BP, Shell, Chevron and Exxon: big oils collide over the energy transition

BP, Shell, Chevron and Exxon: big oils collide over the energy transition

European and American big oils are tackling climate change differently. The New York Times insight

With oil prices plummeting and climate change concerns rising, BP, Royal Dutch Shell and other European energy companies are selling oil fields, planning to drastically cut emissions and investing billions in renewable energy. American oil giants Chevron and Exxon Mobil are going in a very different direction. They are doubling their investments in oil and natural gas and investing enough to raise a small amount of money in innovative climate-oriented initiatives, such as small nuclear power plants and devices that capture carbon from the air, writes the NYT.

The disparity reflects large differences in how Europe and the United States are approaching climate change, a global threat that many scientists believe is increasing the frequency and severity of disasters such as fires and hurricanes.

As world leaders struggle to adopt coordinated and effective climate policies, the choices made by oil companies, with their deep pockets, their scientific prowess, experience in managing large engineering projects and their lobbying force can be critical. . What they do could help determine whether the world can meet the Paris Agreement goals to limit the rise in global temperatures to below 3.6 degrees Fahrenheit above pre-industrial levels.

The large American and European oil and gas companies publicly agree that climate change is a threat and that they must play a role in the kind of energy transition the world last saw during the industrial revolution. But the urgency with which companies are planning to transform their business couldn't be more different.

"Despite rising emissions and social demand for climate action, US oil majors are betting on a long-term future for oil and gas, while European majors are betting on a future as electricity suppliers," said David Goldwyn, an official with the Obama administration's State Department of Energy. "How the market reacts to their strategies and the 2020 election results will determine whether one or the other strategy will work."

For environmentalists and even some Wall Street investors, the American oil giants are clearly making the wrong choice. In August, for example, Storebrand Asset Management, Norway's largest private money manager, sold Exxon Mobil and Chevron. And Larry Fink, who leads the world's largest investment manager, BlackRock, called climate change "a determining factor in the long-term prospects of companies."

European oil executives, on the other hand, have said that the fossil fuel era is fading and that they are planning to leave many of their reserves buried forever. They also argue that they need to protect their shareholders by preparing for a future where governments implement tougher environmental policies.

BP is the standard bearer of the rapid change strategy. The company announced that it will increase investment in low-carbon companies tenfold over the next decade, to $ 5 billion annually, while reducing oil and gas production by 40%. Royal Dutch Shell, Italy's Eni, France's Total of France, Spain's Repsol and Norway's Equinor have set similar goals. Many of these companies have cut their dividends to invest in new energy. BP attempted a transition in the late 1990s and early 2000s under the leadership of John Browne, then CEO, but renewable energy financial results were disappointing and the company eventually dropped its nickname 'Beyond Petroleum ".

In an interview, Browne said this time it will be different. "There are a lot more rumors now," he said, adding that the Paris Agreement was a watershed, the renewables economy has improved and investor pressure has increased.

This month BP and Equinor announced a partnership to build and manage wind projects along the New York and Massachusetts coasts. The governors of these states want to reduce their dependence on natural gas and coal, which this effort will help.

American oil executives say it would be folly to switch to renewable energy, arguing that it is a low-profit business that public utilities and alternative energy companies can pursue more effectively. They say it is only a matter of time before oil and gas prices recover as the pandemic recedes.

For now, Exxon and Chevron are sticking to what they know best, shale drilling in the Permian Basin of Texas and New Mexico, offshore deep-sea production, and natural gas trading. In fact, Chevron is acquiring a smaller oil company, Noble Energy, to increase its reserves.

“Our strategy is not to follow the Europeans,” said Daniel Droog, Chevron's vice president for the energy transition. "Our strategy is to decarbonise our existing resources in the most cost-efficient way and to constantly bring in new technologies and new forms of energy." But we are not asking our investors to sacrifice yields or move forward with three decades of uncertainty over dividends. "

Chevron says it is increasing its use of renewable energy to power its businesses. It also says it is reducing emissions of methane, a powerful greenhouse gas. And the company has invested more than $ 1.1 billion in various projects to capture and sequester the carbon so it won't be released into the atmosphere.

Its venture capital arm, Chevron Technology Ventures, is investing in new energy start-ups like Zap Energy, which is developing modular nuclear fusion reactors that do not release greenhouse gases and limit radioactive waste. Another, Carbon Engineering, removes carbon dioxide from the atmosphere to convert it into fuel.

Chevron Technology Ventures has two funds totaling $ 200 million, about 1% stake in the company and last year's exploration budget. The company has a $ 100 million separate fund to support a $ 1 billion investment consortium that aims to reduce emissions in the oil and gas industry.

"We need cutting-edge technology, and my job is to look for it," said Barbara Burger, president of Chevron Technology Ventures, which employs 60 of Chevron's 44,000 employees. “The transition is not an overnight event. It will be gradual, evolving continuously for decades ”.

Exxon has also largely moved away from renewables and instead invested in about a third of the world's limited carbon capture capacity, which has been so expensive and energy-intensive that few companies have been willing to underwrite large-scale projects. .

It spends about $ 1 billion annually on research and development, much of which goes into developing new energy technologies and efficiency improvements that reduce emissions. One project is to direct the carbon emitted from industrial operations into a fuel cell capable of generating energy. This should reduce emissions and at the same time increase energy production.

The company is also working on algae whose oils can make biofuel for trucks and planes. Plants also absorb carbon through photosynthesis, which Exxon scientists are trying to speed up as they produce more oil.

“Step 1, you have to do the science, and it's impossible to set a deadline for the discovery,” said Vijay Swarup, Exxon's vice president of research and development. Research into fusion, algae and carbon capture has been ongoing for decades, and many climate experts say these technologies could take decades longer to commercialize.

This is why many scholars and environmentalists believe that American oil companies are not serious about tackling climate change.

"Oil companies don't do things that put themselves out of business," said David Keith, a Harvard professor of applied physics who founded Carbon Engineering. "That's not how the world works." But some energy analysts argue that US oil companies are right not to rush to change their business. They argue that American lawmakers simply haven't given them enough incentives to make a radical break.

"If this is sunset time for oil and gas, someone has forgotten to tell consumers," said Raoul LeBlanc, a vice president of IHS Markit, a research and consulting firm. He said that while sales of electric cars may have increased, it will take decades to replace the more than one billion internal combustion cars on the road. It will likely take just as long, if not longer, to replace the large fleets of fossil fuel-powered trucks, planes and ships. There should be enough oil demand in the next 30-40 years for Exxon and Chevron to tap into their reserves and make money, even if profits will decline over time, said Dieter Helm, an Oxford economist who studies politics. energy.

"Investors can invest in Tesla or any renewable or electric company," he said. “Why should an oil company with large-scale hydrocarbon development expertise be able to compete with these new players?
But Helm, who published the book "Burn Out: The End Game for Fossil Fuels" in 2017, said he believes all oil companies have a dim future beyond the next few decades, because technological advances will make them obsolete in a while. world economy dominated by electricity, battery storage, three-dimensional printing, robotics and other innovations. "These companies will eventually die."

(Extract from the foreign press review by Epr Comunicazione)

This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/bp-shell-chevron-ed-exxon-le-big-oil-si-scontrano-sulla-transizione-energetica/ on Sun, 27 Sep 2020 06:10:38 +0000.