By Antonio De Pinho
Senior Analyst, Pure Assets Fairness Technique
Equinor, a world vitality firm, is likely one of the best-positioned firms to transition to a low-carbon future, in our view.
We proceed our sequence on our portfolios firms that we imagine are at forefront of present traits of their respective areas, characterised by innovation, technological advances and superior administration.
In our view, there are few firms higher strategically positioned than Equinor1 to be a dependable, sustainable supply of pure fuel, whereas additionally being a primary mover into offshore renewable and carbon resolution applied sciences.
Equinor, a Norwegian vitality firm, has lengthy established itself as one of the crucial dependable and predictable world suppliers of pure fuel whereas additionally driving profitability. Critically, it has achieved this whereas producing vitality with the bottom carbon depth of any main oil and fuel firm on the earth. On the similar time, the corporate is remodeling itself to take middle stage in accelerating the vitality transition. It’s powering its oil and fuel manufacturing with renewable vitality, pioneering offshore wind farms and creating carbon seize utilization and storage (CCUS) expertise. The following step is the event of the corporate’s groundbreaking vitality hub community that can combine its oil and fuel manufacturing, offshore wind vitality and low-carbon options throughout borders.
Beforehand referred to as Statoil, the corporate has demonstrated a protracted monitor file of superior experience in supplying pure fuel, which it’s now leveraging to pioneer new applied sciences that capitalize on the alternatives introduced by the vitality transition.
Gasoline because the Keystone within the Power Transition
Pure fuel will stay an necessary a part of transitioning the world to a decrease emissions future. Nations worldwide have set targets to succeed in web zero greenhouse fuel (GHG) emissions,2 which would require transitioning their respective vitality provide from fossil fuels to renewable sources. This shift might be gradual as international locations slowly section out extra polluting sources like coal, and finally oil, whereas introducing extra renewable vitality. Pure fuel will serve to bridge the hole from “dirtier” to “cleaner” sources, because it produces fewer emissions in comparison with different fossil fuels. The Worldwide Power Company (IEA) expects the demand for pure fuel to remain (roughly) regular till 2050 whereas it serves because the keystone within the vitality transition.3
For many years, Equinor has established itself as one of the crucial dependable pure fuel suppliers on the earth. The corporate is Europe’s largest “home” provider of pure fuel, offering the continent with over 15% of its fuel.4 Equinor has offered an uninterrupted provide of fuel at an reasonably priced worth to the continent and continues to attempt to enhance provide amid the urgency to switch Russian flows, which have been suspended as a result of Russia-Ukraine struggle.5
European Pure Gasoline Provide Market Share
Supply: BloombergNEF, VanEck. European Gasoline Provide Demand Balances. As of September 2022.
Equinor has offered a gentle provide of vitality whereas additionally remodeling its operations to make them the cleanest on the earth. The corporate’s upstream oil and fuel operations have the bottom carbon depth, i.e., the bottom quantity of carbon dioxide (CO2) emitted for every unit of vitality produced.6 Since 2015, the corporate has lowered its upstream carbon depth by roughly 30%, bringing it under half the present trade common.7 Equinor has achieved this through the use of renewable vitality as the facility supply at its offshore platforms, as a substitute of or along with fuel.8 This renewable vitality comes via energy cables from land or from its personal offshore wind farms. Past decreasing its environmental affect, powering its operations with renewable vitality additionally makes Equinor’s operations each cheaper and safer.
Past Gasoline to Wind and CCUS
Nations all over the world are aggressively setting targets to scale back their emissions and are adopting laws to work in the direction of reaching them. Annual climate summits have mobilized greater than 70 international locations to pledge to succeed in web zero emissions, together with the U.S., Europe and China, which collectively account for greater than 75% of world emissions.9 With the intention to meet these targets, international locations and areas are passing bold laws that ought to speed up the vitality transition, together with the Inexperienced Deal in Europe and the Inflation Reduction Act within the U.S. As an rising variety of international locations set local weather targets, they are often anticipated to move comparable laws that can decarbonize their vitality provides. Equinor will play an necessary function in serving to international locations attain these targets via its trailblazing enlargement into offshore wind and CCUS.
Equinor’s offshore experience uniquely positions it to pioneer offshore wind vitality, permitting it to capitalize on the headwinds of the vitality transition. Offshore wind farms are teams of wind generators positioned out at sea the place the wind blows quicker than on land. Offshore wind is a dependable, emissions free supply of vitality that is ready to present the identical quantity of vitality per unit as some fuel and coal energy vegetation.10 The IEA estimates that offshore wind will turn out to be a $1 trillion trade over the following twenty years.11 The following frontier for offshore wind is floating wind, the place generators are positioned even farther offshore the place wind blows quicker.12 Equinor put in the world’s first floating wind farm off the coast of Scotland in 2017 and is within the course of of putting in one other off the coast of Norway.13 The venture, Hywind Tampen, would be the world’s largest floating wind farm. It would provide greater than a 3rd of the electrical energy for 5 of Equinor’s oil and fuel platforms, which may also make it the world’s first floating wind farm to energy offshore oil and fuel platforms.14 As soon as all of the wind generators are put in for Hywind Tampen, Equinor will function almost half of the world’s floating wind capability.15 In our view, Equinor’s pioneering expertise will permit new areas to harness the potential of floating offshore wind, with plans for the corporate to increase its offshore wind enterprise to South Korea, Vietnam and the U.S.
Past its enlargement into offshore wind, Equinor is spearheading the event of large-scale CCUS tasks. The corporate’s CCUS tasks seize carbon dioxide (CO2) emissions from its oil and fuel manufacturing and transport them to be saved completely underground.16 Equinor has lengthy been a pacesetter in CCUS, working a number of tasks in Norway for over 26 years.17 The corporate continues to be on the frontier of CCUS developments with its new cutting-edge Northern Lights venture. The venture would be the first open supply transport and storage community on the earth, capturing emissions from powerplants and factories throughout Europe and transporting them to be saved beneath the North Sea.18 It’s scheduled to be operational in 2024,19 which is sooner than most different main CCUS tasks globally, which have focused timelines past 2025.20 Northern Lights will first seize, transport and retailer CO2 from industrial emitters in Norway, with plans to increase to 16 companions throughout seven European international locations sooner or later.21
Firms Main in CCUS Improvement in Europe
Supply: BloombergNEF. 2022 CCUS Market Outlook. October 18, 2022 (Y-Axis = # variety of tasks).
Now, Equinor is looking for to reshape the way in which the world addresses its vitality wants via the event of its vitality hub community. Every vitality hub will combine Equinor’s oil and fuel operations, renewable vitality manufacturing and low-carbon options in a single location. The corporate will have the ability to concurrently energy its oil and fuel operations with its wind vitality and seize and retailer emissions from its personal enterprise in addition to these from different industrial emitters. The vitality hub community will share infrastructure and seize provide chain synergies throughout nation borders as has by no means been finished earlier than. The primary vitality hub is deliberate within the North Sea, putting Norway as Equinor’s first stepping stone in increasing this strategy to Europe and the U.S. east coast.
Supply: Equinor. Norway Power Hub. 2022.
Secure, Renewable, Worthwhile
Equinor has reworked its upstream oil and fuel enterprise into the cleanest on the earth. In parallel, it’s pioneering offshore wind and CCUS applied sciences to turn out to be an early entrant in these excessive development markets.
Now, Equinor is taking its strategy to the vitality transition one step additional via the event of vitality hubs. These hubs will create a groundbreaking vitality community that can combine the corporate’s oil and fuel operations, renewable vitality manufacturing and low-carbon options throughout borders. By integrating its operations and infrastructure, Equinor can seize provide chain synergies, develop new and materials markets and in the end reshape the way in which the world addresses its vitality wants. Norway and the North Sea are its first stepping stones.
Whereas world local weather ambitions develop, vitality firms which might be supplying safe sources of vitality in a extra sustainable manner, whereas pioneering new expertise, are the place we glance to be positioned. Equinor is spearheaded by superior administration that continues to drive revenue and stay aggressive in an ever-evolving setting whereas offering govt compensation that’s far under the median of its friends. On account of its enterprise foresight and administration fashion, we imagine that Equinor has a lot to offer within the vitality house.
Initially published by VanEck on February 23, 2023.
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1 Be aware: As of October 31, 2022, Equinor represents 3.38 % of web belongings for the VanEck World Assets Fund.
2 United Nations Local weather Change. NDC Registry. 2022.
3 Equinor. 2022 Power Transition Plan. 2022.
4 Bloomberg NEF, European Gasoline Provide Demand Balances; VanEck. As of September 2022.
5 Nasdaq. Equinor (EQNR) Submits Improvement Plan for Irpa Gasoline Undertaking. November 2022.
6 Equinor. Sustainability Report. 2022.
7 Equinor. 2022 Power Transition Plan. 2022.
8 Equinor. Electrification of Platforms. 2022.
9 United Nations. Internet Zero Coalition. 2022.
10 Power Info Administration (EIA). Electrical Energy Month-to-month. 2022; United States Division of Power. What’s Technology Capability? 2020.
11 Worldwide Power Company (IEA). Offshore wind to turn out to be a $1 trillion trade. 2019.
12 U.S. Division of Power. Floating Offshore Wind Shot. 2022.
13 Equinor. First energy from Hywind Tampen. 2022.
14 Equinor. Hywind Tampen. 2022.
16 Northern Lights. Accelerating decarbonisation. 2022.
17 Equinor. Carbon seize, utilisation and storage (CCS). 2022.
18 Equinor. Northern Lights. 2022.
19 Equinor. Carbon seize, utilisation and storage (CCS). 2022.
20 World CCS Institute. World Standing of CCS 2021. 2021 BloombergNEF. 2022 CCUS Market Outlook. 2022.
21 Northern Lights. Work with us. 2022.
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