Feb 6, 2020

Axios Generate

By Ben Geman
Ben GemanAmy Harder

Good morning!

1 new thing: Axios unveiled its new website! Check out what’s changed, and tell us what you think by replying to this email. (Today's Smart Brevity count: 937 words, 3.5 minutes.)

Situational awareness: "Russia has rejected a Saudi-led effort to deepen OPEC’s oil production cuts in response to the deadly coronavirus in China, cartel delegates said Thursday." (Wall Street Journal)

And at this moment in 1993, Digable Planets hit the top of Billboard's rap charts with today's cool-as-hell intro tune...

1 big thing: Big Oil's evolving climate strategies

Illustration: Rebecca Zisser/Axios

This morning the oil-and-gas giant Equinor rolled out new climate plans that include a pledge to cut carbon intensity (that is, emissions per unit of output) by at least 50% by 2050.

Why it matters: The 2050 commitment covers not only emissions from its own operations, but the vastly larger pollution from the use of its products in the economy, known as Scope 3 emissions.

  • It adds to what remains a very small handful of oil companies with any kind of targets around Scope 3.
  • The move comes amid rising activist and investor pressure on oil giants over global warming.

Where it stands: The Norway-based multinational also said that it plans to grow its renewable energy portfolio by a factor of 10 by 2026, targeting 4-6 gigawatts of capacity.

  • The company said it intends to become a "global offshore wind major."
  • In addition, Equinor said it wants its direct operations to be carbon neutral by 2030.

What's next: BP, a bigger global player than Equinor, will unveil updated climate plans next Wednesday, which, per Reuters, are also expected to include some kind of Scope 3 element.

  • The last 24 hours have only intensified the spotlight on BP.
  • In addition to Equinor's move, Greenpeace protestors yesterday temporarily shut down BP's London offices and nine people were arrested, per multiple reports.
  • It occurred on the first day of longtime BP executive Bernard Looney's tenure as CEO.

Quick take: Equinor's announcement signals that addressing Scope 3 is quickly becoming the new table stakes at a time of growing pressure on the oil industry.

The sector has been expanding its investments in low-carbon tech and startups, but that remains a very small fraction of overall spending.

  • The specifics of BP's plan will matter a lot. Equinor's plan is an intensity target, not an absolute reduction goal.
  • The big Spain-based oil company Repsol in December pledged to reach net-zero absolute emissions, including Scope 3, by 2050.

What they're saying: "Equinor's announcement substantially raises the bar for how BP's commitment will be judged," Andrew Logan of the sustainable investment advocacy group Ceres tells Axios.

"Anything that doesn't include a substantial commitment to lower Scope 3 emissions will be seen as falling short," he added.

  • Edward Mason, head of responsible investment of the Church Commissioners for England, said this morning on his personal Twitter feed that Equinor is doing "some great stuff," but added:
  • "I’m not sure a pledge to halve carbon intensity by 2050 does it any more. #Repsol has shown the net zero 2050 ambition we need." (H/t @ronbousso1)
2. AI startup snags big-name backers

An AI company with energy applications is emerging from stealth mode with $10 million from backers including VC arms of Chevron and the Malaysian oil giant Petronas.

Driving the news: Worlds, a spatial AI company being spun out of the firm Hypergiant Sensory Sciences, announced the Series A funding led by Align Capital.

  • The company's technology "combines deep learning and IoT inside of a 4D environment to give organizations the ability to observe their organization’s physical space and then, analyze and learn from their physical surroundings," the announcement states.

The intrigue: It's the first disclosed investment from San Francisco-based Piva, the recently launched VC firm that's a Petronas subsidiary but is structured to operate independently from the Malaysian company.

What they're saying: Piva CEO Ricardo Angel, in a new blog post, said companies like Worlds can play a "critical part" in the energy sector's future.

"We’re seeing many corporations in verticals such as oil and gas, manufacturing and logistics, investing in hardware solutions often generating too much data without getting valuable insights," he writes, making the case that companies like Worlds can help make sense of it.

Go deeper: $250 million venture capital firm Piva targets the energy industry

3. The new normal for crude oil exports
Expand chart
Data: EIA; Chart: Andrew Witherspoon/Axios

The latest Energy Information Administration weekly data shows that U.S. crude oil exports have averaged above — usually well above — 3 million barrels per day for 12 consecutive weeks.

Why it matters: The weekly data that runs through the end of January is a sign that 3 million-plus is the new normal for U.S. crude exports.

  • The growth has been enabled by booming shale production that produces light oil that many refineries are not optimized to run.
  • That has created a spillover effect as companies are building new pipeline and port infrastructure to handle the rise.

The intrigue: Politically, it raises the stakes of the White House race. Bernie Sanders and Elizabeth Warren have both called for ending U.S. oil exports as part of their climate platforms.

But, but, but: Yes I know the weekly data is noisy. But on a multiweek basis it is consistent with more complete monthly data, which arrives after a lag.

Exports averaged over 3 million barrels per day in November, the most recent period in the monthly tallies, as well as October and September.

Flashback: Legislation to remove heavy export restrictions was enacted at the end of 2015.

4. Catch up fast: Oil earnings and BlackRock's climate push

Climate: "Siemens has been criticised by its largest external shareholder for failing to consider properly the 'breadth of risks' it faces, as the German industrial group comes under intense scrutiny for its involvement in an Australian coal-mining project." (Financial Times)

  • Why it matters: The FT piece notes that it's the first "intervention" since BlackRock, the world's largest asset manager, rolled out its new sustainability strategy last month.

Earnings: "Total SA’s fourth-quarter profit beat even the highest estimate as record production offset the impact of slumping natural gas prices and strikes at its French oil refineries." (Bloomberg)

More earnings: "Norway’s Equinor reported a smaller-than-expected drop in fourth-quarter core operating profits on Thursday as the startup of a major new oilfield partly mitigated the impact from weak European gas markets." (Reuters)

5. Tesla's wild ride got even wilder
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Source: FactSet; Chart: Axios Visuals

Shares of Tesla closed down more than 17% on Wednesday, shredding more than $27 billion in market cap value, Axios' Courtenay Brown reports.

Between the lines: Wednesday ended a streak of eye-popping stock gains for Tesla. Per CNBC, it was the second-worst day for the stock ever.

But, but, but: Tesla’s stock is still up more than 60% since the beginning of the year.

Where it stands: Tesla is down almost another 4% in premarket trading.

Go deeper: Tesla shares crater 17% after coronavirus delays Model 3 deliveries (CNBC)

Ben GemanAmy Harder