Repsol is a publicly listed integrated oil and gas company headquartered in Spain. In 2020, it had USD 42.70 billion in revenue and reported 24,125 employees*. Repsol plans to scale up its renewables, hydrogen and biofuels businesses. However, it has had little progress in reducing its emissions intensities to date and has not yet committed to stop exploring for new oil and gas fields.
Repsol’s strategy to increase low-carbon product sales focuses on steering its 24 million strong Iberian customer base through the energy transition by cross-selling e-mobility, energy services and electricity on digital platforms. The company is collaborating with Nissan to expand fast charging and offering Nissan customers a 50% discount on Repsol’s charging network.
Repsol is also working with Kia to install electric vehicle charging infrastructure in homes, while its Solmatch and Solify services help communities and individuals install and connect rooftop solar panels. The company hopes such services can enable it to sell more services and products to each customer.
Repsol has set targets, deployment schedules and expected rates of return for its renewable electricity, hydrogen and biofuel activities. The company is targeting 5.2 gigawatts (GW) of renewables in 2025 and 12.7 GW in 2030. The company has a clear deployment schedule for projects in Spain and Chile, and has recently acquired a 40% stake in Hecate Energy, a US based solar energy and battery storage developer.
Repsol is also targeting 0.4 GW equivalent of renewable hydrogen capacity by 2025 and 1.2 GW equivalent by 2030. It is also expanding its biofuel capacity from 0.7 million tonnes per annum in 2020 to 1.3 million tonnes by 2025 and more than 2 million tonnes by 2030, with a target for more than 65% of this to be derived from waste.
While Repsol’s board has oversight of climate issues, it does not have significant expertise related to the low-carbon transition. Around 30% of Repsol’s 2021-2024 long-term incentive programme for executives is linked to emissions reductions and 10% to renewables targets. Although the company has removed incentives for upstream production growth and reserve replacement, executives may still be indirectly incentivised to grow fossil fuel volumes, e.g. through cash flow metrics.
The company’s internal carbon price is USD 25 per tonne in 2018-2022 and rises to USD 40 per tonne in 2025. This is low compared to the International Energy Agency’s (IEA’s) 1.5°C scenario, which expects advanced economies’ carbon price to reach USD 75 per tonne by 2025.
Repsol is expected to just remain within its 1.5°C carbon budget between 2019 and 2050 if it only utilises its existing fields and reserves. However, Repsol will be investing USD 800 million between 2021-2025 in exploration for new oil and gas fields in the Gulf of Mexico, Alaska, Colombia and Indonesia, which will lead to the company exceeding its 1.5°C carbon budget. This is at odds with the IEA’s 1.5°C scenario, which states that no new oil and gas fields can be approved for development, and is also out of line with Repsol’s home country, Spain, which has banned new fossil fuel exploration and production licenses.
In 2019, 5% of Repsol’s total CapEx was allocated to low-carbon technologies, with the share rising to 16.7% in 2020. Repsol’s 2021-2025 strategic plan sets out an ambition to invest nearly 30% of its CapEx over this period in low-carbon projects. These include renewables, efficiency and e-mobility. However, to align with a 1.5°C scenario, oil and gas companies should be aiming to invest 77% of CapEx in low-carbon and mitigation projects. In the first quarter of 2021, 40% of Repsol’s CapEx was for low-carbon technologies, showing the company needs to be more ambitious.
Repsol receives a trend score of =. If the company were reassessed in the near future, its score would likely remain the same. Continuation of the company’s 2014-2019 trend would see its scope 1 and 2 emissions intensity increase and its scope 1, 2 and 3 emissions intensity decline only marginally. This would be insufficient for the company to align with its 1.5°C pathway.
However, Repsol does have a detailed transition plan to develop renewables, hydrogen and biofuels, supported by a commitment to invest 30% of its CapEx in low-carbon technologies between 2021 and 2025. Its recent acquisition of a 40% stake in Hecate Energy, which has a large portfolio of solar energy and battery storage under development, indicates its focus on the low-carbon transition.
Repsol is aiming for a 12% reduction in its scope 1, 2 and 3 emissions intensity by 2025, a 25% reduction by 2030, a 50% reduction by 2040 and to reach net zero by 2050. It is also aiming for a 75% reduction in upstream scope 1 and 2 emissions intensity between 2020 and 2025, as well as a reduction of 1.5 million tonnes of absolute scope 1 and 2 emissions in the same period.
Repsol is increasing its renewable electricity capacity from around 1.1 GW in 2020 to 12.7 GW by 2030. It is also aiming to develop 1.2 GW equivalent of renewable hydrogen capacity by 2030, as well as 2 million tonnes of biofuels a year by 2030. The company will be investing 30% of its CapEx in low-carbon projects between 2021 and 2025.
In 2020, 2.3% of Repsol’s revenue came from renewables. In 2019, nearly 27% of the company’s research and development expenditure was on low-carbon technologies. Regardless, the company is continuing exploration for new oil and gas fields.
Repsol is clearly seeking to diversify and transition away from being just an oil and gas company. However, to stay within its 1.5°C carbon budget to 2050, it needs to cease oil and gas exploration altogether and show a sustained decline in emissions intensity.