Carbon Neutrality in Mining and Oil & Gas

Part
01
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Part
01

Carbon Neutrality in Mining

The major steps being used to achieve carbon neutrality in the mining industry include using new energy sources, carbon optimization, adapting digital technologies, measuring OEE, and implementing efficiency measures and increasing the mining of copper for renewable energy.

New Energy Sources

  • Only 2.5% of the mining sector's electricity currently comes from renewable energy.
  • Debeer's has announced its goal of carbon neutrality in five years. They expect to leverage different technology choices for renewable electricity generation, which are proliferating, or through clean alternative fuels such as hydrogen.
  • Renewable technologies — mostly solar, but also wind and water where topography permits — are being used as a replacement for fossil fuels such as diesel.
  • New power sources would affect the facilities management staff who would have to manage the latest technology, but it should be transparent to the rest of the employees. [Analysis]

Carbon Optimization — Kimberlite

  • De Beers Group has recently been awarded a C$675,000 grant from the Canadian government's Clean Growth Program for pioneering research on delivering carbon-neutral diamond mining.
  • Laboratory experiments have proven the science of storing "large volumes of carbon in processed kimberlite through mineral carbonation."
  • Debeer is supporting wider mining applications and has stated that "there is great potential to achieve carbon-neutral mining operations at sites where this type of rock is present. This award will help accelerate this innovative work that could fundamentally change the carbon footprint of not only the diamond industry but the mining sector more broadly."
  • The process involves the injection of carbon dioxide in kimberlite rock that has been processed so that it sequesters the carbon dioxide as a stable carbonate mineral.
  • Until a cost-effective process is defined, it is impossible to be sure of the impact on employees. However, logic says it could be a whole new group of employees being trained to work with the kimberlite carbon neutralization process.

Digital technologies

Implementing Efficiency Measures

  • The term "Overall Equipment Effectiveness (OEE)" originates with the manufacturing industry. As a metric for efficiency, it transfers easily to the mining industry. Measuring OEE is increasingly becoming the best practice in underground mining. It is used to identify losses, benchmark progress, and eliminate waste, including CO2, from the process.
  • Newtrax has created a graphic, shown here, to demonstrate the steps and savings potential.
  • In a recent case study, the company installed tracking devices on four trucks to measure efficiency.
  • After collecting data for eight weeks, the following metrics were uncovered: availability time was 93%, utilization time was 52%, and Haulage efficiency was 64%.
  • These metrics translated to an OEE of 31%.
  • As a result, the company increased dumper bed wall height to accommodate extra buckets, added digital scoreboards on the trucks' cab for LHD, and installed an alarm system on each truck to provide a warning in the case of overloading.
  • None of these required significant changes in the employee process.

Copper

  • Copper is required for electric vehicles and for renewable power generation.
  • The mining company Tek recently completed a long-term purchase agreement with its new copper mining project in Chile.
  • The goal is to have half of its operating power needs being met with renewable energy.
  • Kennecott Utah, Chilean copper mining company Antofagasta, and Aggreko's Bisha mine in Eritrea owned by Chinese mining group Zijin are all moving to copper usage.
  • The use of renewable power should have minimal effect on mining employees. [analysis]
Part
02
of three
Part
02

Carbon Neutrality in Oil & Gas

Oil and Gas companies can achieve carbon neutrality by switching to renewable energy, improving energy efficiency, reducing emissions, creating green hydrogen, capturing carbon and changing organizational priorities.

Context

  • Oil and gas companies are under pressure from banks and investors looking to align their investments with the Paris Agreement. These investors are demanding information on how the companies are preparing for carbon neutrality. At the same time, plunging costs and rising demand for renewables are altering the global energy market.

Renewable Energy

  • The Spanish company Repsol has pledged to increase spending on renewables. It expects to could reach at least 70% of its goal using technology that is already developed or nearly mature.
  • As an example of renewable energy technologies, Tech Mahindra has installed solar panels with a total capacity of over 3400 kWp. In 2018, these solar panels over 4430 MWh of energy, leading to a reduction of more than 3,700 metric tonnes of CO2 equivalent. The company used all the power generated through solar and purchased over 18,500 MWh through power purchase agreements.
  • Another option currently being implemented is to replace "gas turbines that power offshore platforms with renewable electricity from the land."
  • The effect on most employees will be negligible. Facilities managers and staff may have to learn how to deal with new power sources. [analysis]

Improving Energy Efficiency

  • The design and build of the facilities used in the oil and gas sector can contribute to reducing energy consumption. Both the architectural design of facilities and the equipment and processes in each facility provide opportunities to improve energy efficiency on site.
  • Some ways the oil and gas industry can improve energy efficiency include regular energy audits, upgraded equipment to more efficient options and long term action plans to manage energy better
  • For example, to reduce electricity waste, Tech purchased “energy-efficient laptops and servers, natural cooling systems for data centers, better air conditioning equipment, and installed motion sensors and low carbon lighting in all major campuses and new buildings.”
  • The Mahindra Sanyo company has reengineered energy-efficient processes like revamping furnaces; implementing more efficient electric-arc and oxyfuel technologies in furnaces; reducing cycle times for ladle furnaces; installing a 6 MW waste heat recovery boiler and new burners for preheating ladles; improving pumps, and switching from oil to natural gas in all furnaces. The company has also installed low carbon lighting and motion sensors.
  • Other efficient sustainability policies include better water and waste management and greener value chains.
  • Like any other process changes, the effect on the employees is driving by the depth and breadth of the change. New lighting will have little effect, but revamping furnaces could be significant in the day to day operations of the employee. [analysis]

Reducing emissions

  • The flaring of associated gas from the process of oil production is responsible for high levels of greenhouse gas emissions. The industry must find alternative options for associated gas and eliminate flaring. Examples include “selling associated gas to local industries or processing associated gas into liquefied natural gas.”
  • Under the International Energy Association (IEA) scenarios, the emissions' intensity of all energy products needs to fall 66 percent under 2DS and 88 percent under B2DS.
  • A Science-Based Target initiative is a partnership between CDP, WRI, WWF, and the UN Global Compact. Businesses develop science-based targets with relevant metrics.
  • Tech Mahindra also reduced its value chain (Scope 3) emissions. Their major source of Scope 3 emissions was employee business travel. To reduce these emissions, the company invested in remote communication's infrastructure, such as teleconferencing, and provided shared transport facilities. These changes have resulted in a 32% reduction in emissions from business travel.
  • Overall in 2018-2019, Tech Mahindra achieved total emissions reductions of more than 19,500 metric tonnes of CO2 equivalent.
  • Like employee efficiencies, the impact on employees of reducing emissions is dependent on the depth and breadth of the changes. In the example above, reducing travel and installing videoconferencing would have a significant impact on employee productivity and family life. [analysis]

Green Hydrogen

  • Most refineries use hydrogen to separate toxins like sulfur in the production of gasoline and diesel. The hydrogen is produced by heating natural gas, which is a carbon-intensive process. With green hydrogen, the water is heated through electrolysis to produce the hydrogen.
  • Employing green hydrogen at a refinery will reduce the carbon emissions created when transforming crude oil into products like gasoline and diesel.
  • When renewables are used to fuel the production of hydrogen, it significantly lowers refinery emissions.
  • Even more attractive to the oil company, the adoption of green hydrogen will allow oil companies to begin marketing hydrogen in other sectors of the economy.
  • "The oil industry is a hydrocarbon business. The carbon is the problem, and hydrogen is the solution. They need to figure out how to maximize the solution."
  • To implement this technology will require scientists, and technologists with new skills. [analysis]

Carbon Capture

  • Carbon sequestration technology traps the gas in caverns or porous spaces underground. A significant number of oil and gas CEOs believe the technology will be critical in meeting the goals set in the 2016 Paris agreement.
  • IEA recently concluded that to achieve "the goals of the Paris Agreement, CCS will need to contribute 32% of the extra effort to move from a 2°C scenario to well below 2°C."
  • Initially, the industry must develop "enabling transport and storage infrastructure of sufficient capacity" to provide investor confidence.
  • The first step of the process, capture, usually occurs at "large fossil-fuel power plants or within industries that produce a lot of CO2 (fertilizer factories or steel plants, for example)." Capture technology separates CO2 from other gases.
  • Capture can be accomplished in one of three ways: "via pre-combustion capture (in which the fossil fuel is converted into an easily separable mixture of hydrogen and CO2), post-combustion capture (in which the CO2 is removed from the flue gases after the fuel has been burned), or oxyfuel combustion (in which the fuel is burned in oxygen instead of air)."
  • Once the gas is captured, it is transported to its final storage site. It is then pumped into porous geological formations, hundreds or thousands of yards beneath the surface of the Earth.
  • It is cheaper to capture geological CO2 from oil and gas production than from power plants.
  • An oil and gas company implementing carbon capture and sequestration will likely require a full team to manage this from implementation to transportation to IT solutions and managers and finance staff familiar with the capturing and analyzing the metrics. [analysis]

Organizational Priorities

  • Some companies are reorganizing their priorities to achieve carbon neutrality. BP will lobby for policies that would hasten action on the climate crisis, and will cut its spending "on corporate reputational sponsorship and redirect the funds towards promoting climate action."
  • The shakeup will also include a new organizational structure with "four new business areas: production and operations, customers and products, gas and low-carbon energy, and innovation and engineering."
  • Repsol recently announced it will tie 40% of their executive compensation to emission reductions.
  • Both of the examples above could have a significant impact on the employees and the organization. New business areas mean new responsibilities and perhaps the elimination of existing positions, and tying executive compensation to emissions can add significant pressure. [analysis]
Part
03
of three
Part
03

Challenges Post-M&A


Challenges faced by companies that have gone through a recent M&A include an unexpectedly negative financial position, difficulties with integration in culture, processes, and systems, and the lack of a well-defined common strategy going forward.

Financial Position

  • The significant fluctuation in prices, as seen in the third quarter of 2018 when prices dropped from $85 to $50 a barrel, has made projecting revenue and agreeing on an equitable value of assets during a merger a challenge.
  • A challenge in an oil and gas merger shows itself when prices plummet. When that happens, revenue targets are not met, the value of assets plunge, and the stock price drops, resulting in unhappy shareholders.
  • When Deloitte did a study of M&A challenges, about one-third of respondents reported that expected sales failed to materialize.

Integration

  • Often projected expenses used to drive approval for a merger don't pan out. Companies are considered difficult to manage when merging differing structures, operational and IT systems, and cultures. The expected job cuts either do not materialize or cause chaos. Personnel-related issues will arise as employees jostle for power in the new hierarchy.
  • Harvard Business Review reports that 70-90% of all mergers fail. It is well documented how challenging any large scale transformation and integration project is. When doing that with "two companies, two cultures, and two sets of technical infrastructure, that challenge more than doubles."
  • Some successful risk mitigation strategies have worked. One recent merger stayed on top of cultural integration in key customer-facing areas by implementing a web-based employee "chatter board." This tactic gave them insight into the success or failure of their initiatives and allowed them to capture employee feedback in real-time. This gave the team critical insights on "whether to accelerate integration or take their foot off the gas across a broad set of geographies."
  • In another example, leaders identified areas where cultural differences had the most impact and traveled there in the first week of the new company. The goal was to put a face to the new company and help focus employees on the future.
  • Beyond helping to inform the integration plans, cultural insights and tracking help the M&A team know where to monitor and when to intervene after the close.
  • A Deloitte study of integration challenges found that 32% of respondents reported gaps in integration execution during acquisition.

Lack of Well Defined Strategy

  • The oil and gas industry is in the midst of a significant sea change. Investor pressure to decrease carbon emissions can leave companies and employees expecting very different strategies in fulfilling corporate social responsibility goals.
  • Many conventional oil and gas companies have started to diversify their portfolios and their activities by investing in renewable.
  • If the acquiring party in the M&A is well down the road in that strategy and the other has not yet begun, it can be a heavy lift to get all managers on the same team. An anticipated strategic plan may find date slippage when this happens.
  • Companies with offshore production experience have the engineering experience and a competitive advantage when moving to offshore renewables. These skills could be perceived positively or negatively depending upon the new company's strategy.
  • Deloitte's M&A study reported that 24% of corporate responders said the company lacked a well-defined strategy. Even more significant, 23% claimed the company did not do their due diligence.


Sources
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