“You spent more on this event than you do on renewables,” claimed a protester’s banner outside the Shard, the UK’s tallest building, last Friday.
The message was aimed at participants in the Oil and Gas Climate Initiative (OGCI) – some of the world’s largest oil and gas companies including Saudi Aramco, Shell, BP, Total, Italy’s Eni, Norway’s Statoil and Spain’s Repsol. Seven chief executives assembled in the Shard to pledge a total investment of $1bn over 10 years “to develop and accelerate the commercial deployment of innovative low emissions technologies”.
The event certainly cost much less than what the firms spend on renewable energy, but the total –roughly only $10mn per OGCI member per year – did raise some eyebrows, given the firms’ annual budgets amount to billions and billions of dollars. That is why the chief executives tried their best to explain their logic.
“That commitment to form this fund together is only in addition to all of the work that we do individually as companies, which is actually far more than that. It also represents a start,” explains BP chief executive Bob Dudley. “This is happening alongside all of the work that we are doing individually as companies on the transition to a lower emissions world.”
“The target of this fund is to be some kind of seed, to be a catalyst,” agrees Spain’s Repsol chief executive Josu Jon Imaz.
“I think the value of spending this money [$1bn] independently is much less than spending it together,” says Statoil chief executive Eldar Saetre.
The OGCI companies have decided to focus collectively on accelerating the deployment of carbon capture, use and storage; on reducing methane emissions in order to maximize the role of gas as a cleaner fossil fuel, and on improving energy efficiency. But why not also spend collectively on accelerating the development of renewables?
Total’s Patrick Pouyanne explains: “We are oil and gas companies. And we want to focus on challenges… where we have some competences. This is why we selected gas and carbon capture, use and storage.”
He says renewable energy projects are also part of the solution to address climate change issues, but admits renewables are a “diversification” for oil and gas companies. “We have no reason really to group together oil and gas companies to invest in a diversification area,” he says. “It is part of the solution, but here we are together to concentrate on what are the core areas of our competences and where we can have the most impact for the future.”
That oil and gas companies are addressing climate change issues is, to a large extent, about them being realistic about the future of their businesses. While they – and most experts – agree oil will continue to be part of the global energy mix for decades to come, they also admit the energy mix is changing. The world faces a low-carbon future, says Dudley.
“It is not at all philanthropy. We stick to our business,” says Pouyanne. “We are hydrocarbon producers, and if throughout the year we have met six times… [it means] it is real business… Because the energy mix of the world will evolve.”
He also puts the world’s drift towards low-carbon energy into historical context.
“I never use ‘energy transition’ words to be honest, I think it is part of long history, long journey of energy,” Pouyanne says. “300 years ago people were using wood. From wood they went to coal, from coal to oil, oil to gas, gas will go to other energies. And you need to see that with the long-term perspective. And the ambition for Total… is to stay a major energy company for long decades, and so to begin to invest today in what could become tomorrow important and profitable for the company.”
The task now is to make two ambitions – firms making money from low-carbon energy and the world solving climate change issues – meet.
“The growth of renewables has been remarkable – and luckily so. But the capacity of the industry to make money in that segment has been remarkably absent,” says Shell chief executive Ben van Beurden. “We will have to find a way to participate in a renewables-dominated energy system in a way that allows us to continue to make profits, and pay dividends, and everything else – because ultimately that is also an aspect of sustainability that is important.”