Oil Companies That Claim Carbon Neutrality – Are They for Real?

On January 29th of this year, Occidental Petroleum announced it had delivered 2 million barrels of carbon-neutral oil to India. It claimed it was the first energy supplier to achieve this through the entire lifecycle of the product from extraction to combustion. Calling it “net-zero oil” is a bit of a stretch because the way Occidental could make the claim was to include the purchasing of offsetting carbon credits known as offsets.

The oil came from Occidental’s Permian Basin wells. An investment bank arranged to purchase carbon offsets to neutralize the greenhouse gas (GHG) emission footprint. In other words, the process produced GHG emissions from the beginning to the end including oil extraction, transportation, storage, shipping, refining and the ultimate burning of it once delivered to India. The emissions produced from this product lifecycle process were estimated to be equal to 860,000 metric tons of carbon dioxide (CO2).

The offsets purchased came from a variety of projects that met United Nations carbon offset and reduction standards. The cost of the carbon offsets was assessed at $1.02 US per metric ton. So Occidental probably paid less than a million dollars to compensate for the GHG emissions it produced. Pretty cheap I would say.

Occidental is currently one of only a few US oil companies pledged to achieve net-zero emissions. Occidental’s President and CEO, Vicki Hollub, in December stated, “We have set a target to reach net-zero emissions associated with our operations before 2040 and an ambition to achieve net-zero emissions associated with the use of our products by 2050.” The company joins seven European energy companies in pledging to get to net-zero. These include BP, Shell, Eni, Equinor, Galp, Repsol, and Total. None of these companies have yet to make a similar claim to the one Occidental stated in January.

Yesterday, a smaller European company, Sweden’s Lundin Energy, made a similar announcement to the one from Occidental. Lundin stated it had sold the world’s first oil cargo certified as carbon neutral to an Italian refiner amounting to 600,000 barrels. The oil originated from Norway’s Edvard Grieg field which produces 3.8 kilograms (8.4 pounds) of CO2 for every barrel. this is five times less than the current global average. The total estimated emissions equal 2,302 metric tons of CO2.

The offset purchased involves a reforestation project in Mexico. Lundin did not disclose the cost for the offsets but if the amount was equal to offset pricing from Occidental then the company’s purchase was a piddly $2,348 US. Lundin previously had announced it was investing $39 million US to plant eight million trees in Spain and Ghana as part of a company program budgeted at $750 million to achieve carbon neutrality from its production by 2025.

These two announcements are representative of a shift in the way oil producers are positioning themselves with the public. But are these no more than greenwashing, putting a “lick of green paint” on an industry that is vested far more in putting GHG emissions into the atmosphere than taking them out? BP, and Equinor, two of the companies among the group of European producers that have announced net-zero emission ambitions have been proclaiming green credentials through advertising. Even ExxonMobil advertises itself these days this way. But the truth is, buying carbon credits and offsets doesn’t solve the emissions problem. As long as these companies continue to extract, refine, and ship oil to world markets they are far from being carbon neutral. Buying a few solar and wind farms representing a tiny percentage of total energy investments does not make you a net-zero company. Stopping exploring for oil, however, would be a critical first step. Neither Occidental nor Lundin have any plans to do the latter. So read these business headlines and recognize them for what they are, public relations greenwashing.