Climate Change: How Microsoft Is Helping Oil Giants BP, Shell Meet Decarbonization Targets

British-based oil giants BP plc (BP) and Royal Dutch Shell (RDS-A) have separately teamed up with Microsoft (MSFT) to develop ways to reduce the carbon emissions of all three companies.

Microsoft and BP said they intend to develop new technology innovations and digital solutions to help meet their sustainability aims, including reducing energy use and carbon emissions. BP will also supply Microsoft with renewable energy.

Earlier this year, BP said it planned to become a net zero emissions company by 2050 at the latest.

By the end of this decade, BP plans to have developed about 50 gigawatts of net renewable generating capacity; increase its annual investments in low carbon projects to about $5 billion; and eventually reduce its oil and gas production by 40%.

In January 2020, Microsoft said it planned to be “carbon negative” by 2030.

“BP is determined to get to net zero and to help the world do the same. No one can do it alone – partnerships with leading companies like Microsoft, with aligned ambitions, is going to be key to achieving this,” said William Lin, BP’s executive vice president for regions, cities and solutions.

Judson Althoff, executive vice president of Microsoft’s worldwide commercial business, stated that BP “shares our vision for a net-zero carbon future, and we are committed to working together to drive reductions in carbon emissions and fulfill demand with new renewable energy sources.”

Microsoft’s strategic alliance with Shell is similar to its partnership with BP. Like BP, Shell also plans to become a net-zero emissions energy business by 2050 or sooner.

“We are seeing a cultural shift, not just internally, but everywhere. We have to change the way we do business,” said Dan Jeavons, Shell’s general manager of data science.

Harshit Sharma, an analyst at Lux Research, told International Business Times that Microsoft has extensive experience in the oil and gas industry, all built over the last decade with the emergence of cloud computing.

“Its primary partnerships are with Chevron and an extended agreement with Schlumberger for developing cloud-hosted [exploration and production] software,” he said. "Microsoft also already works with ExxonMobil in the Permian [oilfield in southwestern U.S.], hence, Shell and BP partnering with them was not surprising at all.”

Sharma notes however that how much digital technology can reduce carbon emissions remains up for debate.

“Outside [of] situations such as gas leak detection (particularly methane) where novel sensors can completely eliminate unplanned leaks of gases, the impact of digital technologies such as [artificial intelligence] in reducing emissions is largely incremental as opposed to say carbon capture, hydrogen, etc.”

While digital technology and Microsoft’s Azure cloud computing system may seem remote from the development of renewable energy, Sharma points out that digital technology is essentially an “enabler” mostly for higher operational efficiency and for novel business models.

“For renewable energy, digital tech enables [methodologies] such as grid optimization, predictive maintenance of wind turbines, weather forecasting, and peer-to-peer energy trading [the buying and selling of energy between two or more grid-connected parties],” he said. “All of these applications of digital technology optimize renewable energy projects.”

Sharma is not certain that Microsoft can realistically achieve net-zero carbon status by 2025 – only five years away.

“It is indeed an ambitious target and it’s unlikely Microsoft will itself scale up renewable energy such as solar [photovoltaic systems] across its operations -- such as data centers -- in just five years,” he said. “Instead we imagine the tech giant will request energy suppliers like BP and Shell to sell only renewable energy to them and use carbon-offset projects (say, by planting more trees) to reach net zero. The tricky bit here is that it’s not an easy thing to track if the energy you are receiving from the grid is indeed coming from a renewable project, we imagine this is where emerging technologies such as blockchain will make a big difference in the energy system.”

Sharma said Shell and BP both reaching net-zero by 2050 is probably more realistic.

“[But] it’s hard to hold anyone accountable when the targets are so far off in the future,” he commented. “One has to commend Microsoft for aiming for a [quicker] timeline that people can visualize and monitor.”

Moreover, digital transformation projects do not come cheap.

“We imagine Shell and BP are [already] easily spending in the $100 million-plus range each year on digital transformation -- regardless of this particular partnership [with Microsoft],” Sharma noted.

But Sharma cautions that while the transition toward cleaner energy is inevitable, fossil fuels are unlikely to disappear from the energy system anytime in the future.

“These companies [like Shell, BP] will continue producing oil and gas for heavy industries such as the chemicals industry, aviation, shipping, where the demand for petroleum will be sustained,” he stated. “However, exploration of new reserves will stutter as evident from BP claiming they will stop looking for oil reserves moving forward.”