The Vikings Attack Climate Change: Statoil’s Quest to Reduce Emissions.

Can oil and gas companies adapt their ways of working to the pressure resulting from climate change? Norway’s Statoil thinks the answer is yes!

In 1990 the Intergovernmental Panel on Climate Change (IPCC) issued its first assessment which claimed that certain emission from human related activities were the cause of the substantial increase in the concentration of greenhouse gases, leading to a rise in earth’s temperature [1].

In its fifth assessment, published almost 25 years later, the IPCC categorically asserts, with more that 90% certainty, that human activities are the main contributor of the rise in global average temperature over the last 50 years. Additionally, the assessment states that “warming of the climate system is unequivocal, as is now evident from observations of increases in global average air and ocean temperatures, widespread melting of snow and ice and rising global average sea level”, and that “unmitigated climate change would, in the long term, be likely to exceed the capacity of natural, managed and human systems to adapt”. Fortunately, however, the report also notes that “many impacts [of climate change] can be reduced, delayed or avoided by mitigation” [1].

As a result of these reports and the overwhelming scientific consensus, the Paris Agreement, a historic agreement that provides a solid framework to address the threat of climate change, was signed in 2015. As part of the agreement, the countries involved would establish CO2 emission targets and outline the steps that each country will take to address climate change [2].

As Statoil, one of the largest integrated petroleum companies in the world, is 67% owned by the government of Norway, one of the main backers of the Paris Agreement, its top leadership is specially incentivized to turning Statoil a low carbon footprint operator and support the ambitious goals of the Paris Agreement [3].

From a strategic point of view, Statoil’s management recognizes that being a low carbon operator is a source of completive advantage and better positions the firm to provide long-term shareholder value. Being a large oil and gas producer, however, presents special challenges for the Norwegian company, particularly, balancing the challenging tasks of minimizing carbon intensity and its associated costs [4].

To address the challenge presented by climate change, Statoil’s leadership has put forth a series of initiatives to achieve annual emission reductions of 3 million tons by 2030. An important part of Statoil’s strategy for reducing emissions consists of implementing innovative solutions as part of its logistics and supply chain processes [5].

From 2011 to 2016, Statoil has almost halved CO2 emissions from its logistics and transportation operations, which include more than 40 vessels, 19 helicopters and thousands of trucks. In only 5 years, the Norwegian company has been able to take emissions to 325,000 from 605,000 tons of CO2, a reduction equivalent to the annual emissions of 140,000 cars [5].

Examples of how Statoil has achieved these results and plans to position itself as a low carbon operator include, maximizing vessel and helicopter capacity utilization, and choosing vehicles with the highest fuel efficiency metrics, but perhaps the most radical approach is the way that its sourcing processes for vessels operating Norwegian Continental Shelf are being modified [5].

Focusing on minimizing carbon emission from its shuttle tankers, Statoil has awarded long term contracts to build tankers with LNG dual fuel intake for main and auxiliary engines, with an option to add a volatile compound recovery system. The tankers will be in operation by 2019 and will be the first LNG and most fuel-efficient vessels of their class [6]. Additionally, as part of its emission reduction strategy, Statoil will start awarding long-term contracts to providers whose marine vessels have hybrid batteries or the ability to use shore power. The implementation of hybrid batteries will significantly reduce fuel consumption, and consequently carbon footprint. Currently, Statoil has 2 battery operated vessels and plans to replace or retrofit its remaining 14 vessels with hybrid batteries [7].

The close relationship that Statoil has with the Norwegian State has positioned the company to be at the forefront of energy efficiency in the oil and gas industry, and although costly, management sees the investment in energy efficient equipment as a source of future competitive advantage. Two questions remain, however: (1) Will other companies in this industry share Statoil’s vision and incorporate energy efficiency as part of their strategy, if their management and boards are not incentivized by their respective governments? (2) To what degree should governments intervene in setting the climate strategy of major oil and gas companies around the world?

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[1] (2017). IPCC – Intergovernmental Panel on Climate Change. [online] Available at: [Accessed 14 Nov. 2017].

[2] Change, U. (2017). The Paris Agreement – main page. [online] Available at: [Accessed 14 Nov. 2017].

[3] Hub, I. (2017). Norway Ratifies Paris Agreement, Promises to Go Carbon Neutral by 2030 | News | SDG Knowledge Hub | IISD. [online] Available at: [Accessed 14 Nov. 2017].

[4] (2017). Climate – [online] Available at: [Accessed 14 Nov. 2017].

[5] (2017). The supply chain – [online] Available at: [Accessed 14 Nov. 2017].

[6] (2017). Statoil awards contract on new shuttle tankers – [online] Available at: [Accessed 14 Nov. 2017].

[7] (2017). Statoil awarding contracts to five ship owners – [online] Available at: [Accessed 14 Nov. 2017].





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Student comments on The Vikings Attack Climate Change: Statoil’s Quest to Reduce Emissions.

  1. Your question on the extent to which governments should set the climate change agenda for oil and gas companies warrants thoughtful consideration. Determining how much say government can and should have on this front depends on 1) the impact that these environmental regulations will have on the company’s business operations and its bottom line 2) whether the costs of these regulations will be disproportionately higher for some oil and gas companies than others.

    The costs of government imposed environmental regulations typically manifest on a company’s balance sheet in the form of capital expenditure on new equipment or technology, fines for exceeding emissions targets, and/or additional staffing costs to ensure compliance with these regulations. Regulations that require companies to purchase costly and sophisticated technology to treat their emissions might be relatively easy and affordable for a large multinational like Exxon Mobil but uneconomical for their smaller counterparts. In this case, government imposed environmental regulations that are capital intensive might give larger companies additional competitive advantages in the sector and drive smaller companies out of business. Regulations that are target driven, requiring companies to reduce emissions by a set percentage each year are less arbitrary and will companies the flexibility to make the necessary investments in infrastructure, systems, and processes needed to achieve those targets.

  2. The steps that Statoil took to reduce emissions are impressive and should be a beacon for other oil and gas companies to follow. Statoil has demonstrated that it is possible, although costly, to remain profitable in oil and gas while honoring a commitment to reducing emissions. I do believe that the majority of oil and gas companies will require some government incentive to follow suit. This incentive could be in the form of government subsidies for companies that reduce emissions or penalties for companies that do not reduce emissions. Unfortunately, if not economically motivated, many companies will continue operating in a way that maximizes shareholder value, despite the environmental ramifications.

  3. It’s ironic to think of a fossil fuel company as carbon emission-conscious, but they clearly are. In addition to tactical efforts to reduce emissions, I’m curious how Statoil grapples with being a leader in reducing dependence on their primary product. Presumably if the entire world took similar steps, demand for oil would decrease and impact their bottom line.

    My article dealt with a topic that could be relevant to Statoil as they continue to cut emissions: nuclear powered ships. Russian-owned Rusatom builds and operates nuclear powered ice breakers, which despite a negative connotation from land-based disasters such as Chernobyl are zero carbon emission vessels. Rusatom has never had a significant environmental or safety issue with their nuclear power and serves as an example of what can be responsibly done with that technology. The US Navy, whose submarine and carrier forces are purely nuclear powered, has also never had an incident. Statoil and other companies operating large ships should explore incorporation of nuclear power as an environmental protection measure.

  4. Beyond governments working together with the key oil players in their own territories, it is also interesting to see how countries have developed cross-border initiatives to tackle the topic of climate change.

    According to a report by the Dialogue’s Energy, Climate Change and Extractive Industries program published last May, government institutions in the United States has engaged in multiple initiatives to cooperate with countries in North and South America, strengthening regulatory standards. For example, a working group on Climate Change and Energy, established by the Department of Energy of the US, Canada and Mexico, is working on designing solutions for “reliable and resilient low-carbon energy grids, modeling and deployment of clean energy technologies, energy ef ciency, carbon capture, use and storage, climate change adaptation and resilience and emissions from the oil and gas sector” [1]. In addition, de US Department of Energy is working along with the Department of Energy in Brazil on establishing “consultation mechanisms for hydrogen cell technology, carbon credits, biofuels and electricity transmission” [1] called Consultative Group on Energy/Binational Energy Working Group (BEWG). This consultation is also in charge of developing “cooperation to include energy security and climate change, renewable energy, energy ef ciency, oil, gas & coal, nuclear energy, research cooperation, and research development in both countries” [1]. Would this be solely to enhance commercial opportunities for the US?

    It would be interesting to see how corporations respond to these initiatives and how open they are willing to spend to cover to be more carbon-friendly, especially in periods of low energy prices are already hitting the industry.

    [1]. Viscidi, Lisa; O’Connor, Rebecca. “US-Latin America Energy Investment Proposal for Policy Engagement”.; Accessed on November 30th, 2017.

  5. It is encouraging to read about Statoil’s response to global climate change and its investment in cleaner technology to cut emissions. However, I fear that many corporations will not follow suit unless incentivized by their respective governments or by more cost competitive prices in clean technology. As mentioned in a previous comment, government regulations typically result in expensive solutions for corporations. Specifically in the US, the collaboration between industry and government in the drafting of regulations is limited, which results in higher costs for corporations than projected by the regulators. The solutions can also result in unintended environmental consequences that don’t get communicated until the regulation is finalized, combined with a lengthy process to acquire an approved deviation. My recommendation to minimize the financial impact of regulations is increased communication between parties during regulation drafting. This early communication would allow for the regulation to achieve its intended results of reduced emissions at the most efficient costs to the corporations. This could result in oil and gas corporations being more receptive to regulation, since many have mission statements to be environmentally responsible.

    Additionally, I found it interesting that Statoil is starting to use hybrid batteries for many of their applications. Given the focus on energy storage technology in the renewable energy sector, it is likely that these batteries will decrease in cost in the near future. Affordability will drive adoption by other corporations with Statoil providing examples of its applicability.

  6. I’m curious to learn more about the regulatory implications of this industry, and how regulation can encourage competitors to do the type of investment that Statoil is making in clean energy. Will better regulation encourage more investment into clean energy, or does long-term minded management and PR get us there.

  7. I’m surprised to hear how much an oil & gas company is doing to actively minimize its carbon footprint! One important fact that wasn’t addressed is how their costs went up to enact many of these important changes. I think this is a driving factor many companies consider when improving their operations. However, in the case of Statoil, the company is 67% owned by the government of Norway and these changes could be top down initiatives with cost thought of maybe as an afterthought.

    I think that if companies can demonstrate that they can be profitable and reduce their carbon footprint, these companies can be models to others of how to be successful in the long-term. Therefore, without government incentives, I think companies will want to follow initiatives done by Statoil or other model companies that have demonstrated cost beneficial, environmentally friendly projects. Countries and people that truly want to make a positive change should also petition their governments so that more subsidies and incentives are offered to companies to enact projects that will improve their carbon footprint.

  8. I agree that Statoil has been doing a good job of reducing it’s carbon footprint, but I wonder if it has had to make any tough decisions or trade-offs. For example, are the LNG vessels costlier or less ideal to operate? I think corporations will always choose to make the green choice if it helps their bottom line.

    If this indeed a trade off then I think that’s where the government comes in. The environment a tragedy of the commons and different bodies need to agree to make equal compromises for the greater good. That’s why comprehensive buy into agreements like Paris are critical.

  9. To answer your first question about whether or not other oil majors will share Statoil’s vision, I think this recent article in the financial times perfectly captures how some of the biggest energy groups are making a conscious effort of doing their part in reducing emissions. Exxon’s announcement on Wednesday of reducing emissions despite the Trump’s administrations efforts of reducing regulation goes to show that the oil majors are very conscious of their responsibility in curbing emissions. It also shows that government intervention is not a requirement for oil companies to realize their responsibilities in curbing emissions.

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