OPINION: The oil and gas industry has a huge role to play in the transition to the kind of low carbon economy that is needed to tackle global warming.
BP this week became the latest company to try to seize the initiative by outlining its plans for greening the business. This message risks being drowned out — at least on Western pavements — by protesters claiming Big Oil is sinner, not saviour.
In government circles, there is still huge respect for a hydrocarbon sector that has done so much for global human well-being.
The Chinese economic “miracle” could not have been achieved without cheap and efficient coal, oil and gas. But as any decent chief executive in the business world knows, complacency is the enemy of success.
How long will politicians remain faithful to the oil and gas industry as public pressure builds for rapid change from fossil fuels to fuel cells?
And to what extent will industry expectations that gas will be used as a bridge fuel be undermined if lower carbon gas is lumped in with coal and oil as yet another unwanted fossil fuel?
Western independent oil companies, ironically, are both most in the firing line and doing most to move their business models towards low carbon. State-owned oil companies are largely continuing with business as usual.
Neither strategy is working well. Oil majors such as Shell and Total are accused of “greenwashing” with their low carbon investments.
And promises to align their strategies with the demands of the Paris climate change agreement only get snorts of derision from the eco-campaigners.
The oil majors' scale of spending outside of their core hydrocarbon business is believed to represent around 5% at most. For the industry as a whole, the figure is about 1%, according to the International Energy Agency (IEA). As long as this remains the case, then oil companies are in danger of continuing to be marginalized in the public debate.
As the IEA said in its Energy Transitions report last month: “The oil and gas industry faces the strategic challenge of balancing short-term returns with its long-term licence to operate.”
And it warned: “The transformation of the energy sector can happen without the oil and gas industry, but it would be more difficult and more expensive.”
Companies do need to spend more money on low carbon investments.
Gas, in particular, deserves its bridge role in the new energy future, bringing with it cleaner air and lower carbon emissions — certainly lower than coal.
The much-vaunted Golden Age of Gas has in many ways come to pass, with consumption soaring in China, the US and the Middle East.
Gas demand rose by 4.6% in 2018 alone – but future growth risks being stymied by oversupply and rising public concern about CO2.
Gas may only reach its future potential if accompanied by major industry initiatives to halt flaring, minimise methane leaks and develop more carbon capture and storage plants. Governments need to play their part by educating their citizens about the importance of harnessing the financial power, technological expertise and management skills of the oil and gas sector.
But beyond advocating for gas, the industry needs to move faster if it also is to champion hydrogen, biofuels and other low-carbon options.
(This is an Upstream opinion article.)