UPSTREAM: What impact will the energy transition have on the operations of oil and gas companies over the next five years and beyond?

IMAZ: The energy transition demands decarbonisation, and this is too often conflated with electrification.

There is no doubt that oil and gas, and indeed liquid fuels, have a role to play in serving global energy needs for decades to come.

Oil and gas companies can play a leading role in lowering emissions, not only from the production process but also from the net carbon effect of the fuels produced.

Beyond the fact that some of us are developing multi-energy approaches, investing heavily in renewable electricity, decarbonisation offers opportunities that will substantially modify the way we do things as an industry.

From carbon capture and storage to geothermal projects, upstream operators have critical skillsets that are essential for the energy transition.

Also, the refineries of the future will be very different from today, using different feedstock to produce fuels with a lower carbon footprint, maximising the value of circular economy initiatives.

In terms of upstream operations, these businesses have an essential role to play as cash generators to enable the transition by providing funds for investment in other activities, such as renewables, which we are scaling up, and green hydrogen, which needs further development investment to realise its full potential.

UPSTREAM: Is natural gas becoming more attractive than oil for companies and, if so, what implications does that have for the business?

IMAZ: For years, Repsol has viewed natural gas as a key fuel for the energy transition, as the most cost-effective solution to promote an orderly and equitable transition.

Natural gas emits half the carbon dioxide per unit of energy generated, produces less sulphur dioxide and particulates, provides greater performance and efficiency in power generation than coal, and it can serve as backup for more intermittent renewable sources, such as solar and wind energy.

Cleaner-burning natural gas is crucial to replacing coal and supporting the integration of renewables into the power system.

In line with this, natural gas already makes up three-quarters of my company’s reserves and two-thirds of its output.

Our Marcellus asset, which produces dry natural gas, is one of the key projects in our portfolio.

The importance of natural gas for power generation has recently been made evident in Europe by soaring electricity prices resulting from high gas prices.

A reliable and predictable supply of natural gas will help immediate decarbonisation of electricity.

In fact, US investment in natural gas production and its use in electricity generation has significantly reduced emissions from the electric industry over the last decade.

However, oil will still play an active role in a more decarbonised world, and not only in mobility.

Petrochemical products, present in most activities in our daily lives, also play a major role in achieving a lower carbon intensity scenario by offering infinite applications to achieve energy efficiency goals — making lighter cars and better insulated houses possible.

There is a lot of oil in the products from which EVs are made, for example.

UPSTREAM: How can large-scale, multi-billion-dollar conventional oil and gas developments, including in deep waters, continue to compete for capital?

IMAZ: Oil and gas are and will continue to be, for decades, an important element in the global energy mix.

Considering the annual natural decline in existing fields, this type of project will be critical to maintain production to meet global demand.

Our investment focus is on short-cycle, modular development projects, especially those located near existing production facilities.

This allows us to modulate investment depending on existing conditions.

Larger projects can also compete for capital, but the key element here is a lean, standardised, and cost-conscious approach to development.

Our recently completed Buckskin development in the Gulf of Mexico is a good example of this, where production was achieved with 75% less investment than the initial development plan.

Investors need to see a clear commitment and a concrete roadmap to decarbonisation, and we also need to give them confidence and returns.

We are showing our investors that our business case is solid and that we have the right ambition, with legacy businesses financing the transformation.

Moreover, the cash generated by our upstream business will allow us to accelerate the energy transition and offer a competitive and attractive remuneration to our shareholders.

The debate around COP26 revealed widespread perceptions that the oil and gas sector is more concerned about preserving the value of fossil fuel assets than engaging in real energy transition.

Such divisions can be seen when the different "colours" of hydrogen are discussed.

UPSTREAM: What role do oil and gas companies have to play in the energy transition, and how do they build trust?

IMAZ: As a multi-energy company, we need to show that we are part of the solution to climate change, and that we can keep supplying the energy that our societies need in a safe, sustainable, and efficient way.

We need to be sincere and humble, and we need to make every effort to push decarbonisation in every sphere of our activity.

What we cannot do is pander to the myth that decarbonisation equals electrification because that is only part of the solution.

There are relevant parts of economic activity where electrification is not viable, including heavy industry and long-haul, air, and maritime transport.

So, the development of other solutions is necessary, including advanced biofuels, synthetic fuels, renewable hydrogen, CCUS, and other negative emission technologies, as well as circular economy and digitalisation initiatives. Repsol is already betting on all of these.

We believe that regulators must promote technological neutrality to activate all possible levers, instead of fighting climate change with one hand tied behind our back.

This will also help guarantee a just energy transition that preserves competitive and innovative industrial activity, allowing companies to create stable, high-quality jobs, promote research and development, and generate wealth on a local level so that nobody gets left behind.

UPSTREAM: Where do you expect the oil price to be by the end of this year? And in five years? What are your hopes and fears for energy transition?

IMAZ: Obviously, the oil price is still stabilising after the pandemic, and the events of the last weeks have shown that volatility is still very much a factor.

Our job is not to predict the oil price but to manage our activity, whatever the price.

Our 2021-2025 strategic plan is self-financed at a prudent $50 per barrel of Brent crude.

At this price, the company can generate cash to cover investments and dividends throughout the period without increasing debt.

The higher prices of the last few months have allowed us to increase our low-carbon investments by €1 billion ($1.3 billion) to a total of €6.5 billion between 2021 and 2025, allowing us to boost renewable electricity generation and develop renewable hydrogen production as well as other low-carbon initiatives. Dividends have also been increased.

My hope for the energy transition is that we can approach it without determinism, to speed up decarbonisation and move forward in the most cost-effective and just manner.

I’m a firm believer in technological neutrality to boost the energy transition.

We cannot foresee the future and all the technological developments ahead.

Incentivising all possible technical solutions for achieving success in the fight against climate change so that all of them can contribute, without exception, will accelerate the progress of the energy transition to the benefit of all.

The game then becomes focusing on those that contribute to reaching our goals in the most cost-effective way.

That is the challenge we face as a company and as a society.