I’ll talk to you later.
Hey, this is Paul. I hope you liked this podcast. If you did want to hear more. I’d appreciate it if you would either Subscribe to this channel on YouTube, or connect with your favorite platform through my website at www.thehydrogenpodcast.com. Thanks for listening. I very much appreciate it. Have a great day.
