SLB – known as Schlumberger until three and a half months ago – is aiming for billion-dollar business opportunities only under its New Energy unit.
“We look for two things: impact and scale,” Gavin Rennick, president of SLB New Energy told BloombergNEF in an interview. “If the scale is not there, it is not really an energy transition business.
”The unit is expected to bring in around $3 billion by the end of this decade and at least $10 billion by the end of the next decade by focusing on five areas:
•Carbon solutions
•Hydrogen
•Geothermal and geoenergy
•Energy storage
•Critical minerals
Carbon capture, utilization and sequestration (CCUS) is the fastest growing opportunity with the boost that it got from the US Inflation Reduction Act.
“We were involved in about 20 carbon capture and sequestration projects last year. Between November and now, that number has risen to just under 30. That is because the tipping point has been crossed for certain use cases,” said Rennick.
This year will likely see a couple of carbon capture projects move forward with a final investment decision. Activity in the geothermal space is picking up too, including in geothermal heat.
The New Energy unit was set up in 2020, while the renaming of the company was done last year. “We put a decarbonization curve into our logo very specifically to indicate the direction and the magnitude of what we want to do,” Rennick said.
SLB has committed to reach net-zero emissions by 2050. Its plan includes a phased reduction in Scope 1, 2 and 3 emissions, and envisages minimal reliance on offsets.
The following Q&A has been lightly edited for length and clarity.
Q: SLB’s New Energy business unit was started in 2020. What has been the high point of the journey to 2023?
A: The future of our company is built around three pillars –our core business, digital business and the new energy business, which probably has the longest runway.
We started by making a series of investments well before 2020 in promising technology companies. That evolved to a point, late last year, where we rebranded our entire company, changed the name to SLB and we put a decarbonization curve into our logo very specifically to indicate the direction and the magnitude of what it is that we want to do. SLB New Energy to Target Billion-Dollar Opportunities Only February 6, 2023“We have identified the niches where we can shift the economics and have a significant impact.”
We have asked ourselves how we can solve a technical problem in a way that has a major impact and allows us to grow a material global business. Along the way, we created new companies such as Genvia, which is a joint venture that we are participating in to create solid oxide electrolyzers with CEA of France [the Alternative Energies and Atomic Energy Commission]. It recently secured €200 million ($215 million) from the European Union to accelerate commercialization of its industrial decarbonization technology. Celsius Energy, a company which can take 80% of the emissions out of heating and cooling of a building, was created as an internal startup. We have recently been awarded a greenfield geoenergy project in France –one of the top 10 in Europe –for new residential developments. We are mobilizing now for the first sustainable lithium production operation from brine that’s going to be executed in Nevada in the US.
Q: The new energy focus areas you have identified –lithium, geoenergy, geothermal, low-carbon hydrogen, carbon capture and sequestration, and stationary energy storage –seem to be the preferred sectors for many other players too. Where do you think your winning edge is?
A: We have a number of things that we can leverage. We are fundamentally a technology developer, so we can bring to market a new technology and deliver it in over 120 countries in the world.
We are good at understanding what is in the subsurface and how to get it out in a really sustainable way. We have the engineering pedigree and over 70 technology centers distributed around the world. We have identified the niches where we can shift the economics and have a significant impact. We see that in the hydrogen space. In lithium, we believe we can deliver something that is so much more sustainable and also allows marginal resources that today are not economical.
Q: How did you zero in on your focus areas?
A: We had a few screening criteria. We looked for areas where we can have hundreds of megatons of [carbon] impact. If the scale is not there, it is notreally an energy transition business. We looked at the addressable market and we set a minimum market size of $10 billion. Then we asked if we could feasibly grow a billion-dollar business out of the individual opportunity.
We expect the new energy division to be at around $3 billion by the end of this decade and at least $10 billion by the end of the next decade. We believe it will be the largest division of the company at some point.
Q: The next logical question then is, what is the level of business now for this unit? Is it starting from an almost zero base?
A: We are not starting from a zero base. We’ve got significant activity in CCUS, for example. There are some ventures, as you know, that are still in engineering, where we don’t expect to have a product in the market for a few years.
The fastest growing business in the short to medium term is likely to be carbon capture and sequestration. We already have commercial technologies available that we are deploying. In the long term, potentially the two that will have the biggest impact are hydrogen and critical minerals.
Q: How big is the New Energy unit?
A: I have not been public on our headcount. We leverage the strength of the rest of the company. We leverage our geographic footprint –I have seniormanagers representing new energy in all the geographies that are relevant. We are running multiple startup companies at the same time but with the horsepower of an enormous organization behind us. That gives us a great chance of success.
Q: Do the recent policy changes in US –specifically the Inflation Reduction Act (IRA) –boost activity in your New Energy unit?
A: Absolutely. We were involved in about 20 carbon capture and sequestration projects last year. Between November and now, that number has risen to just under 30. That is because the tipping point has been crossed for certain use cases –high concentration emissions cases –like natural gas processing and ammonia, where the carbon is already being captured or can be captured economically. I don’t think for power generation, the $85 per ton one can potentially get for a sequestration project works. And it doesn’t work for cement and steel, and some of those hard-to-abate sectors at this price point as well. So, we need more technology to bring the costs down and we probably need $100-120 as a price point to make it economic.
I think the IRA is great, but it’s the first step. It is structured around getting projects off the ground in the early 2030s. Longevity of policy all the way to 2050 will give investors a better sense of security and allow a lot more projects to move forward. Disruptive new technologies that shift economics need to be supported from inception at a much higher level than they are today to be able to move at the speed we need to for net zero.
Q: So, you are saying there is need for a lot more support than the IRA and associated legislation is delivering?
A: Making sure that everyone understands what is necessary to deliver net zero is also important. In Bloomberg’s compilation of carbon capture projects, you have 300 megatons of emissions identified that can go into the ground but somewhere between 5 and 8 gigatons of emissions need to come out just from carbon capture. I don’t think that getting excited about what we have in front of us should take us away from the size of the challenge that we need to tackle.
Q: How would you compare the policy support for your sectors in Europe and US?
A: There is a healthy competition between the regions, and that is going to drive the whole world forward. The program for Important Projects of Common European Interest –Genvia was awarded €200 million under this –supports grassroots startups of industry. It enables partnerships that are quite different: there is SLB, CEA, a cement company, a construction company and a local region that are working together. The US has boosted opportunities for local manufacturing.
Q: Could your core areas see new additions at some point?
A: You need to have focus but you need to always be looking around. Our Ventures organization reports into me, and they are constantly scanning the space. We look for two things: impact and scale.
Q: In the new energy business, who do you identify as your competitors?
A: I think our traditional competitors have different areas of focus. We are working with a whole slew of new companies and new sectors. We are in collaboration with Linde, a huge industrial gas company. In lithium manufacturing, we are partnering with Panasonicthat is running and operating several gigafactories around the world. In steel, we are doing projects with ArcelorMittal, and in cement, we are engaged in pilot projects with Vicat and Cemex, where we are looking at changing the economics of decarbonization opportunities. We are working with Aramco around a carbon platform to be able to both track and model and make decisions on the best way to reduce emissions in various industries of the company. I don’t think that the competitive space is anywhere near being clearly set and I don’t think it will be clearly set for probably another decade.
Q: SLB recently announced its results, and there was a capital investment announcement of $2.5-2.6 billion. What part of this pertains to the new energy business?
A: That’s not the right metric to look at us as a technology company. The right metric is investment in technology. We have said half of our research spend this year is going to be directed to new energy investments and technology, and within the next decade, a third of our entire R&D would be directed towards new energy. The R&D budget last year was just over $600 million.
Q: What are the headlines likely from your unit this year?
A: I think it will be important to see a couple of carbon capture projects move forward with a final investment decision. We want to deliver a sustainable lithium processing solution for brine. In geothermal, we are now publicly supporting Oman on their geothermal strategy. We’ve been in the geothermal business now for several decades. We have touched –at some point –80% of the operating geothermal projects in the world. The geothermal business is shifting gears and really starting to accelerate. There is the opportunity for geothermal heat which is a whole different aspect of geothermal that is taking off in certain parts of the world. In hydrogen, I think that some of the tipping point milestones –technical proof points –will come through this year.