The global oil and gas industry "should be less aloof, more assertive" in the global energy debate ahead of the United Nations Climate Change Conference in Paris in November CEO of Royal Dutch Shell Ben van Beurden told industry colleagues in February at an International Petroleum Week gala dinner.
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It was a call for van Beurden’s colleagues and peers to make their voices heard ‘by members of government, by civil society and the general public’, but also to have, what he called, "a more balanced debate", one that doesn’t focus on "fossil fuels out, renewables in."
Van Beurden’s speech highlighted one of the great challenges of the 21st Century – how to balance energy access for all – which often "makes the difference between poverty and prosperity"- and the pressing need to reduce global green house gas (GHG) emissions.
As a key energy supplier and one of the biggest polluters it’s necessary oil and gas producers are part of the climate change mitigation conversation, but how industry can credibly do this with such conflicting interests is a challenge. For so long, as van Beurden admits, oil and gas companies have deliberately dodged the conversation or partaken in it on their own terms. And in many instances companies have used sly and underhand tactics – such as bank-rolling climate change deniers – to actively undermine or divert the ongoing debate to meet their own ends – to ensure free and easy production of more and more fossil fuels.
Solid solutions
The debate about fossil fuel companies’ role in mitigating climate change has been going on for decades within the industry.
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By GlobalDataOver the years oil and gas companies have tried various ways to make their image ‘greener’. BP‘s now infamous ‘Beyond Petroleum’ campaign launched in 2000 to portray the company as sustainable and ‘green’ was subsequently branded spurious green-washing by critics. This kind of PR-based tactic no longer ‘washes’, so to speak; companies must go beyond simply ’emerald painting’, as Greenpeace calls it, and make concrete commitments backed up by transparency and action.
A new breed of investor is seeking to force climate change into the boardrooms of big oil.
Van Beurden calls for a shift from coal to gas as a ‘transition fuel’ – because gas emits around 50% less carbon than coal – while renewables catch up. He also advocates a roll out of widespread carbon capture and storage – the company has one CCS project in Peterhead, UK – as well as a "well-executed" carbon pricing system.
Statoil, along with ExxonMobil, BP and Chevron and many others, also champion a transition to gas and a price on carbon. ExxonMobil has included a proxy price on carbon in its business planning since 2007, enabling the company to analyse the impact of a price on carbon on various investment opportunities.
It’s refreshing that these typically big polluters are lobbying for credible carbon-reducing changes to legislation. Experts have long championed the benefits of a carbon pricing system as way to incentivise a reduction in carbon emissions – although there is much debate around how this should effectively be done.
Naomi Oreskes from the Department of the History of Science at Harvard University says carbon pricing is an "essential first step".
"But for it to work, it’s got to be stiff enough to push people out of fossil fuels and into non-carbon based fuels. It’s not clear that the fossil fuel companies are going to accept that readily," she adds.
Transparency on carbon emissions
But is all this ‘green’ lobbying enough to win back credibility lost decades ago?
For industry to prove its commitment to mitigating climate change while balancing global energy needs, Rick Heede from the Climate Mitigation Institute says there are a number of other things industry could do. For example, improve transparency by improving reporting of GHG emissions – European Union and Member States are required to report annually on their GHG emissions, as are companies operating in the US. Heede thinks reporting should also cover operational emissions for each company, as well as estimate emissions from the petroleum and natural gas products extracted, refined, and marketed to consumers.
Heede would also like to see companies estimate the potential emissions — operational and from products sold — from each company’s proven recoverable reserves and from the resources now in its CAPEX plans that each company will acquire or develop and produce.
Professor Paul de Leeuw , who has worked in the oil and gas industry for 25 years and is now director of Robert Gordon University’s Oil and Gas Institute, agrees transparency is key to driving change: "I am great supporter of clear transparency…it really is going to drive a set of behaviours and culture in a company; they can see if they are making progress and if they are actually making a difference, you can see if they are serious about making a difference and driving down emissions."
Secret lobby no-more
Industry also needs to "unequivocally encourage and support state, federal and international policies consistent with keeping warming below the 2°C global temperature target" says Heede.
But while companies advocate some low-carbon legislation they still fund lobby groups that lobby against low carbon legislation. For example, BP America, Statoil, Chevron and ExxonMobil, and a whole host of other oil and gas companies, are all members of the American Petroleum Institute (API) which regularly lobbies government on issues such as repealing the Renewable Fuel Standard, which requires transportation fuel sold in the US to contain a minimum volume of renewable fuel.
Shell is also still a member of powerful government lobbying group the American Legislative Exchange Council, which claims not to be a climate change denier but has reportedly previously claimed that the science behind human-caused climate change was uncertain. Many companies, including BP and ConocoPhillips, have cancelled its membership with the group.
Most recently Shell has come under harsh criticism for its relentless pursuit to drill in the Arctic Ocean.
Norway is in a better position than most countries to deal with turbulent times in the offshore industry.
"Shell’s position on climate and the environment is pure paradox. Shell says one thing, but does another. And there’s nothing more inconsistent than trying to say you’re progressive on climate change, at the same time as readying to drill for oil in the melting Arctic Ocean," Charlie Kronick, senior campaigner, Greenpeace said in a press statement.
Further contradicting its environmental stance is an internal Shell document leaked by The Guardian that appears to accept that global temperatures will rise to 4C – double the internationally agreed threshold to prevent climate change.
More action less PR
It’s important for oil and gas companies to act on what they say and not just pay lip service to climate change mitigation. Government has to be the key driver but companies need to accept legislation and not, through third parties, lobby against them.
Industry also needs to put its money where its mouth is and invest more in low carbon technologies such as carbon capture storage (CCS) and renewables. For example the industry has been extremely slow in piloting and mobilising CSS technology.
There are, however, positive signs; both Chevron and Shell have modest renewable energy investments, ExxonMobil Fuels & Lubricants (F&L) products play a role in a number of power-generation applications used in wind turbines, geothermal, hydroelectric installations, and nuclear facilities.
BP has a modest biofuels business and invests in some wind energy projects in the US but had quietly divested almost all of its substantial renewable energy investments, such as solar and onshore wind by 2010 to focus almost exclusively on oil and gas. In the 80s and 90s the company had a huge internal research and development programme – which it spent around $450m a year on, according to a report from The Guardian – focusing on energy efficiency and alternative energy.
Government need to drive energy direction
Ultimately, oil and gas companies’ role in climate change mitigation will be, and should be, determined by ideas discussed at the Paris climate change talks and then implemented in individual states. Though governments have proved weak in the past at implementing climate change mitigating policy – "we would have had a carbon tax a decade ago" if they hadn’t of been, says Oreske – governments can, after all, successfully set the tone of a country’s energy strategy with good legislation.
"In Norway electricity is generated by hydropower," says de Leeuw. "There is a very clear, intentional government policy to do so; they produce huge amounts of oil and gas which all gets imported – it’s about a balance and what you want to do in a country."
Oil and gas companies will need to deliver their product within that framework, de Leeuw says. Eventually, in the distant future, oil and gas companies might have to accept that if they don’t diversify their product further – by moving into further low carbon or neutral carbon energy generation – they will face a diminishing role in global energy supply, but for now that doesn’t seem a realistic prospect.
"People are reliant on fossil fuels for their living standards, including the UK. It is a delicate balance: yes, there absolutely is a role for [oil and gas] companies [in the climate change mitigation debate] and this needs to be balanced with the question of how do we make sure we have an affordable product whilst dealing with the climate change challenge – how do you balance these competing demands?," de Leeuw says.
It’s a vital question that, right now, no one has the answer to, but which industry, NGOs, think tanks and government must work towards – with full transparency, co-operation and no hidden agendas.
