“Equinor Will Become A Leading Global Player in Renewables to Support the Energy Transition” – Christel Kvalvik
The Energy Republic talks to Christel Kvalvik, Managing Director of Equinor Nigeria Energy Company Limited, about the company’s action plans to unlocking new opportunities around the energy transition. Christel also provided an update on Equinor’s involvement in Tanzania’s $30 billion LNG deal.
Interview by Ndubuisi Micheal Obineme
TER: Welcome back to the post-COVID-19 era. Please could you shed more light on Equinor’s main building blocks in navigating the pandemic?
Christel: In 2021, the Covid-19 pandemic showed signs of being less severe. However, there continues to be uncertainty around the duration and extent of the impact of the Covid-19 pandemic. Equinor’s operations and workforce, including projects under development, have and continue to be impacted by the global Covid-19 pandemic. Quarantine rules, travel restrictions, workforce shortage, supply chain disruptions, and Covid-19 prevention and mitigation controls, such as social distancing requirements and reduced utilization of offshore beds, have resulted in lower activity levels on certain sites, causing delays, cost increases, and disruption of further work.
As a consequence, the start-up of projects (Njord future, Johan Castberg, and Peregrino phase 2) have been postponed.
In addition, certain of our suppliers and customers have and continue to be impacted by the spread of the pandemic, and the efforts to contain it, and may as a result explore invoking contractual clauses such as those involving force majeure. There can be no assurance that the ongoing Covid-19 pandemic, new variants, and efforts to contain the virus will not materially impact our operations or financial condition.
TER: Equinor has set a target to become a net-zero company by 2050, with a new investment focus on onshore and offshore renewables as part of its energy transition plan. What are the growth and project opportunities in Equinor’s Energy Transition Strategy?
Christel: Equinor is applying its competitive advantage to create value in new areas of the energy system. A central element in this effort is our goal to become a leading global player in offshore wind. We will accelerate growth in renewables to strengthen our competitive position and achieve the economies of scale necessary to improve returns. To build a competitive wind portfolio, we are applying our experience in technology, innovation, and project delivery and building new competence and capacity to support the transition. We have the ambition to have a total of 12-16 GW of installed net renewable capacity¹ by 2030 – five years earlier than previously announced.
To put that in perspective, this would equal more than twice the total global offshore wind capacity installed in 2020. We have already accessed around two-thirds of our growth ambition through a competitive and high-quality pipeline anchored by our Dogger Bank and Empire and Beacon Wind projects in the UK and US. As we execute on these world-class projects, we are well positioned to grow our presence in markets where we look to continue to create value and optionality.
As we expand our global wind portfolio, we are also moving into regions, such as Eastern Europe and East Asia, where there is potential for our renewable projects to displace coal from the electricity mix. Throughout our expansion into renewables, we will continue to be guided by a focus on capital discipline, value creation, and delivery.
Based on our outlook, we plan to allocate around 23 billion USD gross CAPEX to renewables between 2021 and 2026 and expect a real base project return of 4-8%. In addition to our investments in offshore wind, we are expanding into other areas of renewable energy. Our significant equity ownership stakes in Scatec, a leading renewable power producer, and Noriker Power, a UK-based battery storage developer focused on utility-scale storage, are some examples.
Equinor Ventures, our corporate venture arm dedicated to investing in ambitious early phase and growth companies, has a mandate of 750 million USD, with more than 50% of the fund’s capital being deployed towards renewables and low carbon activities by 2025. The current portfolio comprises more than 40 investments, with an almost even split between oil and gas, renewables, and low carbon solutions.
TER: What role will offshore renewables and carbon capture (CCUS) play in Equinor’s global operations more especially in the Northsea?
Christel: We are applying our decades of CCS experience to reach our ambition of developing a CO₂ transport and storage capacity of 5-10 million tonnes by 2030 and 15-30 million tonnes1 by 2035. Since 1996, we have safely stored nearly 20 million tonnes of CO₂ at our Sleipner field. In addition to our technical experience, we are capitalizing on the competitive advantage of our established geographic footprint. Our North Sea infrastructure lies close to potential carbon and hydrogen markets. The Northern Lights project, which we are developing with our partners Shell and TotalEnergies, is an essential step. Northern Lights is part of the full-scale Norwegian Longship CCS project, the first ever cross-border, open-source CO₂ transport and storage infrastructure network. It will offer companies across Europe the opportunity to capture and store their CO₂ safely and permanently underground.
Beyond the NCS, we are pursuing CCS projects in other regions that have the necessary framework conditions for low carbon solutions. In the UK, we are part of the Northern Endurance Partnership, which aims to put in place the offshore infrastructure to transport and store CO₂ from projects in the UK’s pioneering East Coast Cluster (ECC). The ECC, which was selected in 2021 by the UK government as one of its first two carbon capture and storage projects, has the potential to transport and securely store nearly 50% of all UK industrial cluster CO₂ emissions, equaling up to 27 million tonnes of CO₂ emissions a year by 2030.
TER: Talking about the global energy transition agenda, please could you provide more insight on Equinor’s action plans toward Decarbonization, Digitalization, and Decentralisation?
Christel: Hydrogen offers a low and zero-carbon solution to sectors that are technically difficult to decarbonize, such as heavy industries including steel and cement; and transport sectors such as heavy duty trucking, shipping, and aviation. Because of its versatility, most credible low carbon scenarios include significant deployment of hydrogen. Pursuing a technology-neutral approach to hydrogen development will enable the fastest and most cost-efficient decarbonization across sectors and regions.
To this end, we aim to supply hydrogen to 3-5 major industrial clusters by 2035, aiming at a 10% market share of clean hydrogen in Europe. We plan to realize these ambitions through a portfolio of hydrogen projects, centered in industrial clusters in Norway, Northwest continental Europe, the UK, and the US.
We have made considerable progress on some of our key projects and added several new ones, including the H2BE project for low carbon hydrogen production in Belgium and an initiative to develop a low carbon and hydrogen industrial region in the tri-state area in the US.
As we execute our strategy of providing hydrogen and CO₂ management services to large industrial clusters, we retain significant optionality across decarbonization segments and geographies.
TER: With the recent announcement about the signing of the contract for Tanzania’s $30 billion LNG deal between the Government, Equinor, and partners. What is the significance of this project on your company’s investment in East Africa and the opportunities it will create in the region?
Christel: Equinor, together with Shell and partners, initialed a Framework Agreement with the government of Tanzania on June 11, 2022, aligning on some of the key fundamentals needed for the development of an LNG project in the country.
The development is an encouraging step as in early 2021 Equinor decided to make an impairment of the full investment in Tanzania. At the time, the overall LNG project economics had not improved sufficiently to make it globally competitive and justify keeping it on the balance sheet.
However, under the leadership of the new Tanzanian President Samia Suluhu, the negotiations have resumed, leading to the positive milestone on June 11th.
The framework agreement sets the stage for negotiations to continue towards a fully termed Host Government Agreement (HGA), with a completion target date of December 2022.
While there is positive momentum for the project, there is still a lot of hard work needed to achieve the next milestones and our negotiating team will be working tirelessly in the coming months.
TER: Some experts have said that the pathway for energy transition may be different in developing countries such as the African continent based on their energy potential. How is Equinor working to support a Just Energy Transition in Africa?
Christel: Most of our assets in Africa are at the moment non-operated. Through collaboration with partners and several national oil companies (the latter through Memorandum of Understandings (MoUs)), we work to ensure that the majority of non-operated assets now have a GHG emissions reduction plan.
For example, through the MoUs signed with Sonatrach and YPF, we will share experiences and explore potential opportunities to reduce flaring and methane emissions, energy efficiency, and reporting of GHG emissions.
We have also agreed to evaluate potential cooperation for the use of renewables, carbon capture, utilization, and storage (CCUS), and low-carbon hydrogen solutions.
We also actively participate in the Oil and Gas Climate Initiative and thereby encourage others to move towards net-zero operations and, most urgently, to near zero methane emissions.
TER: Furthermore, Equinor has a strong footprint in Nigeria, and is involved in major oil and gas projects. With the signing of the Petroleum Industry Act (PIA) and the ‘Decade of Gas’ initiative led by the Federal Government of Nigeria. What are Equinor’s pivotal projects and main focus areas in the country?
Christel: The development of gas resources takes time and requires adequate incentives to encourage investment. Equinor wants to be the catalyst and force for engaging with all stakeholders interested in really moving forward on deep water gas development. We want to make gas, whether it is LNG or LPG, a viable investment proposition for Nigeria.
We want to end up in a situation where there are numerous gas projects which are to benefit of Nigeria’s industrialization and economic development.