Energy Transition Now Podcast – Episode 5 with Grete Tveit

DL:   Hello, everyone. I’m your host, David Linden, the head of Energy Transition for Westwood Global Energy Group, and you’re listening to Energy Transition Now where we discuss what the transition really means for the oil and gas and the broader energy industry. In this part of the series, we’re taking a look at how individual companies are responding to that transition and I’m really pleased to have Grete Tveit here, the SVP for Marketing Midstream and Processing (MMP) Low Carbon Solutions at Equinor. Grete has more than 30 years’ experience in the gas industry after graduating from NTNU in Norway. She started working for Hydro and then later, Statoil, of course, later renamed Equinor. She’s held several senior and executive management positions within the company, including as SVP for Global Strategy Business Development – Finance and Control, and Head of Staff in London. Between 2014-2020, she was the SVP of the Global Valuation Team and then the Global Project Support and Execution Team within GSB and during part of this period she also served as the Head of Mergers and Acquisitions. On the 1st of April last year, she was then appointed the SVP for MMP Low Carbon Solutions. Grete, it’s really super to have you here on the podcast. A very warm welcome. Now, it is a particularly warm welcome, I suppose, because I can see that since you started your role last year, you have been very busy. And of course, Equinor has also been very busy. And we’re speaking just a few days after Equinor has had its Capital Markets Day where the company presented its new strategy, I guess ultimately creating a step change in its energy transition ambitions. So, to get us started, can I ask you, what are now Equinor’s climate ambitions, can you talk about maybe also through the main actions from that?

GT:  Thank you, David, and I’ll be pleased to do so. So, Equinor has set an ambition to become net zero by 2050. This includes what we call scope one, two and three, meaning it also includes emissions from our products, oil and gas. And our pathway has three main elements. The first one is to reduce emissions from our own operations. So, scope one. And Equinor already has an industry leading low carbon footprint from our own oil and gas operations. And we will continue to develop projects characterised by high value and low carbon. And we will continue to take down emissions from our own operations throughout the value chains with electrification of installations from shore, and from offshore wind as key tools. Then secondly, we will develop more renewables. We will accelerate our renewables business, aiming at installed equity capacity of 12 to 16 gigawatt by 2030. Our earlier goal was to have that capacity installed by 2035. And our focus will be on four to five regional offshore wind clusters building on our offshore experience and competitive edge. And we believe that two thirds of the installed capacity will be within offshore wind. So also, some onshore. And we were an early mover in offshore wind, and we will continue seeking attractive wind prospects in markets with favourable framework conditions. And we are also taking part in onshore renewables, with our ownership share in, and partnership with Scatec Solar as an example. So, the third one is that we will develop low carbon solutions and an increasing number of nations and companies, and cities have stating their net zero ambition and commitments. Actually, I believe it is 61% of the, actually, countries in the world have stated a net zero ambition, and this will drive the demand for CCS and clean hydrogen. We see that the pathways towards net zero includes large amount of CCS and clean hydrogen as a prerequisite for getting there by 2050. And we believe that there will be a growing demand for carbon management solutions and clean hydrogen. We believe that Equinor is uniquely well positioned to be the leader in this development. And as you referred to on our Capital Markets Day, we introduced an ambition to have a CO2 transport and storage capacity of 15 to 30 million tonne per year within 2035, which we believe will give us a market share of around 25%. We have also launched an ambition to develop clean hydrogen projects in three to five major European industrial clusters, also within 2035. And when it comes to location, we focus on three main areas. It’s the U.K. It is the rest of Northwest Europe and it’s Norway. And in these clusters, we find industries that need clean hydrogen and carbon management solutions to maintain production and jobs in the low and zero carbon future. And here we can build on our experience, infrastructure, and existing customer base, together with whom we can develop solutions and products. And CCS and hydrogen offer an attractive value proposition within all four segments of industry, heat, power, and transport.

DL:   That’s very comprehensive, thank you very much, Grete. Certainly, I’d like to talk a little bit more about the low carbon solutions side of things, but maybe if we take a quick step back in terms of the shape that Equinor will take going forward, in that sense, should we expect that from now on the upstream business is slowly going to decline and all these other areas are going to grow? Or how’s that looking for the for the shape of the company?

GT:   For the shape of the company, we have a large oil and gas business in place, and we believe that we will stay and even grow in our oil and gas production for the next 5 to 10 years. But following that, we believe we might have a gradual decline in that. What we also announced yesterday was that in 2030, approximately 50% of our investments will be through renewables and low carbon solutions.

DL:   OK, well, that sounds like quite a big rebalancing within that period of time and certainly very interesting. In terms of, you know, your focus is mostly on the CCS and the blue hydrogen side of things. One question I guess I would have is, why should an oil company like Equinor take a role in this? You’ve touched on this a little bit, but you know, is this maybe not the technology that, I don’t know, a company that’s used to running regulated return assets should be charged with as ultimately, I guess it’s almost like a waste management product in one way. If you look at it from that angle, what is it that someone like in Equinor an oil and gas company can bring to the table? Why should they be leading the charge in this?

GT:  Well, in Equinor, we consider, first of all, CCS as vital to meet our net zero target, which includes scope one, and two and three, as I mentioned. And so, CCS, I would say, is an essential climate mitigation tool. And all sustainable modelling shows that significant scale, of CCS, is required to reach this goal. Pathway to net zero indicates that we need seven to eight gigaton per year of CCS injection capacity to meet a global warming goal of below 1.5 Degrees Celsius. And the most, then we have the most common objection towards CCS is whether it will ever be commercial, and this perception is about to change, I believe. As we’ve seen lately or over the last few years, the EU, ETS price is accelerating and has almost doubled. And it is expected to reach 100 euros per ton in 2030. And several European countries are pushing CO2 costs towards the 200 euro per tonne mark in the same period. And meanwhile, economies of scale and technology development are expected to take the cost of capturing, transporting and storing CO2 below the 100 Euro mark. And many of us, me included, believe carbon neutral industries will get a price premium for their products, increasing their willingness to pay beyond the CO2 price level. But as indicated by yourself, until such crossover between costs and a CO2 price is achieved, we do expect moderate returns as projects will depend on government support. But we do believe we will see a similar value upgrade as we have actually experienced in offshore wind by entering early and potentially farming down when projects up firmed up. So, for us, we as an oil and gas company and now turning into an energy company, we consider ourselves as the basin master of the Norwegian Continental Shelf, which is our home turf. And what is mapped out is that the North Sea alone has a storage capacity of 200 gigaton of CO2, and here it is, Norway and UK that stands out. So together, actually, Norway and UK can store CO2 for 25 years of the entire world’s need for CO2 storage capacity. And of course, you can add capacity in the rest of the Norwegian shelf and of course, also worldwide. We are very well placed to take the leading role in building this CCS industry on the Norwegian shelf and by having the oil and gas competence to build on, we have unique experience from actually doing CCS, and not very many are aware of this. We have done CCS on the Sleipner gas condensate field on the NCS, for 25 years. And we have done the same for the Snohvit field in the Barents for 12 years. And now we are one of the driving forces for developing Northern Lights, which is a new CCS opportunity in Norway. So, I think this could be a good business for us, and when it comes to hydrogen and why we are looking to blue hydrogen, this is actually a way to decarbonise our gas. So, it is helping decarbonising the scope three, which is part of our ambition as well.

DL:   OK, that’s very interesting. I remember looking at your numbers, your targets, as to how many tonnes you would like to, or capacity at least, you’d like to store, and it certainly felt like, I haven’t done the full comparison, but it certainly felt like you’re setting the highest targets out of pretty much anyone in the industry for this. So, it’s really a core part of how you’re looking at things. When we come to something like blue hydrogen, so, I can see that it is important about decarbonising your gas and obviously you have a big gas portfolio at the moment. Part of the criticism, I guess, that’s out in the industry, though, around blue hydrogen is around the fact that it’s, it’s only a temporary solution to the real problem or the real question we’ve got. And we should go straight to green hydrogen as an example, you know, use renewable capacity to extend and build that rather than try and maintain ultimately, I guess, which is a hydrocarbon supply and remove, what, 90+% of the CO2, and store that away. I’m assuming you don’t share that view but will be good to just to hear your view on the role of blue hydrogen versus green hydrogen.

GT:  Yes. And very many ask that question. So, it’s very relevant. And there is no doubt that green hydrogen is a desired decarbonisation tool and that over time, the energy system is moving in this direction when it comes to providing clean molecules. But the importance here is that green hydrogen does not have the muscle to lift the hydrogen economy, or the infrastructure required to decarbonise towards 2030. And if you if you are willing to follow me in in a lot of numbers. But just to illustrate this, then I like to take you through an exercise. If we look at Europe, Europe today consumes about 8,000 terawatt hour of power from oil and gas annually. And then if we say, what does it take to eliminate the CO2 emissions from this energy demand? And then please be mindful, this is a simplistic illustration. First, we assume that half of this can be solved by electrification, so batteries, electric cars, and all of this. So, what does it need? Well, it needs renewable electricity generation. And this is a huge challenge in itself. And if covered by wind, for example, we will require 250 Dogger Bank wind farm projects with all the phases. And then, let me remind you that this is the world’s biggest wind farm by a large scale, and it has taken us in Equinor almost 10 years to mature it. So, then we used all the wind power in a way. So, what about the other half, let’s aimed to solve that by producing clean hydrogen? And if we are to produce green hydrogen, it will require about 150 new nuclear plants of the size of Hinkley Point because we used all the renewable power. So, we need clean power and then we need to build electrolysers that actually, they split up the water into green hydrogen. And we need about 50,000 of the largest units in operations today, which is 10 megawatt each. And today in the world, about 100 of these are produced every year. So, of course, technology development and innovation will help this, but that is the situation today. So, then it will take 500 years. But if we look at that for creating blue hydrogen, well, it’s a lot more realistic. First of all, the natural gas energy source and infrastructure already exists because we actually use it today and then we will need 500 reformers of one gigawatt each. And the world today is producing about 100 of these each year. So, we will need about five years to succeed when it comes to blue hydrogen. So actually, my feeling is producing the hydrogen to which is required for the heart to beat, sector will take time. So Equinor we propose not to talk about green or blue, but actually green and blue, and blue will build up first, but also green will come over time. And when I look at the IEA prognosis of hydrogen requirements in 2050, they say that blue will build up early, then green will come and take over. But still in 2050, there is the use of blue hydrogen. So, you can talk about blue being in the intermittent, but how long time is the intermittent? If it is 30 years, well, then that’s fine for me.

DL:   That’s very, it’s a very interesting way of looking at the question and thank you for breaking that down for us like that. And you’re right, I mean, even the IPCC scenario, 90 of them or so to get to 1.5 Degrees. Most of them, if not all of them, have a role for CCS and certainly also for hydrogen. And I guess interestingly and in particular, the latest IEA scenario probably has more hydrogen than maybe a lot of people expected. So, it certainly has a role to play. And there is that overlap between the two types. Just listening to you there, maybe there’s one follow up question. Is part of the answer you’re giving, you saying that it’s just very difficult to build so many renewables in the space of time we have? Is that how I should interpret this of the first part of your electrification point?

GT:   To building renewable is, of course, something we do all the time, but to actually provide 50% of the energy demand in Europe by renewables, it will take a lot of time to generate the capacity. And today, about 20%, I believe, of the power in Europe is provided from renewable. So, what we should first do is actually to build up to 100% of the power capacity and then we can start turning that into green hydrogen.

DL:   Perfect, perfect. OK, and is there a space for green hydrogen in Equinor’s portfolio?

GT:  Absolutely. Absolutely. We have, we are engaged in both blue and green hydrogen, so we don’t say one or the other. We have both in our portfolio and we like to be in both because we see the future for both. And we need to, and we love to, like to be part of the development and the cost efficiency also on the green hydrogen.

DL:   Perfect. OK, well, maybe that’s a good time then to talk about your portfolio that you were starting to build up to create that position and reach those, I don’t want to say ambitious, but sort of large targets you set for yourself. You know, maybe could you spend a few minutes talking about that portfolio, how it’s building up and where particular you’re focusing?

GT:   Yes. And let me talk first about what we do in the U.K. As I mentioned earlier, we focus on Norway, U.K. and Northwest Europe. And in U.K., the reason why we have quite a few projects there is that they introduced by law that there will be net zero by 2050. And they also have a very ambitious emission reduction target for 2030 of a 68% reduction. And U.K. have also put in place funding mechanisms and are working very closely with the industry to develop business models, to put in place terms that make environmental projects investable. And U.K. also acknowledge that both blue and green hydrogen is required to meet the climate emission targets. So that is, of course, important to us as well. And we have one project in Scotland together with SSE, it is a natural gas fired power station with CCS, so carbon capture and storage. But maybe I will focus on the Humber and Teeside region, and maybe to stress that first, we are not in that region by accident. This is the region which is responsible for around 50% of all UK industrial emissions. It is where the major part of our Norwegian gas lands and where our power cables from Dogger Bank will hit shore. And it is the home to large existing gas customers as well. And the key feature in our Humber and Teeside value proposition is what we call the Northern Endurance Partnership short what we say NEP, a CO2 transport and storage network connecting Teesside and Humber to an extensive CO2 storage area. And we will have the capacity of 27 million tonne per year. And the CO2 storage is then the basis for our anchor project in Humber. The H2H Saltend is what we name it. It’s a 600 megawatt blue hydrogen facility, setting up one of UK’s oldest chemical parks, the Saltend, for fuel switching. And then also we have together with our long standing customer SSE, we plan to add a further 1.2 Gigawatt of hydrogen production capacity and build three low carbon CCGTs one called Keadby 2, which will run on a mix of hydrogen and natural gas. And the other one called Keadby3, which will be equipped with post-combustion CCS. And then one called Keadby hydrogen power station, which will run solely on hydrogen and will probably be the first one in the world to do so. And then once the infrastructure is built, we then see the potential for the Dogger Bank offshore wind farm to provide electricity for green hydrogen deployment in the same area. And the last project for now in this region is a project we call H21, where Equinor, together with Northern Gas Networks and Cadent, are planning to develop a very large blue hydrogen production facility. And the plan is to convert existing gas distribution pipeline to hydrogen, and potentially allowing 40,000 businesses and 3.7million households access to clean hydrogen. So that’s very interesting and very exciting. And then we have similar value propositions in Northwest of Europe and also one potential in US and maybe also to mention Norway. The Norwegian government has there on the back of its CCS support, also now has cited high ambitions for hydrogen production. We are working on a plan to develop a substantial clean energy system based on offshore wind and blue hydrogen, in combination with large scale CCS that can support existing industries in Norway, and also potentially attract new industries, and maybe over time we can also expect to export this hydrogen to Northwest Europe. We have other projects in Northwest Europe, but I guess this was quite a bit already.

DL:   Yes, it certainly is a lot of, I think what’s fascinating to hear from my perspective, actually, is you’re having to partner with a number of different players in that sense. This is not just, as you say, this Equinor going alone and say, look, we’re going to build a power plant, we’re going to own the gas and the CCS plant, et cetera. You know, obviously there’s a number of stakeholders also in those industrial hubs, and whether you’re partnering with them directly or maybe even indirectly, there’s a lot of people to work with here. So, is it fair to say that ultimately partnerships and stakeholder management skills are a core part of achieving what you’re looking to do here?

GT:   That’s a very fair statement. So, as I talked about our partnership with SSE and in the NEP, the transport and storage system in the UK, we are together with Shell, Total, ENI, BP, and National Grid. So, that is to mention some partnerships. And then maybe also let me mention the project we have together, with Thyssenkrupp Steel in Germany. Thyssenkrupp Steel emits the same amount of CO2 every year as we do from the entire offshore business in Norway. So, it’s big. So, we’re working together, with Thyssenkrupp Steel, to see how they can convert their process and to use hydrogen instead of coal in the process. And of course, if they can do that switch, that will dramatically reduce their emissions. And we are working with them on their plant to see how they can change this. And we are working with them to see how we can produce the hydrogen for them to use.

DL:   OK. I think if I look at that sort of portfolio as a whole, it’s an interesting point that comes out, and I think something that makes a lot of sense to me and others is clearly helping someone like Thyssenkrupp, for example, to decarbonise, these are the hard to abate sectors that people are going to struggle with. If I was to ask maybe a little bit more of a controversial question, though, around for example, the new build around CCGTs, that’s actually a new power plant being built in the UK, which obviously has some CCGTs already and other new power being built, nuclear, et cetera. How does that marry, in your mind, form the kind of concept where a lot of people talk about CCS as the hard to abate. You know, the last drop of CO2 that we need to get rid of, or versus let’s build a new CCGT and then add CCS to it to make it low carbon. Does that does that make sense in your mind?

GT:   Yes, it makes sense. And I think U.K. have been extraordinarily good at reducing your emissions and you have more or less phased out coal and you’ve been very successful in your offshore wind development. But what is the thing when you replace offshore wind with, or sorry, when you replace coal with offshore wind is that the wind is not blowing all the time. And then what do you do when the wind is not blowing and then you need backup, and that backup can be CCGTs. So, this is CCGT plans that we are partnering up to build is for backup for the wind power. And then you want the backup power to be having the least amount of emissions as possible. And the old CCGTs are emitting quite a bit of CO2 and if you replace them with this new one, you can actually make it clean, also, the backup power.

DL:   OK, yes, I can see the value proposition there. Maybe the last question for you, then, you’ve obviously talked us through a lot of things here already. Carbon management in itself, which I think you’ve called it, was a carbon management as a whole within Equinor comes in many forms, is broadly about the mitigation concept and then the removal of carbon as well. There are obviously other solutions that we haven’t talked about at the moment, and they might not be core to what you’re doing. But I’d like to just hear your view on things like nature based solutions, direct air capture, etc, that other companies, maybe not Equinor, are participating in and maybe be useful to hear from you, why that might be?

GT:  And we are participating. We’re not a very active participant, but we are participating, and we are actually participating to compensate for our travel emissions, for example. But we will also need a nature based solutions to close the gap and be net zero by 2050, we believe. But first of all, we need to focus on reducing our own emissions. Then we need to focus on capturing and storing and we need to focus on efficiency measures. And then last of everything is the nature based solution. But I can mention one example, because we are together with 11 other companies working to decarbonise the Humber cluster, as I talked about earlier, and we hope to do so by 2040, to actually make it a net zero or even zero, we need some negative emissions. And how can we get that? That is from Drax’s installations. We can do BECCS. And if you burn this material and you collect the CO2, then you have negative emissions, so we plan to collect that CO2 and to store that CO2 to compensate for other hard to abate emissions. So, yes, we are participating. And as I mentioned earlier, also our Northern Lights project in Norway, which is actually the first of a kind, CCS solution where we can transport and store any CO2 from any customer that has access to a port. And we are in dialogue with various BECCS companies that want to store their CO2 in Northern Lights, and then creating these negative emissions. And we also have an MOU with Microsoft, and they are looking at various ways to decarbonise and going actually not net zero, but negative on this to compensate for earlier emissions. And they are studying DACs as part of that.

DL:   OK, fascinating. OK, so there’s there is a broad range of solutions, but there are some things we need to do first. OK, well, thank you for joining us today, Grete, and thank you for taking us through, I guess initially Equinor’s strategy, but then in particular on CCS and hydrogen and the role that has to play going forward. There’s clearly a lot you’re doing, and I can see you’re very passionate about it. So that’s really good to see. Thank you.

GT:  Thank you.

DL:      Perfect, and thanks everyone else for listening as well. Hope you enjoyed it. Please make sure you subscribe, give us a great rating and share, and talk to you next time.

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