Repsol is a platinum sponsor of the 24th World Petroleum Congress, set to take place from 17–21 September 2023 in Calgary, Canada. Here, Repsol CEO Josu Jon Imaz talks to Petroleum Economist about the issues facing energy firms as they approach the congress.
Repsol has set itself the goal of becoming a net-zero emitter of greenhouse gases by 2050. What is the company doing to achieve that goal?
Imaz: An orderly energy transition requires access to diversified sources of energy—including hydrocarbons—and adequate supply to meet present and future demand at affordable prices. At Repsol, we are deploying an integrated model of decarbonisation technologies to achieve this goal—focused on efficiency, renewable generation, renewable fuels, new customer solutions, the circular economy and breakthrough projects to reduce the industry’s carbon footprint. We believe technological neutrality is crucial to achieving a just energy transition that benefits everyone. The key is to find the routes that can get us to net zero in the fastest and most cost-effective way. Our goal must be energy transition rather than energy disruption.
How important are interim targets in the achievement of this goal?
Imaz: Repsol has set a path to net zero based on ambitious short- and long-term targets, while at the same time ensuring the continued supply of accessible, competitive and sustainable energy that supports social and economic development. Setting interim targets is necessary and important to map our performance and stay on track to reach this goal. Since we announced our first net-zero plan in 2019, we have already upgraded our targets twice to accelerate our progress, which underscores our ambition and demonstrates the solid progress the company is making towards becoming carbon neutral by 2050.
Are you still optimistic that the goal can be achieved, especially in light of the increasing global focus on energy security over the past two years?
Imaz: In the current geopolitical context, the need to incentivise all technological solutions is especially clear to continue driving the energy transition in a fair and just manner. We need to be ambitious about lowering our carbon footprint, but we must also prioritise security of supply for our citizens and industry. These objectives are not contradictory. Repsol is fully committed to achieving carbon neutrality by 2050 and to delivering a just energy transition that guarantees security of supply and affordability built on technology and industrial development in a low-carbon future.
Some oil and gas firms are moving to decarbonise their portfolios faster than others. Is it an advantage or a disadvantage to be a first mover?
Imaz: Repsol was the first company in our sector to set a target for net-zero emissions by 2050, which we announced in 2019. We are decarbonising Repsol first of all because we have a moral commitment and we want to reduce the CO₂ footprint of our activities. But we are also decarbonising because we want to make money. We want to have a competitive Repsol in 2030, 2040 and 2050 in a world that is going to be ever more decarbonised.
What is the firm’s strategy for hydrogen?
Imaz: Renewable hydrogen is one of the key pillars of our transformation strategy to become a net-zero emissions company. As the leading consumer of hydrogen in Spain, we are making significant investments in the hydrogen value chain to promote the growth of this industry. This includes promoting hydrogen hubs through collaborations such as the Shyne project, installing electrolysers for hydrogen production and developing transportation capacity to supply our industrial complexes and support mobility. With these investments, we aim to have 550MW of installed hydrogen capacity by 2025 and 1.9GW by 2030.
What is your position on windfall taxes on the oil and gas sector?
Imaz: We fully respect our commitment to society and are aware of the difficulties caused by the energy crisis. At the same time, the need to guarantee security and affordability of supply is more evident than ever. The European proposal for a solidarity contribution would create conditions of inequality and place a discriminatory burden on companies in the refining sector, jeopardising their ability to supply the market and compete internationally. With this proposal and others, we must also consider the potential impacts on investments that are needed to decarbonise the economy and continue progressing the energy transition. We must incentivise energy investments and ensure the competitiveness of energy companies that are playing a key role in providing secure and affordable energy, not punish them.
Are the policy regimes Repsol is contending with in Europe well designed? If not, how could they be improved?
Imaz: I cannot stress enough the importance that regulation will play in delivering a just energy transition. The EU has built up a complex system of rules and regulations that does not facilitate rapid progress in the energy transition. In many cases, regulations overlap and are often accompanied by restrictions and even prohibitions of technologies and solutions that could help us reduce emissions faster. We need policies that create clear incentives for investment by promoting all decarbonisation solutions on a level playing field. What we are seeing in the US with the Inflation Reduction Act is better. The American framework is predictable, it is simple, it is clear and it supports all technologies. We have to improve this view in Europe and rethink our approach on the basis of technological neutrality.
What role will oil and gas play in a low-carbon future, if any, and how is Repsol adapting its upstream business for this reality?
Imaz: In a world that is going to be carbon neutral, we are still going to need oil and natural gas to meet the growing global demand for energy that is secure, affordable and sustainable. Targeted investment in upstream will be crucial to tackle this energy trilemma, to drive leadership in decarbonisation and to retain the technical talent needed for the energy transition. In Repsol this year, 47pc of our capex is going to our upstream business, where we are decarbonising our operations with a target to reduce the carbon intensity by 75pc in 2025 compared with 2016 levels. We are adapting how we find and produce oil and natural gas, optimising our portfolio to develop the best projects and evaluating solutions such as CCS and geothermal that will be necessary to fulfil the commitments of the Paris Agreement. The recent addition of US-based institutional investor EIG as a partner with 2pc of our upstream unit—a deal that valued this vertical in Repsol at $19bn—reflects the proven ability of our strategy to transform our business and deliver results in the energy transition.
Does addressing the energy transition require a greater degree of collaboration with other companies than the traditional business of oil and gas production? If so, how are those collaborations being fostered?
Imaz: Collaboration is in our DNA at Repsol, and this has always been important for our industry to meet the energy needs of society through the services and products we provide. The benefits of collaboration are even more visible today for a just energy transition, which requires public and private partnerships to generate disruptive innovations and solutions to decarbonise our global economy. We are already making significant contributions through open innovation and cross-cutting collaboration that facilitates the transfer of knowledge, accelerates the detection and deployment of new technologies, and supports the entrepreneurship and innovation ecosystem. We engage in strategic alliances and collaboration with the aim of combining resources, efforts and capabilities to solve the energy challenges facing our industry and society.
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