Cosmo Energy Holdings is a publicly listed integrated energy company headquartered in Japan. In 2020, it had USD 25.34 billion in revenue and 6,788 employees*. Cosmo Energy Group operates three refineries and is Japan's third-largest refiner by sales. It plans to invest in wind power generation and petrochemicals for its low-carbon transition, but remains reliant on its oil operations.
As part of its medium-term management plan from 2018 to 2022, Cosmo Energy invested around 20% of its total capital expenditure (CapEx) in wind power generation in 2019 and plans to maintain this annual share until 2022. This represents a significant proportion of the company’s spending but is still far behind the sectoral expectation for oil and gas companies to invest 77% of their CapEx in low-carbon projects to align with a 1.5°C scenario. Cosmo could improve its performance on material investment by ramping up the current CapEx share it allocates to low-carbon technologies and beginning to invest in carbon removal technologies.
Cosmo Energy reports its intention to reduce absolute scope 1, 2 and 3 emissions for its downstream operations by 16% and for both its upstream and downstream operations by 26% between 2013 to 2022. However, the company does not report the baseline or the exact coverage of these targets to enable an assessment. Cosmo’s targets also seem to measure avoided emissions through deployment of renewable energies instead of measuring actual emission levels. The lack of transparency around the company’s targets and emissions reduction performance metrics limits an assessment of its commitment to the low-carbon transition.
Cosmo Energy has seen a marginal decrease of around 6% in its oil extraction and refining volumes. However, the company has been shifting its oil extraction activities away from less emissions-intensive regions such as Qatar (the share shrinking from about 40% to nearly 29% of oil mix) towards regions that are more emissions-intensive such as United Arab Emirates (the share growing from about 59% to nearly 70% of oil mix). This shift in regional extraction in the company’s oil mix has resulted in an overall increasing trend in its scope 1 and 2 emissions intensity, although there is no indication that this trend will not continue. Cosmo needs to rapidly decrease its scope 1 and 2 emissions intensity to align with its 1.5°C pathway.
Cosmo Energy is planning to expand its onshore wind power generation capacity from 230,000 kilowatts (kW) to 400,000 kW by 2022. The company is undertaking projects in many areas, including Port of Akita, Port of Noshiro, Coast of Yurihonjo, Akita Prefecture, Northwest Coast of Aomori Prefecture, and Akita Central Sea Area. It also aims to develop its offshore wind power generation capacity to 1 million kW by 2030. This business model is profitable for Cosmo as it represents more than 10% of the company’s 2019 net sales.
The share of renewable electricity in Cosmo Energy’s sold product portfolio between 2014 and 2019 increased from 0.0007% to 0.0027%, which is negligible in comparison to the share of petroleum products sold, which has not changed. This indicates that the company’s scope 1, 2 and 3 emissions intensity has remained stable over this time period, leading to a significant divergence from its 1.5°C pathway which requires an annual scope 1, 2 and 3 emissions reduction of about 4% until 2024. Cosmo needs to reduce its scope 3 emissions, especially those from sold products, which represent more than 75% of the company’s overall emissions.
Cosmo Energy receives a trend score of -. If the company were reassessed in the near future, its score would likely decrease. The company does not have a long-term emissions reduction target beyond 2030. The company’s planned expansion of renewable electricity and low-carbon mobility businesses is likely to improve its performance, but the company is yet to implement these businesses at the scale required to align with its 1.5°C pathway. At present, Cosmo’s low-carbon electricity business is still negligible compared with the size of its oil and gas operations.
Cosmo Energy aims to reach its emissions reduction targets through more efficient equipment and operations, and the development of wind power generation. Cosmo also plans to further develop its petrochemicals business due to the forecasted decrease in domestic oil demand, and to further expand its car leasing business.
In 2019, Cosmo Energy invested nearly 20% of its CapEx in wind power projects and it plans to maintain this CapEx share in 2020-22. Overall, the company will spend 93 billion JPY (USD 853 million) in wind power as part of its medium-term management plan from 2018 to 2022. However, the company is also investing 207 billion JPY (~ USD 1900 million) in oil exploration, refining and sales activities over the same period.
While Cosmo Energy has reduced its oil extraction and refining volumes between 2014 and 2019, it has increased its scope 1 and 2 emissions intensity by shifting its oil extraction activities to regions that are more emissions-intensive. This has led to the company diverging even further from its 1.5°C pathway.
Cosmo Energy’s investments in renewable power generation and petrochemicals, which represent about 20% of its total investments, support its transition away from fossil fuel activities. However, this needs to be reinforced with effective emissions reductions through emissions targets with longer-term horizons.