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Chevron the Venture Capitalist: The Oil Giant Is Pumping $500 Million Into the Future of Energy

Motley Fool - Fri Apr 19, 5:15AM CDT

Chevron(NYSE: CVX) is one of the world's top oil and gas investors. The energy company will spend about $14 billion on oil and gas development projects in 2024 alone. It could invest even more money into fossil fuels this year if it can close its roughly $60 billion acquisition of oil and gas producer Hess.

However, Chevron isn't burying its head in the sand when it comes to climate change and the global transition to lower-carbon energy. It has committed to spend $10 billion on lower carbon energy investments and projects by 2028.

One aspect of its strategy has been using its venture capital arm to launch funds that invest in innovative companies focused on lower carbon energy. Chevron just launched its third fund, committing to invest another $500 million in lower-carbon energy.

Investing in the future of energy

Chevron's venture capital arm, Chevron Technology Ventures, is launching its third fund, Future Energy Fund III. Chevron and other investors have committed $500 million to the fund, which will focus on companies developing innovations in industrial decarbonization, emerging mobility, energy decentralization, and the circular carbon economy. The company's latest fund will also look for opportunities in novel low-carbon fuels, advanced materials, and transforming carbon into higher-value products.

Chevron initially launched Chevron Technology Ventures in 1999 to find and develop technologies and new business solutions to enhance its ability to produce and deliver energy. The venture capital arm has since launched seven funds, including two other Future Energy Funds (2018 and 2021), with a $400 million commitment that it invested in more than 30 companies. Chevron's funds have invested in several companies focused on lower carbon technologies, including direct air capture technology (Carbon Engineering, which Occidental Petroleum has since acquired for $1.1 billion) and electric-vehicle (EV) charging company ChargePoint.

Another notable investment was Svante in late 2022. Chevron was the lead investor in Svante's Series E fundraising round, which raised $318 million to help accelerate the manufacturing of its carbon capture technology.

Svante has developed carbon capture and removal technology using structured absorbent beds known as filters. It can capture carbon dioxide from industrial flue gas. The captured greenhouse gas can then move via a pipeline to a sequestration site or for industrial use.

Technology like that could be key to helping Chevron develop a meaningful carbon capture and storage business to compete with Occidental Petroleum and ExxonMobil, which are emerging as early leaders in the sector.

A multipronged investment approach

Venture capital investments are one of several ways Chevron is investing in the future of energy. The company is spending about $2 billion on lower carbon projects this year.

Those investments are helping reduce the carbon intensity of its traditional operations and develop new growth platforms. One of its most notable investments is its Geismar renewable diesel expansion project, which it expects to complete this year.

Chevron has been working on developing new growth platforms that can help power its business in the future. One that's starting to gain some traction is hydrogen. For example, in late 2023, Chevron acquired a majority stake in ACES Delta. It's the largest proposed storage facility for hydrogen produced by renewable energy (green hydrogen).

Chevron also announced it's building its first solar-to-hydrogen production facility in California. It will use power from an existing solar facility and non-potable water produced from its oil and gas operations to make clean hydrogen.

The company is also making inroads into other areas. For example, it expanded its Bayou Bend carbon capture and sequestration hub in Louisiana by acquiring nearly 100,000 acres last year. Meanwhile, Chevron and its partner Bunge agreed to build a new oilseed processing facility in Louisiana to process soybeans and other softseeds to help them better meet the growing market demand for renewable fuel feedstocks.

Taking a broad approach to the energy transition

Chevron knows that the world won't need oil and gas forever. That's leading the fossil-fuel giant to invest money in the future of energy.

It's now launching its third venture capital fund to complement its direct investments in building out lower-carbon businesses and reducing its emissions. This strategy positions Chevron to continue growing, even as the world slowly pivots away from oil and gas, enhancing its long-term investment appeal.

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Matt DiLallo has positions in Chevron. The Motley Fool has positions in and recommends Chevron. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.

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