Oil giant Chevron to invest $10 billion into new energy

Jeff Gustavson, Chevron New Energies President, sits down with Yahoo Finance Live to discuss the oil giant's plans to invest $10 billion into lower carbon solutions, such as renewable fuel, carbon capture technology and geothermal energy.

Video transcript

BRAD SMITH: When it comes to energy, oil and natural gas are king. Chevron is the world's second largest oil supplier. And 2022 was a record year for the company. Full-year earnings topping $35 billion. More than double year the earlier-- the year earlier rather.

Buoyed by some higher fuel prices here, the oil major now setting its sights on greener pastures literally. The Chevron new energies unit that launched in 2021, and it's focused on lowering carbon intensity, and investing in longer term cleaner energy solutions.

The company plans to allocate more than $10 billion over the next five years towards lower carbon emissions solutions. Jeff Gustavson is the president of Chevron New Energies. He joins us in studio, now, all the way up from the Lone Star State in Houston there. Thanks so much for joining us here in site.

JEFF GUSTAVSON: Great to be here. Thanks for having me.

BRAD SMITH: Let's dive into this. And where you've been able to prioritize this part of the business among some of the executives over at Chevron.

JEFF GUSTAVSON: So we made the decision a couple of years ago to invest more aggressively in these new sectors. Our mission statement as an organization, Chevron New Energies, is to accelerate lower carbon solutions, both for our traditional businesses in Chevron, but also for third-party customers and consumers.

We're focused on several areas in this space. Renewable fuels-- so these are bio-based fuels and products, carbon capture utilization and storage, growing a low carbon or no carbon hydrogen business. We see a lot of applications for hydrogen in the decades to follow. Growing our carbon offsets business. And also, growing a set of emerging technologies, including things like geothermal.

These are all sectors that are focused on hard to abate emissions. So parts of the economy that are difficult or impossible to electrify. That's where these technologies and solutions will bear fruit. They also fit a lot of the skill sets we have in our company today and our traditional business. I could go through the long list of those capabilities. I'll spare you that. But we fit these businesses.

So we think we can scale these businesses for ourselves, for our third-party customers, and also generate attractive returns at the same time. I'm very excited about this.

JULIE HYMAN: Chevron is about a $230 billion company in terms of revenue. All of that revenue now is from oil and gas. So when is this going to actually bear fruit, the businesses that you're talking about?

JEFF GUSTAVSON: So we are a predominantly an oil and gas company, a large producing company. Oil and gas represent more than half of the energy that the world consumes today. We see oil demand growing for decades to come in the future. So we'll continue to grow that part of the business to provide reliable and affordable energy for the world to enable human progress.

We're also focused on making that energy ever cleaner. Lowering the carbon intensity associated with our oil and gas operations. But that is the most material part of the business. It's the bulk of our revenues today. These new businesses will take time. We're investing $10 billion over an eight-year period to start to grow these businesses.

We've made significant progress in renewable fuels. We acquired company renewable energy group early last year. We're investing in some very large carbon capture utilization storage projects around the world. I mentioned hydrogen and some of the other emerging technologies. We see huge revenue potential in these businesses in the decades to come.

JULIE HYMAN: Are you selling anything yet?

JEFF GUSTAVSON: We're selling renewable fuels and products. We're selling renewable natural gas. These are products that are based on biomass using lower carbon intensity feedstocks to produce the products that we all use today for mobility and for other uses. So we are generating revenue in that part of the business. And we see line of sight to generating much more revenue in some of these new businesses. But it will take time. These are nascent technologies.

BRAD SMITH: You're here in New York City, right now in a time period where we're seeing some of the worst air quality index that we've seen in our lifetimes. And for a lot of people, they think about what climate change, what that could actually feel like in the future. And they're trying to pair that with what they're experiencing right now over this past week. Wildfires or other inclement disasters that may also be a reality. What is the reality if we don't invest quickly enough or hit some of our targets that you've set forth at Chevron and other players in the industry around clean energy?

JEFF GUSTAVSON: So this is a concern for us. And it's a great example here, just in the last couple of days. And the New York area was very interesting to fly in yesterday. And land in that in that kind of environment.

JULIE HYMAN: And lucky that their plane got in.

JEFF GUSTAVSON: That's right. So that is our lower carbon strategy. There's two big pieces to this. It is to lower the carbon intensity with the traditional oil and gas products we produce today. These are critical for the world today, going back to these are reliable, affordable products that the world consumes today. But also, growing these new lower carbon businesses and solutions. We need to do both of those.

Three key elements to the energy system-- your energy needs to be reliable to support energy security. It needs to be affordable to support economic prosperity. And it needs to be ever cleaner. We're focused on all of those aspects in both our traditional business and now, these new businesses.

JULIE HYMAN: What do you say to critics of the industry who say it's been far, far too slow to make some of these changes? And to your point, not just about producing these new kinds of fuels, where I understand it's nascent. The technology is still being developed, but also, if you are going to produce the fossil fuels doing it in a cleaner manner, where possible.

JEFF GUSTAVSON: So we've been working on lowering our carbon intensity for decades. These are not new. What's new is a couple of years ago, standing up new dedicated, low carbon businesses and solutions. And I mentioned the areas that we're focused on. We are now trying to accelerate that. But remember, early days, there are very significant risks associated with these businesses. We're investing, I think, appropriately for our company today.

I hope to see that accelerate in the years to come. And, again, both lowering the carbon intensity of the traditional oil and gas business, but also growing these new products and solutions. Partnership with governments, with other companies will be critical in order to scale these businesses even faster.

BRAD SMITH: You have a lot of investors as well that you have to communicate this strategy to, why it matters. And for some investors, they look at some of the cleaner energy moves that companies are making. And saying, that's just politically-driven or that is driven by a factor that does not have to do with the return on investment that I'm looking to get. How do you message to those investors?

JEFF GUSTAVSON: So our two key objectives as a company are, to deliver higher returns and lower carbon. It's not just lower carbon. It's not just higher returns. It's both. And we think we can do both.

So we'll continue to invest in our traditional business while lowering the carbon intensity. We see a lot of promise in these new businesses. It will take time for these sectors to grow and generate real profitability. But we can see a pathway to doing that. So when we talk to investors, you need to meet both of those objectives, higher returns and lower carbon. We feel like we can do that.