OPINION: First the good news for the oil and gas industry: the number of rigs operating in North America has reached its highest point since 2018.
Oil prices rose 5% last week and ended at a two-year high on the back of strong US economic data and rising hydrocarbon demand.
And now the bad news: Shell was last week ordered by a Dutch court to reduce its greenhouse gas emissions by 45% in the next nine years.
ExxonMobil saw its shareholders vote in favour of two seats on the board being handed over to an activist investor fund pushing for more climate action.
Chevron saw over 60% of its shareholders pass a resolution at the US group’s annual general meeting calling for a cut in its Scope 3 emissions — pollution caused by third-party use of its products.
It all happened on one day last week and followed the International Energy Agency saying oil and gas companies needed to stop new exploration if the world is to meet Paris climate agreement goals.
The normally sober Financial Times warned this was Big Oil’s Black Wednesday and said May was the month “the wind changed".
What it meant was that the days when the oil and gas industry were under fire just from climate activists are over.
Now it is highly disruptive shareholders who are prepared to use AGMs to change corporate policies — and boards — if necessary.
But the more dangerous event last week for oil was in the law courts where a judge ruled against Shell.
The case brought by Friends of the Earth in the Hague follows hot on the heels of seven climate activists being found not guilty by a jury for smashing windows in Shell’s London headquarter windows despite the judge saying they should face penalties.
Strategic risk expert Verisk Maplecroft said the Dutch case could mean “open season” on carbon emitters in the oil and gas industry.
The consultancy said that 90% of the growing number of climate lawsuits had been in the US or European Union, but warned that this is likely to change with future court cases being brought worldwide.
The irony is that the “good news” from rising oil prices means the industry is financially back from the near dead of 2020 and Covid-19.
Companies such as Shell argue that they need the profits made from oil and gas operations to pay for their transition into renewables and low-carbon activities.
And as some Western oil majors point out, forcing their businesses out of hydrocarbons will not stop production by others — or ongoing demand.
State oil companies in the Middle East, Russia and China have little local pressure on them to cut back and may even buy up Shell and other majors’ cast-off assets.
The national oil companies are certainly much less vulnerable to climate activist and shareholder pressure to change their mode of operating.
Private equity-backed companies are increasingly active and similarly less accessible or transparent.
It will be up to governments ultimately to provide the framework for a low-carbon transition.
France's Total last week formally changed its name to TotalEnergies as part of its “green energy drive".
But none of this will stop the mounting pressure on even the greenest of oil companies such as Shell to do more and do it quicker.
The Arctic has just seen extraordinary temperatures of 32.2 degrees Celsius (90 degrees Fahrenheit).
Western oil company boardrooms face a similar kind of heat — and its going to get hotter.
(This is an Upstream opinion article.)