View from the top: Alex Grant, UK Country Manager for Equinor

Equinor’s stated ambition is to continue supplying society with energy, with lower emissions over time, and to reach net zero by 2050. How is this ambition becoming a reality?

Recognising the global shift towards cleaner energy sources and the need to combat climate change, Equinor has integrated sustainability into its business strategy. We’ve set ambitious targets to reduce our carbon emissions and intensify our push into renewable energy.

Our activities in the UK show this ambition becoming reality. Our planned Rosebank development west of Shetland will have some of the lowest production emissions of any oil and gas field worldwide. We have three major UK windfarms, including Dogger Bank, the world’s largest floating offshore wind farm, and we are investing in a sustainable future by developing carbon capture and storage (CCS), hydrogen and battery storage. For every £1 we plan to invest in the UK in oil and gas, we aim to spend more than £3 in renewables, CCS and hydrogen. 

Equinor plans to allocate more than 50% of the Group’s annual gross CAPEX to renewables and low-carbon solutions by 2030. Given the worsening delays in global green projects getting the go-ahead, is this ambition still achievable?

In short, yes – we believe our ambition is still achievable and we are on track to achieve it. In 2022, we allocated 14% of our gross CAPEX to renewables and low-carbon solutions. Our plan is to increase that to 30% by 2025 and 50% by 2030. On the renewables side alone, we have Dogger Bank coming online in the UK, followed by Empire Wind and Beacon Wind in the US. We’ve made bolt-on acquisitions such as BeGreen in Denmark and Wento in Poland, and most recently Rio Energy in Brazil. All of those will contribute to higher renewables CAPEX, along with accelerated activity in Poland, South Korea and elsewhere.

In 2022, we allocated 14% of our gross CAPEX to renewables and low-carbon solutions. Our plan is to increase that to 30% by 2025 and 50% by 2030

Less than 5% of the world's hydrogen and carbon capture projects have reached financial investment decision – how bullish are you about these technologies becoming a reality in the near future?

Equinor has been developing and using CCS technology for more than 25 years. We’re now pursuing new business models to make CCS commercially viable in the decarbonised energy systems of the future. For example, alongside Shell and TotalEnergies, we’re developing the Northern Lights CCS project on the Norwegian Continental Shelf (NCS), which will involve transporting CO2 from onshore industries to a receiving terminal by ship, and to permanent offshore subsea storage by pipeline.

Leveraging our R&D and innovation capabilities will be key in developing new energy solutions at an acceptable cost. We’re focusing on options to maintain oil and gas competitiveness in a low-carbon future, including in carbon capture, utilisation and storage, decarbonisation of natural gas through hydrogen value chains, and low-carbon fuel transportation solutions. We’re also exploring synergies between renewables and oil and gas value chains.

Equinor is participating in several significant hydrogen projects, including ambitious plans in the UK. With developments in hydrogen technology, the potential for business and emissions reductions is promising. Continuing our decades of energy innovation, we’re participating in several projects to show how hydrogen can provide scalable and profitable growth opportunities in the future.

With the recent acquisition of equity in the US Bayou Bend CCS Project, does Equinor see the US market moving faster than other competing markets?

Bayou Bend is Equinor’s first announced low-carbon solutions project on the Gulf Coast and is positioned to be one of the largest CCS solutions in the US for industrial emitters, with gross potential storage resources of more than a billion metric tonnes.

Entering Bayou Bend strengthens our low-carbon solutions portfolio and supports our ambition to mature and develop 15 to 30 million tonnes of equity CO2 transport and storage capacity per year by 2035. Our experience from developing carbon storage projects can help to advance decarbonisation efforts in one of the US’s largest industrial corridors.

The US’s Inflation Reduction Act will encourage investment in the next generation of clean energy technology, creating industrial demand that will speed up much-needed innovation and lower costs to make US projects more globally competitive.

We’re focusing on options to maintain oil and gas competitiveness in a low-carbon future

Equinor is showing great intent in delivering offshore wind capacity around the globe. What needs to be done to scale up supply chain capabilities to deliver the projects in a cost-effective way, and can the industry really deliver subsidy-free offshore wind farms?

To scale up the offshore wind supply chain’s capabilities while protecting the focus on cost, particularly for mature markets such as the UK, we need to rethink how we enable and stimulate the supply chain. To date, the Contracts for Difference regime in the UK has been a tremendous success in contributing to offshore wind’s cost decline to price levels that are cheaper than most other sources of electricity generation. We’re building Dogger Bank under this regime.

However, the industry has reached a level where suppliers are struggling to deliver projects, particularly in the context of a globally constrained supply chain in raw materials, components and vessel availability. To achieve the offshore wind ambitions of the UK (50GW by 2030) and Europe (300GW by 2040), supply chain capability will need to increase. To deliver the capability, the industry will need to deliver on its targets while protecting the viability of projects – there can’t just be a race to the bottom on cost as the criterion for winning leases.

Equinor’s exploration strategy is to drill between 20 and 30 exploration wells each year, moving forward. Which countries are you most excited about for future production, and why?

Equinor has already built a strong position in some of the world’s most prolific oil and gas provinces, including the NCS, the US Gulf of Mexico and Brazil, which are our core areas for exploration. On the NCS we prioritise near-field exploration in addition to selected high-graded step-outs that could have material or play-opening potential. Our ambition is to create superior value every year, primarily in high-graded prolific basins, by identifying and accessing subsurface sweet spots and safely drilling a high-quality portfolio of cost-efficient wells. 

Why would you say renewables are still valued so highly by the finance markets?

Valuation is not just a matter of looking at the cashflows forecast to be generated by an asset. It also has to factor in the discount rate, or the risk applied to those cashflows. The discount rate depends on a number of elements, including the interest rate (which disproportionately affects lower-risk assets) and the longevity of those cashflows as part of a business’s sustainability. Clearly, renewables and low-carbon fuels have a longer lifespan than oil and gas assets. Rising interest rates have meant that valuations of renewables companies have come down recently. Whether they have come down enough to reflect the different impact of rising interest rates on renewables versus oil and gas – that’s open to question.

Would you describe the current oil and gas market as booming, and if so, what are your views on the likelihood of a bust?

The oil and gas market is cyclical by nature. For the rest of the year China will be key to crude oil demand while OPEC and Russia try to control the supply side. There are constraints to refinery capacity, and in most regions oil stocks are low as the market has been in backwardation. But China is sitting on record crude stockpiles, which provides flexibility.

The European gas market has stayed loose, despite supply concerns prompted by a potential strike of Australian liquefied natural gas workers. Demand has been fairly weak and the EU has already hit its storage filling target. Asian gas inventories are quite high, while in the US, strong production is keeping the market well supplied and inventory growth signals market looseness there as well. We expect some tightening in gas markets towards the winter as seasonal demand kicks in.

About

Alex Grant

Alex Grant is Senior Vice President for Crude, Products and Liquids Trading and UK Country Manager at Equinor. He joined the company in 2017 as Senior Vice President for Global Business Development, overseeing mergers, acquisitions and divestments across the oil, gas and renewables portfolios. He moved to Equinor from investment banking at Jefferies, where he worked on mergers and acquisitions and financing transactions in the energy sector for 20 years. He holds a master’s degree in engineering from Oxford University.

There are several challenges facing the global economy, but I don’t expect a global recession in the near term

Are you expecting a global recession and, if so, how likely is it that this will significantly hamper Equinor’s performance?

There are several challenges facing the global economy, but I don’t expect a global recession in the near term. While momentum may be slowing, inflation is on a declining path in most economies. Tight labour markets and low unemployment are supporting consumer spending and dampening some effects of higher household costs. Global growth increased from 2.4% year-on-year in Q1 2023 to 2.8% in Q2 2023, and we expect it to be moderate in the near term. Downside risks include the potential for the Chinese economy to underperform, failure to bring down inflation, the resurgence of financial market stress, increased debt distress given high borrowing costs, worsening geopolitical tensions and further geoeconomic fragmentation.

What do you hope COP28 will deliver in a meaningful way?

We hope COP28 will be an opportunity to accelerate the industry’s contribution in addressing the climate challenge: both as a platform for collective ambition-setting for carbon-intensive sectors such as oil and gas, and as a forum for public-private engagement on policy frameworks and tangible projects to accelerate decarbonisation and energy system transition.

Alex Grant, UK Country Manager for Equinor

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