Oil and gas are vital fuel sources for the global economy. In 2018, they combined to supply 57% of the worldwide energy mix, according to BP's Statistical Review of World Energy. Add in coal at another 27%, and fossil fuels provide the lion's share of the world's energy needs.

Unfortunately, they're also major contributors to climate change, which is why the world's economies are investing trillions of dollars in switching over to renewables. That accelerating transition is forcing oil companies to seek ways to reduce their carbon footprints so that they're part of the solution and not just contributing to the problem. Two of the oil giants leading the way are Total (NYSE:TOT) and Occidental Petroleum (NYSE:OXY).

Oil pumps under the setting sun with solar panels in the foreground.

Image source: Getty Images.

Targeting carbon neutrality

Occidental Petroleum firmly believes that oil has a bright future. That's why it paid $55 billion earlier this year to buy rival oil producer Anadarko Petroleum. However, the company knows that the industry can do a better job of reducing carbon emissions. That's why it's investing in projects that will help it supply lower-carbon oil.

One way it's doing that is by developing the world's largest Direct Air Capture and sequestration facility. The plant would capture up to 500 kilotonnes of carbon dioxide per year directly from the atmosphere. To put that number into perspective, it's like taking 100,000 cars off the road.

Occidental would then inject that carbon dioxide into an older oil field. That would enable the company to produce more oil out of that field while permanently storing the carbon dioxide underground.

In addition to that project, Occidental recently started up its first solar energy-generating facility. The 16 MW solar farm will provide power to its Goldsmith oil field in Texas, reducing its reliance on fossil fuel power from the grid.

Meanwhile, the company signed long-term power purchase agreements for another 109 MW of solar capacity starting in 2021. That will further reduce the carbon footprint of the company's oil fields in Western Texas. These investments are all part of Occidental's aspirational goal to eventually become carbon neutral.

A hand with an eraser removing carbon dioxide, with green grass and a blue sky in the background.

Image source: Getty Images.

Shifting toward cleaner sources

French oil giant Total is also investing in a variety of initiatives to reduce its carbon footprint. The company, for example, is planning to double its liquified natural gas (LNG) production by 2025. That fuel produces roughly 40% fewer greenhouse gas emissions than coal, when used to generate electricity.

In addition to that, it's investing directly in several low-carbon businesses. In 2011, for example, the company bought a controlling stake in solar panel maker SunPower. Meanwhile, in 2016, it acquired battery company Saft.

Total has also made several direct investments in building renewable energy-producing assets. It recently started construction on a third solar power plant in Japan. That 52 MW project is the largest one in the country and will boost the company's total solar capacity in Japan to 100 MW when it comes online in 2021.

In Total's view, these low-carbon businesses could account for 15% to 20% of its revenue by 2040. That implies hefty growth, considering that the company's gas, renewables, and power division only supplied 4% of its sales in 2017. While the company isn't completely pivoting away from carbon, it's working to reduce its footprint in a meaningful way.

Balancing their approach

Oil companies can see that the global economy is working on weaning itself off of fossil fuels. That led Total's CEO to say at a recent industry conference that, "if we don't want to become dinosaurs, we'll have to adapt."

That's why his company is one of a growing number of oil producers that are starting to make investments that will lower their carbon footprint so that they'll be part of the solution. By doing so, they're increasing the probability that they won't go extinct as fossil fuels become less relevant in the coming decades.